The following was originally posted at the MacIver Institute.
New federal rules clamping down on the e-cigarette industry are already costing jobs and livelihoods, and will likely run scores of small vape shops in Wisconsin out of business if fully enacted this year.
A recent survey of Wisconsin vape shop owners conducted by the Electronic Vaping Coalition of America (EVCA) reveals the frustrations of respondents, who fear the steep costs the new rules will impose on their industry. Survey respondents estimated the FDA’s impending “deeming” regulations will cost them anywhere from a few thousand dollars to $3 million or more, mostly depending on how many products they offer.
Others said they simply don’t know the cost – also known as “hell” for a small business owner who counts on a thin profit margin to put food on their table and provide for their employees.
The majority of vape shop owners said they’d already reduced or eliminated inventory and would be forced to lay off employees as a result of the new regulations.
What exactly is a vape shop? Many are simply retailers of e-cigarettes and related products like refill cartridges. Others also manufacture their own e-liquid, the nicotine-containing fluid vaporized in e-cigs. All will likely be crushed by the FDA’s deeming regulations.
Senator Ron Johnson has been a leader in the push to stop the FDA deeming regulations before it’s too late for the vaping industry. “The FDA threatens to crush the emerging e-cigarette industry, leading to negative unintended consequences for public health by making it harder for consumers to buy products that serve as an alternative to smoking,” he said in a statement when the rules went into effect.
Vape shop owners share Sen. Johnson’s frustration, but aren’t sure who to blame. Many pointed the finger at the power of a reckless big government. The ultimate enemy of the free market is an all-powerful bureaucracy with the power to destroy an entire industry at the whim of massive special interests fearful of competition and innovation.
Newer vape shops won’t be the only small businesses to feel the pinch, however. One survey respondent said his company has been in business since 1939 blending pipe tobacco. Under the new rules, that business would be classified as a tobacco product manufacturer subject to the new regulatory regime. The FDA is essentially giving this long-established business a choice between death by murder or death by suicide.
Like the tobacco blender, vape shops responding to EVCA’s survey tend to be smaller businesses – those responding to EVCA’s survey employ anywhere from one to 72 people at between one and twenty locations. Almost all survey respondents opened shop within the past eight years, and many pointed out that their livelihood depends on their business. One, a 24-year-old who said he has just a high school education, worried he and his seven employees would be relegated to poverty level jobs were it not for their successful vape shop. Starting a business and growing it to create a more prosperous life for yourself and others sounds like the American dream, doesn’t it?
But then again, ruined livelihoods and crushed dreams are just a little collateral damage to the powerful bureaucrats at the FDA. After all, the government can just raise the minimum wage – small comfort to a ruined small business owner who made the mistake of working in an industry the government doesn’t like.
What exactly makes the FDA’s deeming regulations so dangerous to the young vaping industry? As with anything bureaucratic, it gets complicated and makes almost no sense.
The FDA regulations set February 15, 2007 as the “predicate date” for new, tougher rules for any items the agency deems to be tobacco products. Any new such products that entered the market after that date will be subject to a stringent, byzantine new approval process with a massive cost that increases with each individual product a business sells.
If you’re a successful vape business with a wide variety of product lines, you’d better get the accountants and lawyers on the phone post haste – both of which add additional costs that most small businesses simply can’t afford.
The e-vapor market was still in its infancy on the February 2007 predicate date, so nearly all e-vapor products will be subjected to the burdensome approval regime. Because of that arbitrary date, the vast majority of companies in the e-vapor business will likely be out of business within three years.
One curious fact about the regulations gives credence to vape shop owners’ suspicions that the new regulations might be motivated by more than just concerned bureaucrats trying to protect public health – traditional cigarette companies conveniently won’t have to comply.
That’s because most traditional combustible cigarettes were already on the market on February 15, 2007. That essentially lets manufacturers of traditional cigarettes (also known as Big Tobacco) off the hook, protected from the new rules. The rules will protect traditional cigarettes while snuffing out the e-vapor industry, which many of the vape shop owners credit for helping hundreds of their customers to quit smoking.
Any American who hasn’t been living under a rock for the past half-century is well aware of the nanny government’s incessant finger-wagging about cigarette smoking. The feds have spent untold taxpayer fortunes warning kids and adults alike about the dangers of smoking. But putting aside arguments over whether government should be lording over individual decision making, the evidence that traditional cigarette smoking is a killer is the closest thing to a “settled science” as can be found.
Yet, true to form, the very government that spent years looking down its nose at anyone who lights up is now actively trying to destroy an effective new way for smokers to put away their caustic cancer sticks for good.
Evidence is mounting that e-cigarettes are considerably less harmful than traditional cigarettes. An August 2015 study by Public Health England, an agency of England’s Department of Health, found e-cigarettes are 95 percent less harmful than combustible cigarettes.
The study also found that most of the chemicals that cause smoking-related diseases are absent from e-vapor and that e-cigarettes release negligible levels of nicotine into ambient air.
The studies back up a commonsense understanding of smoking versus vaping. After all, smoking involves lighting tobacco on fire and inhaling the smoke. Vapers instead inhale vaporized water containing nicotine and flavor – and practically none of the thousands of carcinogens found in cigarette smoke.
Simply put, the new FDA deeming regulations are a glaring example of either government ineptitude or, less charitably, corruption. That choice seems to be a common theme when it comes to government and bureaucracy. Whichever it is, the regulations will have a profound impact if enacted.
“If you want to see how regulations can destroy an entire industry, this is it,” said Christian Berkey, owner of Johnson Creek Vapor Company, in an earlier interview with the MacIver Institute. Berkey’s company is one of the first and largest producers of e-liquid in the world. The regulations would cost his company, which employs 47 people full-time in southeast Wisconsin, more than $200 million.
However, Berkey is optimistic about the chances that the Trump administration will eliminate the new regulations or modify them to save his industry.
If Trump really wants to “drain the swamp” and fight for hard working, tax paying Americans frustrated with the federal government meddling in their lives, his administration will turn the tables on the FDA and crush these new rules before they crush the vaping industry.
Read the original column here.
Over at the MacIver Institute, I write about Federalism and how Wisconsin leaders are embracing it:
The long-embattled concept of Federalism has new life after the November elections put Republicans in control of Congress and the White House. Judging by President Trump’s cabinet nominees, his team will eagerly embrace restoring a proper balance in the state-federal relationship – and Wisconsin is ready.
Federalism, especially in America, is the idea that federal powers are strictly limited by the Constitution. This seemingly forgotten concept is specifically enshrined in the United States Constitution – the Tenth Amendment states that, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
In other words, other than the narrow and specific list of powers and duties enumerated in the Constitution, all other powers of government belong to the states and the people. However, America has gradually but definitely drifted away from this model and completely ignored the Tenth Amendment in the process.
That’s why the goal of Federalism today is to restore the balance of power by shrinking the scope of the federal government to its core Constitutional duties, scaling back federal mandates imposed on the states (unfunded and otherwise), and giving states more flexibility to administer programs like Medicaid, education, and other responsibilities that the Constitution doesn’t explicitly give to Congress.
In Wisconsin, leaders in both houses of the legislature are already preparing for new responsibilities in anticipation of Washington finally remembering that the states created the federal government, not the other way around. In fact, both the Assembly and Senate now have standing committees dealing with Federalism – the Assembly Committee on Federalism and Interstate Relations, and the Senate Committee on Financial Services, Constitution and Federalism, both created in December.
Read the whole thing here, including specific ideas by the legislature for scaling back federal overreach.
From the MacIver Institute:
An entire industry faces extinction at the hands of impending FDA rules, putting the crushing burden of the regulatory state on full display.
Upwards of 99 percent of businesses in the decade-old e-vapor industry – also known as the vaping or e-cig industry – will likely be crushed under the weight of new FDA “deeming” regulations. However, swift action by Congress and the incoming Trump administration could save the industry and the jobs it supports.
The raft of new rules could cost one small Wisconsin business, Johnson Creek Vapor Company of Hartland, Wis., a staggering $200 million just in FDA application fees and legal costs, said Christian Berkey, the company’s CEO.
“If you want to see how regulations can destroy an entire industry, this is it,” he said.
Though relatively small – the company employs 47 people full-time in southeast Wisconsin – Johnson Creek Vapor was the country’s first producer of e-liquid, the nicotine-containing liquid that’s converted to vapor in e-cigs. Today, Johnson Creek Vapor is the largest e-liquid producer in the country and the second largest in the world, shipping about 50,000 gallons of e-liquid to more than 120 countries each year.
Johnson Creek and its employees, along with the rest of the e-vapor industry in the United States, would likely be snuffed out under the FDA’s new regulatory regime. “It’s going to cost hundreds of thousands of jobs in the U.S. in one fell swoop,” Berkey said. “To say this is ridiculous is the understatement of the year.”
Though one major deadline for e-vapor companies – categorizing all products with the FDA – was pushed back from December to June, that and other deadlines make the next few months a crucial stretch for the industry.
If the objective of the federal government was to destroy the e-vapor industry, these new deeming regulations would be the way to do it.
If the rules take effect, the vast majority of companies in the e-vapor industry will be forced to endure the same massively expensive and complex FDA approval process as Johnson Creek Vapor for every product they sell. That’s because the 2009 law enabling the rules sets February 15, 2007 as the “predicate date” for the rules.
To translate from bureaucrat-speak: Products that entered the market after the 2007 predicate date will be subject to the stringent new approval process. However, products that were already on the market on that date will get a pass – tar-causing traditional cigarettes, for example.
Since the e-vapor industry was still in its infancy at the predicate date – and since most of the industry’s advancements have taken place since then – nearly all e-vapor businesses will be subjected to the costly new process if they want a permission slip from the federal government to keep selling their products.
In practical terms, that means most e-vapor businesses like Johnson Creek Vapor will likely collapse under the weight of the new rules within three years.
The FDA’s draconian and arbitrary new rules don’t sit well with Congressman James Sensenbrenner, who represents the area where Johnson Creek Vapor is located.
“Over-regulation is a pervasive problem in Washington,” Sensenbrenner previously told the MacIver Institute. “I have concerns this new rule will hurt the burgeoning vapor and e-cigarette industry, as well as the businesses supported by it.”
But there is hope for the industry. A first step is the Cole-Bishop amendment, which would change the predicate date from February 15, 2007 to the date the final regulations were adopted – August 8, 2016. That change would put e-cigs on the same regulatory playing field as traditional cigarettes. The amendment is making its way through Congress’ budget process.
Both the Cole-Bishop amendment and regulatory changes by the incoming Trump administration are critical not just to protect jobs, but also to protect public health.
Growing evidence shows that using e-cigarettes is considerably less harmful than smoking traditional cigarettes. An August 2015 study by Public Health England, an agency of England’s Department of Health, found e-cigarettes are 95 percent less harmful than combustible cigarettes.
E-vapor products can help people put down their cigarettes for good and turn to a much less harmful alternative – a ray of hope for many smokers that the FDA is trying its best to extinguish.
Industry leaders and advocates are pushing for a more complete rollback of the FDA rules. “Our ultimate objective is a full repeal and replace” of the regulations, Berkey said.
After talking with members of the new administration, Berkey is optimistic about that possibility. “They are far more reasonable and amenable…today I’m far more hopeful that we’ll get a resolution, and fairly soon,” Berkey said.
Original column here.