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New FDA Rules & Regulations for E-Cig & Vape Retail Stores

e-cig & vapes store FDA regulationsWith the incredible rate of growth in the past few years, businesses in the e-cigarette industry in the United States have done well for themselves.

Behind the curtain, however, the vapes and e-cig industry has been on edge for the past couple years. And now more than ever due to new rules and regulations by the Food and Drug Administration (FDA). Many believe that this is the end of the road for e-cig and vape retail shops.

It had been know for some time that the FDA was examining the e-cigarette market; from the actual products to the manufacturers and vape stores that them. On May 5th 2016, the FDA disclosed new regulations for nicotine and tobacco products. On August 8, the new FDA regulations on the industry went into effect. This date is known at “the effective date.”

What Are the Changes?

All devices that produce a vapor that is inhaled using vaporizes, vape pens and e-cigarettes now fall into the Tobacco Products classification and must adhere to the guidelines and regulations of the Family Smoking Prevention & Tobacco Control Act set forth by the FDA in 2007.

In their amended document published in May, the FDA states that they are “taking action to reduce the death and disease from tobacco products.”

The FDA themselves, have agreed that e-cigarettes are potentially less hazardous than tobacco but have come up with other ways to justify their need to regulate. That is a whole other argument.

Regardless of whether or not the “juice” or liquid that goes into the device contains nicotine, the FDA now refers to these devices as Electronic Nicotine Delivery Systems (ENDS). And even the components, such as the containers for the product, are considered ENDS.

Why is the FDA classifying non-tobacco products and non-nicotine liquids as tobacco products? In an article published in Forbes, Jacob Sullum explains that the FDA’s rationale to regulate e-cigarettes and related devices as tobacco products is that they “deliver nicotine derived from tobacco.”

On their website, the FDA’s lists ENDS components or parts and but states that it’s not limited to this list:

  •      E-liquids
  •      E-liquid containers
  •      Cartridges
  •      Atomizers
  •      Certain batteries
  •      Cartomizers & clearomizers
  •      Digital display or lights to adjust settings
  •      Tank systems
  •      Drip tips
  •      Flavorings for ENDS
  •      Programmable software

36-Month Outlook for U.S. E-Cig Industry

Now that the regulations are in effect, all e-cig manufacturers must register with the FDA, and are prohibited from releasing new products without approval. According to the American Vaping Association, any variation or modification to existing products such as bottle size or flavor amount, will be considered a new product and will be illegal to sell without approval by the FDA.

For the next 24 months after the effective date, a “compliance period” will be in effect. The FDA says:

“FDA does not intend to enforce premarket authorization requirements for e-liquid products that retailers mix and sell without marketing authorization, provided that final mixture is the same as a product the retailer was selling or offered for sale of the effective date.”

This means that for the next 24 months, ENDS retailers are authorized to sell exact or “premarket” products that were being sold before August 8, 2016. Vape shops will no longer make their own mixes of e-liquids or allow customer to purchase various components to assemble their own delivery device.

Manufacturers will be required to submit an application for each product for review by the FDA. During the compliance period, the FDA will review applications and decide whether or not to allow a product to be sold.

After the initial 24 months, a 12-month continued compliance period will allow retailers to continue to sell premarket products if the manufacturer has a pending submission.

The FDA expects that their 12-month continued compliance period of review will be beneficial to manufacturers and retailers. It’s assumed that manufacturers will make retailers aware of the pending applications so that retailers can continue selling the products.

However, each application to the FDA will include an expensive fee predicted to be as high as one million of dollars. This will immediately wash out small ENDS manufacturers as well as premarket products developed by small vape shops that can’t afford to pay high application fees.

Large manufacturers that can afford these fees will certainly take a financial beating, but may make out in the long run. That is, only on products approved by the FDA within 3 years of the effective date.

What this Means for Retail Businesses in the U.S.

Many bloggers have written that these new regulations will shut down 99 percent of the industry and that most retails stores are doomed. On Vaping360, it was said that, “If you’re a manufacturer or seller of vapor products in the US, this is a death sentence for your business.” These regulations will certainly affect the industry, but that statement is probably not entirely true.

The new regulations will possibly have a greater impact on the manufacturing side of the industry than retail. Small manufacturers without the capital to submit multiple applications will likely throw in the towel and give up. Large manufacturers have too much to lose not to fight to stay in the game.

On the retail side, vape shops that mix their own liquids will be more affected than those that sell standard products. The requirement for e-cig or vape retailers to sell premarket products may devastate vape shops whose majority of sales consisted of their own mixes. These stores will have to adapt to selling premarket mixes in order to stay in business.

A hurdle for all stores is the new the tobacco classification for ENDS products that now requires that purchasers to be at least 18 years old. This may result in initial sales slumps but it’s not likely that it will have a drastic effect on the industry in the U.S. in the long-term.

The FDA is not putting a freeze on all products. Therefore, for many retail stores it may just be business as usual for the next 2 to 3 years while manufactures submit applications and wait for a decision.

After 36 months from the effective date, the FDA “expects that all ENDS retailers will sell only those products that are either grandfathered or for which they have, or an

upstream supplier has, received premarket authorization.”

Of course the future of the industry is unknown, but demand for products in this still infant industry will likely continue to grow. Tim Phillips of E-Cig Intelligence predicts that despite the FDA’s regulations, “there will be increased growth in the sector, driven by improved consumer confidence and better products coming onto the market.”

So, it may just be business as usual after the 36-months from the effective date for all retail e-cigarette or vape stores that appropriately manage their operations and choose to the course. It will be interesting to see how it plays out.

About The Transaction Group

The Transaction Group (TTG) is a business financial services company established in 2004. TTG specializes in assisting businesses of all sizes with high risk merchant account services. TTG also offers cash advance business loans.

By partnering with banks and credit card processing companies, TTG is able to deliver fast approvals and competitive rates on high risk merchant accounts. In the past several years, TTG has helped many e-cig and vape retail stores in getting set up with credit card processing services.

If you have an e-cig or vape store and are looking for a new credit card processing solution or hoping to save money over existing rates and fees TTG can help. And/ or you are in need of capital to grow your business, give TTG!

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