USPS cuts off illegal e-cigarette supply chain, causing disruption in the multi-billion market and benefiting tobacco giants.

According to a letter, the United States Postal Service (USPS) has recently cracked down on illegal electronic cigarette distributors who use its services for commercial transportation. This move has dealt a heavy blow to the illegal electronic cigarette industry worth billions of dollars, which has long been eroding the market share of traditional tobacco giants. According to an official letter that was previously undisclosed, after providing solid evidence of illegal activities to the New York City Law Department representing the local government and officials, USPS has officially notified the major electronic cigarette distributor in New York, Demand Vape, to cease using postal services. This action will directly benefit tobacco giants such as Altria Group, Inc. (MO.US) and British American Tobacco (BTI.US). These companies have been competing with illegal electronic cigarette products for market share for many years. As the world's largest market for tobacco alternatives, US law requires all electronic cigarette products to obtain authorization from the Food and Drug Administration (FDA) before they can be legally sold. In a letter dated July 15 to Demand Vape, USPS stated that due to evidence showing that the electronic cigarettes transported by the company were not FDA-approved and violated local flavor bans, the agency revoked their mailing permit last month. The letter explicitly stated, "Your bulk mail processing center in Buffalo will no longer accept any packages from Demand Vape containing ENDS products (electronic nicotine delivery systems, i.e. electronic cigarettes)." Demand Vape emphasized in a statement that its business is completely legal and compliant, and they are appealing the decision to revoke their permit. The company pointed out that the electronic cigarette industry is in a "regulatory gray area," and that the small number of FDA-approved products cannot meet consumer demand. Any accusations describing Demand Vape as opaque, illegal, or dishonest are false. USPS did not respond to requests for comments. Regulatory difficulties and logistical encirclement So far, the FDA has only approved 39 electronic cigarette products for market. However, lax enforcement has allowed unauthorized products to thrive. According to legislation in 2021, USPS is prohibited from mailing electronic cigarettes to consumers in most cases, only allowing commercial transportation between companies with a "mailing exception" permit, which must comply with all relevant regulations. Major logistics companies like FedEx Corporation (FDX.US) have completely rejected electronic cigarette shipments, and DHL only accepts pre-approved commercial transportation. Eric Proshansky, Deputy Director of the active litigation department in New York City, stated that USPS has provided a list of electronic cigarette companies that have been granted mailing permits to the city's law department for legally verifying their compliance. This will further squeeze the logistics channels of the illegal electronic cigarette industry, forcing distributors to turn to smaller logistics companies with higher costs or build their own transportation systems. Industry turmoil intensifies British American Tobacco estimates that the illegal electronic cigarette market in the US was approximately 6 billion ($8.05 billion) last year. However, with the imposition of tariffs this year, increased port seizures, and FDA crackdown on 24 key distributors in May, the industry is facing unprecedented pressure. Tony Abboud, Executive Director of the Electronic Cigarette Technology Association representing companies like Demand Vape, stated that this has already led to shortages in physical stores, and USPS's latest measures will deal a heavier blow to the electronic cigarette industry. According to a lawsuit document filed in New York City in 2024, as one of the largest electronic cigarette distributors in the US, Demand Vape covers approximately 5,000 retailers in 49 states. Another document confirms that the evidence provided by the New York prosecutors to USPS includes invoices from Demand Vape selling illegal electronic cigarettes, with multiple brands explicitly listed by the FDA as prohibited products.