E-cigarette Wholesale Distributor’s Story

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Small business owners and employees of vape shops in Central Jersey are concerned about the fate of their stores under new federal rules

SOMERVILLE – Ryan Bunting spells his name in the NATO phonetic alphabet as if he were still reporting to an officer of higher command. That’s because he spent eight years in the Marines and was deployed to Iraq in 2008. Now, he owns two small businesses — e-Volution Vapors in Somerville and Speakeasy Vapes in Flemington — and he recently began fearing for the future of his shops because of the new regulations facing the electronic cigarette industry.

E-cigarette Wholesale Distributor’s Story. On Aug. 8, the Food and Drug Administration (FDA) began regulating electronic cigarettes, or vapes. For the first time, the devices will be regulated and included as tobacco products under the administration’s authority. Instead of smoke from tobacco, however, vapes release a vapor by heating an “e-juice” made almost entirely of propylene glycol, which can sometimes contain nicotine and different flavors. The new regulations will require vape shops and small manufacturers of e-juices to pay for premarket tobacco applications for all products that were introduced to the market after Feb.15, 2007. The FDA estimated that the tests for the applications can cost anywhere from $100,000 to $500,000 per product.
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“So the issue is that testing and approval process, the estimated costs associated with it, are not something that a small business owner can absorb,” said Bunting, who is also a member of the New Jersey Vapors’ Rights Coalition. The coalition is one of many pro-vaping groups that has joined a class-action lawsuit against the FDA over the regulations.

READ: Popularity of e-cigarettes is facing challenges
READ: Study finds most teens vaping fruity flavors, not nicotine
The regulations will especially hamper small businesses that make their own e-juice, according to Bunting, and a lot of small vape shops make in-house e-juices.

Each flavor of juice and each of its nicotine levels, which can range from 0 mg to 6 mg, will have to be submitted for FDA tests, he said. There are hundreds of flavors, which can end up costing the owners millions of dollars. In addition to his two shops, Bunting also owns an e-juice company in Flemington. The high costs associated with FDA compliance “means the death of the industry as we know it,” he said.

Only 1 percent
Gregory Conley, president of American Vaping Association, estimated that 99 percent of vaping products currently sold will be prohibited under the regulations, as reported in USA TODAY. Only an act of Congress can change the grandfather date, and in April, the House Appropriations Committee passed a vote that would make an amendment exempting all vaping products currently on the market from the FDA review process. It will not, however, be fully voted on by the House and Senate until spending and budget negotiations at the end of the year.
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E-cigarette Wholesale Distributor’s Story. U.S. Rep. Frank Pallone Jr., a Democrat who represents the 6th Congressional District, which includes most of Middlesex County and part of Monmouth County, has been calling on stricter regulations of electronic cigarettes since 2015, and applauded the FDA’s inclusion of vapes in the new regulations.“The majority of youths are using flavored products, and until now, there was dangerously insufficient regulation and oversight of e-cigarettes,” Pallone said in a news release on the day the regulations went into effect. “We have an obligation to protect our young people, and we must all share in this responsibility so that the next generation is not burdened by the immense health and economic costs of tobacco.”
Along with e-cigarettes, the new federal regulations also extend to premium cigars and hookahs. As part of the reasoning to include e-cigarettes, the FDA noted on its website “that e-cigarette use among high school students has skyrocketed from 1.5 percent in 2011 to 16 percent in 2015,” according to a study from the Centers for Disease Control and Prevention. “This rule allows the FDA to protect youth by restricting their access to tobacco products,” the regulatory administration said on its website.

But most teens are not using e-juice with nicotine, but rather vape for the flavors, according to a study published in August by the University of Michigan. The study, which in 2015 asked 15,000 students in grades 8, 10 and 12 about vaping, found that flavoring by itself was “by far the most commonly vaped substance,” with 59 to 62 percent of students reporting this answer in each grade. “Vaping of nicotine came in a distant second place at 20 percent to 22 percent among 10th- and 12th-grade students and 13 percent among 8th-graders,” the study said.

E-cigarette Wholesale Distributor’s Story. “In about two weeks, I started noticing differences between from when I was smoking and when I was vaping,” he said. “As of Aug. 8, we can no longer make any health claims about these products.” In addition to talking about health benefits, the regulations now prohibit vape shops from working on customers’ devices, which is something that shops charged money for as a service.

“It’s almost like going to a mechanic and the mechanic tells you what’s wrong and how to fix it, but telling you that you have to do it yourself,” said Jonathan Golin, a manager at Gorilla Vapes in East Brunswick. The company has 12 stores. He believes that the rules may result in a loss of employees because there won’t be a demand for hands-on services and expert advice.

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“Worst-case scenario, I would imagine that pretty much all of the single shops, the guys who have just one store, their business entity is probably going to close down because their costs just keep going up and up and up,” he said. Vape shops have a two-year grace period before they have to submit to the FDA’s tests.

“Unless something changes, which hopefully it does, then we’ll have to get rid of every device that was made after 2007,” he said. “Which is everything, 100 percent of all of our stock.” A man exhales vapor from an e-cigarette in New York. Richard Harris, a professor in Rutgers University’s Department of Political Science who focuses on regulatory process, said that the high costs facing vape shop owners under the FDA regulations are “entirely conceivable.”

“One of the big costs of regulation is always compliance costs,” he said. “What often happens when you impose regulatory costs, and it doesn’t matter if it’s the Securities and Exchange Commission, the EPA or the Federal Communications Commission, or in this case the FDA, is that it winds up favoring larger firms that can absorb those costs and it winds up killing smaller firms,” he said.

With high costs facing small businesses, only larger companies will be able to afford the compliance costs, he explained. Several large tobacco companies, such as Altria and Reynolds American, have been producing e-cigarettes over the past several years under subsidiaries with different names, like Nu Mark and Vuse, respectively. “On one level, regulation is business versus the consumer,” Harris said. “On another level, all businesses are not monolithic. So, some business can benefit from a regulation, and other business can suffer.”

E-cigarette Wholesale Distributor’s Story. Although the goal of regulation is to protect consumers, Harris said, “anytime you’re making a regulatory decision, you’re creating winners and losers.”

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