The Smokefree Environments and Regulated Products (Vaping) Amendment Act 2020 (Act) recently extended many of the current prohibitions and restrictions applicable to smoking and the sale of tobacco products to vaping and smokeless tobacco products. Regulations are now needed to implement some parts of the Act and to provide the operational detail to help achieve the Act’s intent of:

• better supporting smokers to switch to regulated products that are less harmful than smoking;
• while protecting children, young people and non-smokers from the risks associated with vaping and smokeless tobacco products.

The Ministry’s consultation document presents alternative regulatory proposals relating to seven key parts of the Act. It is now seeking feedback to inform and shape the development of the final regulations.

The Ministry’s public consultation document is available here.

Who will be affected?

If introduced, the proposed regulations would affect current importers, suppliers, and retailers of vaping products, by imposing new packaging, labelling and marketing requirements, and clarifying the rules for when certain retailers can apply to become specialist vape retailers. They would also affect workplaces, the general public and consumers, by imposing restrictions on where and when vaping products can be used.

• What are the regulatory proposals?

The public consultation document canvasses seven broad topics. We highlight some initial reflections on the key regulatory proposals below (discussed in order of likely economic significance), which will:

• Introduce packaging and labelling requirements based on EU and UK legislation and guidance (Proposal 4): The Ministry acknowledges that the existing strict labelling and packaging rules for traditional tobacco products are not appropriate for vaping and smokeless products. Instead, the Ministry proposes to establish tailored packaging requirements that acknowledge the comparatively low risk of these products. Nevertheless, the proposed requirements as to health warning panels, product presentation, product labelling, and safety messaging will generate significant compliance costs for producers and make it more difficult for brands to differentiate their products in the marketplace.
• Introduce further restrictions on the promotion and marketing of vaping products (Proposal 3): The Ministry proposes to: require retailers to display R18 notices at each point-of-sale; limit the number and design of product availability notices that a retailer may display; and strictly control the content of notices that give smokers information to support a transition to vaping.
• Introduce product safety requirements for both vaping substances and devices (Proposal 5): This regulatory proposal sets out safety requirements for both vaping substances and devices, including a proposal to require regulated products to be tested for the presence of certain toxic compounds above prescribed limits. This proposal relates to various aspects of a product, including manufacturing, labelling, composition and nicotine strength. On the latter, it is proposed that the strength in vaping substances shall not exceed 20mg/mL for free-base nicotine and 50mg/mL for nicotine salt.
• Introduce five types of fees (Proposal 7): The Ministry proposes to require applicants to pay fees for various notifications and applications. An application to be a specialist vape retailer is proposed to cost $1,600 (excl GST). Also included in the proposed fees is a fixed product notification fee of $140 per product, per year, payable by manufacturers and importers when notifying the Ministry of their intention to sell vaping products or smokeless tobacco products. The Vaping Trade Association of New Zealand warns that “the proposed fees of $140 per product notification risks putting dozens of our members out of business when facing in excess of $140,000 costs just to keep trading”.
• Introduce product notification and declaration requirements for manufacturers and importers (Proposal 5): The Act requires manufacturers and importers (collectively, “notifiers”) to notify the Ministry of their intention to sell vaping products (or smokeless tobacco products) before any retailer sells them in New Zealand. In addition to collecting the notifier’s contact details and business information, the Ministry proposes to require a declaration that the notifier meets all current requirements of the Act and that the notifier details it has provided are correct. The Ministry also proposes to require notifiers to provide certain information for each combination of product type, brand and variant as part of their notification, as well as an additional declaration that each product meets current legislative requirements. The Ministry is seeking feedback on the information it proposes to collect and whether declarations are the best means for enforcing the Act.
• Lower the threshold to become a ‘specialist vape retailer’ in a rural area (Proposal 2): Specialist vape retailers are exempt from the prohibition on vaping in workplaces, allowing the retailer to demonstrate products, and allow customers to try products. Approval for this status generally requires 70 percent of total sales from the retail premises to be from the sale of vaping products. However, a lower threshold of 60 percent will be sufficient in certain circumstances. The Ministry does not plan to make regulations on when the lower threshold should apply, however, it notes that the 60 percent threshold may be appropriate in rural locations where smokers may have difficulty accessing the range of goods and services that an approved specialist vape retailer can provide. Feedback is sought on whether rural location and / or any other criteria should be considered when considering application for specialist vape retailer status.
• Clarify the definition of an “internal area”, where vaping would be prohibited (Proposal 1): Both smoking and vaping are prohibited in internal areas. Responding to concerns that the current definition is vague, the Ministry’s preferred new definition of an internal area (i.e. an area in which vaping will be prohibited) is “an area that is completely or partially enclosed with a roof or overhead structure of any kind, whether permanent or temporary”. This means an area will be an internal area if it has any roof or overhead structure, regardless of how much it encloses the area. Those in the hospitality sector will need to be mindful of any changes to ensure that vaping prohibitions are enforced correctly.
• Require manufacturers, importers, and specialist vape retailers to provide annual reports and returns (Proposal 6): The Ministry proposes to require manufacturers, importers, and specialist vape retailers to provide an annual return to the Ministry, providing sales information (consistent with current requirements for tobacco products).

The Ministry has acknowledged that businesses will need time to implement any changes to packaging requirements. When the standardised packaging requirements for tobacco products came into force in March 2018, businesses had: nine months to comply from the time the regulations were made; a further six weeks to distribute old stock down the supply chain; and a further six weeks for retailers to sell old stock. The Ministry is proposing a similar implementation timeframe for these proposed regulations.

Our view

The public health issues that the Act is seeking to address are undeniably important, but there is a risk that the regulatory proposals outlined in this consultation document could detract from achieving the Ministry’s aims. The proposals may harm competition and lead to significant, negative economic outcomes for new entrants and smaller market players and consumers if the final regulations reflect the Ministry’s current preferences.

Compliance with the new regime, while expensive and time consuming, will not necessarily overwhelm the bigger players in this industry. Larger producers, importers and retailers will be accustomed to similar (and more onerous) requirements imposed under the existing tobacco control regime. However, New Zealand’s numerous niche market participants may struggle to cope with the new compliance obligations and costs. In addition, if regulations make it more difficult to differentiate products in the marketplace, this may present barriers to entry for new businesses.

While implementation is some way off, affected businesses should carefully consider how the proposed regulations might affect their operations and consider responding to the Ministry’s consultation questions.

What next?

Public consultation is open until 5pm on 15 March 2021. If you have any questions about how the proposed regulations may affect your business, or you require assistance in drafting a response, please contact one of our experts.