The e-vapor industry in the United States faces a significant challenge that has nothing to do with selling to minors, health concerns, or black-market knockoffs. It has to do with getting its items into consumers’ hands.
The USPS’s prohibition on the transportation of all vaping goods, which was ordered by Congress late last year, went into force on Thursday. The withdrawal of the Postal Service, combined with existing delivery bans by FedEx Corp. (NYSE: FDX), UPS Inc. (NYSE: UPS), and DHL eCommerce Solutions, the e-commerce division of German company Deutsche Post DHL (OTC US: DPSGY), has left the vaping industry with few options for getting its products to market.
The four carriers’ limitations apply to online consumer sales and business-to-business transactions involving manufacturers, distributors, and retailers. According to the American Vaping Association (AVA), a pro-vaping lobbying group that receives funding from the business, roughly 10 million regular vapers in the United States. According to the association, between 2.5 million and 3.5 million people order vaping items online. It does not have any information on the size of B2B transactions.
With the Postal Service, which covers every address in the United States, out of the picture, the vaping supply chain, whether B2B or B2C, will need to devise new shipping tactics to stay afloat. There have already been a slew of new models introduced. Vape Freight, created by Michael Wittenberg, a logistics veteran with vaping industry experience, gives B2B customers a range of services spanning from small-package to LTL to container shipping.
LSO, a regional parcel delivery company that has been shipping vaping items for a while, announced on Monday that it would increase activities in its 10-state zone, which includes every ZIP code in the company’s home state of Texas. In a statement, the Austin-based carrier stated that delivering vaping products to homes is equivalent to providing fashion, food and wine, health and beauty aids, and other legal items. The critical distinction is that adult signatures are required when delivering things like wine and vaporizers.
In a statement, LSO CEO Richard Metzler said, “I find it puzzling why other carriers have chosen not to support the vaping market.” Why carriers handle vaping products any differently than legal products requiring an adult’s signature is a “head-scratcher” for Metzler. “Who knows?” says the speaker. “Perhaps they’ll outlaw wine delivery next,” he speculated.
Metzler said in an email that he isn’t aware of any other regional carrier that ships are vaping products, though some small delivery companies might. OnTrac and LaserShip, the two largest regional carriers in terms of geographic coverage, did not respond to requests for comment. LaserShip’s owners, private equity firm American Securities LLC, want to buy OnTrac for $1.3 billion, laying the groundwork for the first national parcel-delivery business carved out of regional networks, according to numerous analysts.
The USPS will accept a limited number of consumer-to-consumer vaping transactions as long as they are not commercial. Firms can request approval from the agency to sell to other businesses. According to Gregory Conley, AVA’s founder and president, the vaping sector will be subject to the same stringent regulations for a cigarette and smokeless tobacco companies in the B2B space.
Applicants must, for example, provide the names and addresses of all the firms to whom they will ship, as well as a list of their customers’ licenses. According to Conley, whenever a company adds customers or an existing customer’s address changes, the application must be revised and approved by the Postal Service before products may be distributed to new addresses. Packages must be taken into the post office and processed individually over the counter.
Last December, after President Donald Trump signed a 5,000-page omnibus spending package that included a statute dubbed the Preventing Online Sales of E-Cigarettes to Children Act, the writing was on the wall for the industry. With a few exceptions, the act required the Postal Service to prohibit all shipments of vaping products. The vaping sector was also subjected to the 2009 Prevent All Cigarette Trafficking (PACT) Act, combing untaxed cigarette sales over the internet.
Cigarettes and smokeless tobacco could no longer be shipped through the mail under the rule, and internet vendors had to register with the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) and the state tax authorities. The PACT Act established regulations for private carriers transporting tobacco goods to homes and businesses and strict tax collection and reporting rules with severe penalties for noncompliance.
Initially, the postal ban on vaping items was set to take effect at the end of March. The procedure was slowed because the government received thousands of comments on the proposed guidelines at the time.
FedEx said in March that it was exiting the vaping delivery market. A month later, UPS followed suit, stating that due to the “added complexity” of shipping vaping products within the United States and internationally to and from the United States, it would no longer ship those goods. DHL has been out of business for a long time before that.
The regulatory climate surrounding the distribution of vaping products, according to Conley of AVA, has become “too opaque” for companies to continue doing business in the field.
