U.S. vaping industry seeks answers as postal service ends deliveries

The US e-vapor industry faces a major challenge that has nothing to do with selling to minors, concerns about health risks and black market fakes. It’s about getting your products into the hands of consumers.

On Thursday, the U.S. Postal Service’s ban on shipping all vaping products, which was mandated by Congress late last year, went into effect. The exit from the postal service, combined with the existing delivery bans by FedEx Corp. (NYSE: FDX), UPS Inc. (NYSE: UPS) and DHL eCommerce Solutions, the e-commerce unit of German company Deutsche Post DHL (OTC US: DPSGY), leaves the vaping industry with limited options for put its products on the market.

The bans imposed by the four carriers affect online sales to consumers as well as business-to-business transactions between manufacturers, distributors and retailers. There are roughly 10 million regular vapers in the United States, according to the American Vaping Association (AVA), a vaping rights organization that receives funding from the industry. Between 2.5 million and 3.5 million consumers order vaping products online, the group estimates. It has no data on the size of B2B transactions.

With the Postal Service, which serves all U.S. addresses out of sight, the vaping supply chain, whether B2B or the business-to-consumer channel, will need to develop new shipping strategies to remain viable. New models have already emerged. A company called Vape Freight, founded by Michael Wittenberg, a logistics veteran who also has experience in the vaping industry, offers B2B customers a portfolio of services ranging from small packages and LTL to transporting containers.

On Monday, regional parcel carrier LSO, which has been transporting vaping products for some time, pledged to scale up operations in its 10-state territory, which includes all zip codes from the home state of the country. company, Texas. The Austin-based carrier said in a statement that shipping vaping products to residences is similar to shipments of clothing, food and wine, health and beauty aids and other legal products. The main difference with delivering products like wine and vaping is that they require an adult signature.

“I find it curious why other carriers have chosen not to support the vaping market,” Richard Metzler, CEO of LSO, said in the statement. Metzler said it was “a headache for me” as to why carriers treat vaping products differently from legal products requiring adult approval. “Who knows? Maybe then they will ban wine deliveries,” he added.

In an email, Metzler said he is not aware of any other regional carrier that carries vaping products, although some local delivery companies may. Executives at regional carriers OnTrac and LaserShip, the two largest in geographic reach, did not respond to requests for comment. LaserShip’s parent company, private equity firm American Securities LLC, plans to buy OnTrac in a $ 1.3 billion deal that is expected to lay the groundwork for the world’s first nationwide package delivery deal. regional networks.

The Postal Service will allow a limited number of vaping transactions between consumers as long as they are not of a commercial nature. Businesses can apply to the agency for permission to sell to other businesses. However, the vaping industry will be governed by the same onerous requirements that apply to cigarette and smokeless tobacco companies in the B2B space, said Gregory Conley, founder and president of AVA.

For example, applicants must provide the names and addresses of all companies to which they will ship, as well as a list of their customers’ licenses. If a business adds customers or if an existing customer changes address, the request must be updated and approved by the Postal Service before products can be shipped to new addresses, according to Conley. Packages must be brought to the post office and each must be processed at the counter.

The writing was on the wall for the industry last December after President Donald Trump signed a 5,000-page omnibus spending bill that included a law called the Prevention of E-Cigarette Online Sales Prevention Act. children. The wording of the law required the Postal Service to ban all shipments of vaping products with a few exceptions. The vaping industry has also been subject to the Prevention of All Trafficking in Cigarettes Act 2009 (PACT), designed to combat online sales of untaxed cigarettes.

Under this law, cigarettes and smokeless tobacco could no longer be mailed, and online sellers had to register with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and tax administrators of each state. The PACT Act established standards for private carriers shipping tobacco products to homes and businesses, and created strict rules for collecting and reporting taxes, with heavy penalties for non-compliance.

The postal ban on vaping products was originally scheduled to come into effect at the end of March. However, the process was delayed after the agency was inundated with thousands of comments on the then proposed rules.

In March, FedEx announced it would be pulling out of the vaping delivery business. UPS followed suit a month later, telling affected customers that it would no longer ship vaping products in the United States, nor internationally to and from the United States, due to the “increased complexity. »Of the shipment of these goods. The DHL unit had ceased operations long before that.

Conley of AVA suggested that the regulatory environment surrounding the delivery of vaping products has become “too murky” for companies to continue doing business in the space.

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