BILL ANALYSIS Ó SB 438 Page 1 Date of Hearing: July 15, 2015 ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION Adam Gray, Chair SB 438 (Hill) - As Amended June 29, 2015 SENATE VOTE: Not Relevant SUBJECT: Electronic cigarettes. SUMMARY: Requires all cartridges for electronic cigarettes and solutions for filling and refilling an electronic cigarette to be in child-resistant packaging. Specifically, this bill: 1. Requires all cartridges for electronic cigarettes and solutions for filling and refilling an electronic cigarette to be in child-resistant packaging, as defined. 2. Defines "child-resistant packaging" as packaging that is consistent with federal standards adopted by the federal Consumer Product Safety Commission (Part 1700 of Title 16 of the Code of Federal Regulations). EXISTING LAW: 1) Authorizes the California Department of Public Health SB 438 Page 2 (DPH), under the Stop Tobacco Access to Kids Enforcement (STAKE) Act, to assess civil penalties ranging from $400 to $6,000, depending on the number of infractions, against any person, firm, or corporation that sells, gives, or in any way furnishes tobacco products to a person who is under the age of 18. 2) Establishes "smoke-free laws," which prohibit the smoking of tobacco products in various places, including, but not limited to, school campuses, public buildings, places of employment, apartment buildings, day care facilities, retail food facilities, health facilities, and vehicles when minors are present, and makes a violation of some of the prohibitions punishable as an infraction. 3) Defines "tobacco product" as any product containing tobacco leaf, including, but not limited to, cigarettes, cigars, pipe tobacco, snuff, chewing tobacco, dipping tobacco, bidis, or any other preparation of tobacco. 4) Defines "electronic cigarette" as a device that can provide an inhalable dose of nicotine by delivering a vaporized solution. Prohibits a person from selling or otherwise furnishing an electronic cigarette to a person under the age of 18. 5) Requires the Board of Equalization (BOE), under the Cigarette and Tobacco Products Licensing Act, to administer a statewide program to license cigarette and tobacco products manufacturers, importers, distributors, wholesalers, and retailers. Prohibits selling tobacco products without a valid license, and makes violations punishable as a misdemeanor. 6) Requires a retailer, for purposes of collecting a tobacco tax, to obtain a separate license for each retail location that sells cigarettes and tobacco products and pay a one-time fee of $100. Requires BOE to suspend or revoke a retailer's license upon notification by DPH of certain SB 438 Page 3 STAKE Act violations. 7) Prohibits, under the Stop Tobacco Access to Kids Enforcement Act (STAKE Act), any person from distributing or selling tobacco products via the United States Postal Service (USPS), or any other public or private postal or package delivery service, to any purchaser who is a minor. 8) Bans, under the Prevent All Cigarette Trafficking Act (PACT Act), the shipment of tobacco products through the USPS. FISCAL EFFECT: Unknown COMMENTS: Purpose of the Bill : According to the author, SB 438 will protect California's youth from e-cigarette liquid poisoning by requiring that all e-cigarette liquids be equipped with child-resistant packaging. What are E-Cigarettes? : Electronic cigarettes are battery-operated inhalers that consist of a rechargeable battery-operated heating element, a replaceable cartridge that may contain nicotine or other chemicals, and an atomizer that, when heated, converts the contents of the cartridge into a vapor, which the user can then inhale. Electronic cigarettes are often made to look like cigarettes, cigars, pipes and sometimes like everyday items such as pens and USB memory sticks. SB 438 Page 4 According to the World Health Organization (WHO), electronic nicotine delivery systems (ENDS), of which electronic cigarettes are the most common prototype, are devices that do not burn or use tobacco leaves but instead vaporize. The main components of the solution, in addition to nicotine-when nicotine is present-are propylene glycol, with or without glycerol and flavoring agents. ENDS solutions and emissions contain other chemicals, some of them considered to be toxicants. There are more than 450 brands and more than 7,500 flavors on the market, according to the policy report. There has been an average of 10 new brands entering the market every month for the last two years, a recent Internet survey found. Electronic cigarettes have been sold in the USA since 2007. The biggest markets are Europe and North America. Sales are banned in 13 of the 59 countries that regulate the devices, the WHO reported, but most of those 13 countries say they are still available because of illicit trade and cross-border Internet sales. According to the Food and Drug Administration (FDA), e-cigarettes have not been fully studied, so consumers currently do not know: 1) the potential risks of e-cigarettes when used as intended, 2) how much nicotine or other potentially harmful chemicals are being inhaled during use, or 3) whether there are any benefits associated with using these products. However, they do suggest they are safer than some traditional tobacco products. Mitch Zeller, Director of the Center for Tobacco Products, FDA, in an NPR interview on January 20, 2014, stated: "If a current smoker completely substituted all of the combusting cigarettes that they smoked with an electronic cigarette, that person would probably be significantly reducing their risk." SB 438 Page 5 Electronic cigarette safety : The California State Health Officer released a report in January 2015, "A Community Health Threat," about e-cigarettes that cites, among other things, the concern about the health risks of the product, the growing number of e-cigarettes poisonings. E-cigarette poisonings increased from seven in 2012 to 154 in 2014. By the end of 2014, e-cigarette poisonings to young children tripled in one year, making up more than 60 percent of all e-cigarette-poisoning calls, according to the report. Furthermore, according to an investigative report by FOX-KTVU, the number of calls to Poison Control for nicotine poisoning from e-cigarette liquid is on the rise, more than doubling in just the last year. California Poison Control reports that most of those cases involve young children ingesting the potentially deadly liquid. The state health officer also noted that in California, use of electronic cigarettes among those between the ages of 18 and 29 tripled in one year, from 2.3 percent to 7.6 percent. Nearly 20 percent of these young adult electronic cigarette users had never smoked traditional cigarettes. However, it must be note, as reported by the Department of Public Health (DPH); California has one of the lowest teenage smoking rates in the nation. Through implementation of the STAKE Act, California also has seen a steady decline in illegal sales to minors. A July 2014 report by the WHO, "Electronic nicotine delivery systems (ENDS)," stated that existing evidence shows electronic cigarettes do not produce merely a water vapor but an aerosol that poses serious threats to adolescents and fetuses. The aerosol inhaled by smokers contains ultra-fine particulate SB 438 Page 6 matter that gets trapped in the small airways of the lungs. According to a 2013 study by The National Center for Biotechnology Information (NCBI) entitled "Does electronic cigarette consumption cause passive vaping?," aerosol exhaled by electronic cigarettes smokers contains nicotine, formaldehyde, and other chemicals, although at much lower levels than emissions from conventional cigarettes, and nicotine metabolites were found in nonsmokers exposed to the exhaled aerosol. According to research paper published in "Tobacco Control" (an international peer review journal covering the nature and consequences of tobacco use worldwide) on March 2013, titled: "Levels of selected carcinogens and toxicants in vapour from electronic cigarettes," e-cigarette toxicant levels were 9-450 times lower than in cigarette smoke and were, in many cases, comparable with trace amounts found in the reference product. The paper goes on to conclude: "that substituting tobacco cigarettes with e-cigarettes may substantially reduce exposure to selected tobacco-specific toxicants. E-cigarettes as a harm reduction strategy among smokers unwilling to quit, warrants further study". Federal Action : Federal law, the Family Smoking Prevention and Tobacco Control Act of 2009 (Tobacco Control Act), provides the FDA authority to regulate cigarettes, cigarette tobacco, roll-your-own tobacco, smokeless tobacco, and any other tobacco products that the FDA by regulation deems to be subject to the law. To date, the FDA has not officially acted on the subject of e-cigarette regulation. However, according to the Federal Register in print Friday, April 25, 2014, the FDA is considering proposed rules regarding, in part, deeming e-cigarettes as a SB 438 Page 7 "tobacco product." Once a product is deemed a "tobacco product", the FDA may put in place restrictions on the sale and distribution of said product, including age-related access restrictions and advertising and promotion restrictions, if FDA determines the restrictions are appropriate for the protection of the public health. The proposed rules have two purposes: (1) To deem products that meet the definition of ''tobacco product'' under the law except accessories of a proposed deemed tobacco product and subject them to the tobacco control authorities in the Tobacco Control Act; and (2) to apply specific provisions that are appropriate for the protection of the public health to deemed tobacco products. These provisions include: (1) Enforcement action against products determined to be adulterated and misbranded; (2) required submission of ingredient listing and reporting of harmful and potentially harmful constituents (HPHCs) for all tobacco products; (3) required registration and product listing for all tobacco products; (4) prohibition against use of modified risk descriptors (e.g., ''light,'' ''low,'' and ''mild'' descriptors) and claims unless FDA issues an order permitting their use; (5) prohibition on the distribution of free samples (same as for cigarettes); and (6) premarket review requirements. The FDA has closed public comment and is reviewing evidence prior to finalizing the proposed rules, specifically on the health risks and the viability of e-cigarettes as a cessation product. Should the legislature decide to wait for the FDA to finalize its regulations, specifically regarding deeming e-cigarettes as "tobacco products", the current definition of e-cigarettes SB 438 Page 8 (Health and Safety Code Section 119405) may be used to effectively regulate the product at the state level. STAKE Act : The Stop Tobacco Access to Kids Enforcement (STAKE) Program of the Food and Drug Branch strives to be a leader in youth tobacco enforcement in California. The mission of the program is to reduce the illegal sales of tobacco to minors through effective enforcement of the STAKE Act. Through implementation of the STAKE Act, California has seen a steady decline in illegal sales to minors. According to DPH, California has one of the lowest teenage smoking rates in the nation. The effective enforcement and protection provisions in the STAKE Act that apply to traditional tobacco products include: 1. Establishes an enforcement program for illegal sales to minors (B&P Section 22952). 2. Requires all persons engaging in the retail sale of tobacco products shall check the identification of tobacco purchasers (B&P Section 22956) 3. Civil and licensure penalties for any person or retailer that sells, gives, or in any way furnishes to another person who is under the age of 18 years a tobacco product (B&P Section 22958) 4. Prohibits tobacco products on any outdoor billboard located within 1,000 feet of any public or private elementary school, junior high school, or high school, or public playground (B&P Section 22961). 5. Prohibits tobacco products from being sold through a SB 438 Page 9 "self-service display" (B&P Section 22962) The committee and author may wish to apply all relevant provisions in the STAKE Act to e-cigarettes using the current definition in Section 119405 of the Health and Safety Code. BOE Licensing Act : In 2003, AB 71 (J. Horton, Chapter 890) enacted the Cigarette and Tobacco Products Licensing Act (Licensing Act), which established a statewide licensure program administered by BOE to help stem the tide of untaxed distributions and illegal sales of cigarettes and tobacco products. Prior to the bill, BOE's Investigations Division had been encountering a large number of cigarettes and tobacco product distributors who were unlicensed. The purpose for being unlicensed is to conceal the nature of their business and to evade the tax. These unlicensed distributors normally maintain minimal assets and are typically transient, which hinders BOE's ability to collect the taxes due and payable. The Act requires every retailer, distributor, wholesaler, manufacturer and importer to obtain and maintain a license to engage in the sale of cigarettes or tobacco products. Currently, BOE has approximately 38,000 retailers and 1,000 distributors and wholesalers licensed to engage in the sale of cigarettes and tobacco products in California. A distributor and wholesaler license is valid for a calendar year upon payment of a fee of $1,000 per location, unless surrendered, suspended, SB 438 Page 10 or revoked prior to the end of the calendar year, and may be renewed each year upon payment of such fee. Violations of the Licensing Act include, in part, the following: 1) Possession, storing, owning, or has made sales of an unstamped package of cigarettes bearing a counterfeit California tax stamp or tobacco products on which tax is due but has not been paid; 2) Sales of cigarettes or tobacco products to any distributor, wholesaler, importer, retailer, or any other person who is not licensed or whose license has been suspended or revoked; 3) Retailer and wholesaler purchases of cigarette or tobacco products from any person who is not licensed or whose license has been suspended or revoked; 4) Distributor purchases of cigarettes or tobacco products from any person who is required to be licensed pursuant to the Licensing Act but who is not licensed or whose license has been suspended or revoked; 5) Failure to maintain records or make such records available to BOE and law enforcement agency, as specified; 6) A person or entity that engages in the business of selling cigarettes or tobacco products in this state without a license or after a license has been suspended or revoked; and 7) Failure to allow an inspection. According to the American Lung Association, 94 cities and counties now require a retailer to obtain a license to sell e-cigarettes. Majority of the cities and counties have done this through special language in the definition of tobacco product in their local tobacco retailer licensing ordinance. SB 438 Page 11 The committee and author may wish to apply all the provisions of the Licensing Act to e-cigarettes using the current definition in Section 119405 of the Health and Safety Code. Smoke Free Laws : Current law establishes "smoke-free laws," which prohibit the smoking of tobacco products in various places, including, but not limited to, school campuses, public buildings, places of employment, apartment buildings, day care facilities, retail food facilities, health facilities, and vehicles when minors are present, and makes a violation of some of the prohibitions punishable as an infraction. According to the American Lung Association, 131 cities and counties in California prohibit the use of e-cigarettes in some outdoor areas (dining areas, entryways, public events, recreation areas, service areas, sidewalks, and worksites), some indoor areas (hallways, city owned/ operated facility, hotels/motels, multi-unit housing, public transit, places of employment, restaurants, and theaters/ convention centers), or both. These 131 municipalities represent a diverse population of local governments-ranging from San Francisco to San Bernardino-that have taken action on where e-cigarettes may be used. The ordinances differ in each city/county. For example, the City of San Francisco prohibits the use of e-cigarettes in public events, recreation areas, service areas, multi-unit housing, public transit, places of employment, restaurants, and theaters/convention centers, while San Bernardino County prohibits service areas, city owned/ operated facility, hotels/motels, public transit, and places of employment. SB 438 Page 12 The committee and author may wish to apply all the "Smoke Free" locations that apply to traditional cigarettes to e-cigarettes using the current definition in Section 119405 of the Health and Safety Code. Mail Delivery : Prevent All Cigarette Trafficking Act (PACT Act) is a federal law, amongst other things, that prohibits the delivery of cigarettes and smokeless tobacco through the United States Postal Service (USPS). This prohibition does not apply to other forms of shipment, such as FedEx and UPS. Some concerns have been raised by the opposition that SB 140, by defining e-cigarettes as a "tobacco product," will place e-cigarettes under the provisions of the PACT Act, specifically the USPS prohibition. Opposition cites this as potentially damaging to the industry, since a large portion of their sells are done online and delivered to the consumer. According to an informal opinion by Legislative Counsel, SB 140 would not be subject to the provision in question under the PACT Act. The provision states: "All cigarettes and smokeless tobacco are non-mailable and shall not be deposited in or SB 438 Page 13 carried through the mails. The United States Postal Service shall not accept for delivery or transmit through the mails any package that it knows or has reasonable cause to believe contains any cigarettes or smokeless tobacco made non-mailable by this paragraph." The language clearly states that only "cigarettes and smokeless tobacco" are prohibited from being delivered by USPS. The PACT Act would have to be amended at the federal level to include e-cigarettes for this provision to apply. California law, under the STAKE Act, requires a specified distributor or seller to verify that a purchaser of tobacco products is 18 years of age or older, and to telephone the purchaser after 5 p.m. to confirm the order prior to shipping the tobacco products. This provision in state law currently does not apply to e-cigarettes. A study by the Journal of the American Medical Association found that more than 96% of minors aged 15 to 16 were able to find an Internet cigarette vendor and place an order in less than 25 minutes, with most completing the order in seven minutes. As of 2012, more than 23% of all high school students had used some kind of tobacco product in the past month and the use of e-cigarettes has more than doubled among high school students. The committee and author may wish to amend the bill to require age verification upon mail delivery of e-cigarettes using the SB 438 Page 14 current definition in Section 119405 of the Health and Safety Code.. Vending Machines : The STAKE Act prohibits a cigarette or tobacco product from being sold, offered for sale, or distributed from a vending machine or appliance, or any other coin or token operated mechanical device designed or used for vending purposes, unless the machine or appliance is located at least 15 feet away from the entrance of a premise that has been issued an on-sale public premises license to sell alcoholic beverages, as specified. According to the National Youth Tobacco Survey, in 2012, 1.78 million middle and high school students nationwide had tried e-cigarettes. Although it is unknown how many students get e-cigarettes from vending machines, it is reasonable to assume that restricting e-cigarette access through this type point of sale could significantly lower the amount of minors who use e-cigarettes. The committee and author may wish to amend the bill to prohibit e-cigarettes from being sold, offered for sale, or distributed from a vending machine using the current definition in Section 119405 of the Health and Safety Code. SB 438 Page 15 Policy Considerations : In its current form, SB 438 would provide a much needed advancement in public health and child safety by requiring child safe packaging for e-cigarette cartridges. While this a very important provision, the committee may wish to add in more protections for consumers, public health and preventing youth access to e-cigarettes. As stated above, these protections can be added into law by using the current definition of e-cigarettes (Section 119405 of the Health and Safety Code). This will allow the legislature to advance important laws on a widely unregulated e-cigarette industry while waiting for the FDA to finalize its federal regulations. The committee and author may wish to amend the bill by adding in the provisions below using the current definition of e-cigarettes in Section 119405 of the Health and Safety Code: 1. Apply all the provisions in the STAKE Act to e-cigarettes (See comments, "STAKE Act" #'s 1-5). 2. Apply all the provisions of the Cigarette and Tobacco Products Licensing Act to e-cigarettes. 3. Apply all the "Smoke Free" locations that apply to traditional cigarettes to e-cigarettes SB 438 Page 16 4. Require age verification upon mail delivery of e-cigarettes (AB 1500 Dickinson of 2014) 5. Prohibit e-cigarettes from being sold, offered for sale, or distributed from a vending machine (SB 648 Corbett of 2013) Related legislation : SB 151 (Hernández) of 2015. Increases the minimum legal age to purchase or consume tobacco from 18 to 21 and makes additional conforming changes to restrictions and enforcement mechanisms in current law. (Pending in Assembly G.O. Committee) AB 216 (Garcia) of 2015. Prohibits the sale of any device intended to deliver a non-nicotine product in a vapor state, to be directly inhaled by the user, to a person under 18 years of age. (Pending in Senate Appropriations) SB 24 (Hill) of 2015. Extends STAKE Act requirements to the sale of electronic cigarettes (e-cigs), distinct from the definition of tobacco products, and requires enforcement, as specified, to begin July 1, 2016; extends current smoke-free laws and penalties to e-cigs; requires e-cig cartridges to be in childproof packaging, as defined; broadens the current definition of e-cigs, as specified; and requires all retailers of e-cigs to apply for licensure to sell e-cigs, as specified. SB 438 Page 17 (Failed passage on the Senate Floor and is pending reconsideration) SB 140 (Leno) of 2015. Recasts and broadens the definition of "tobacco product" in current law to include electronic cigarettes as specified; extends current restrictions and prohibitions against the use of tobacco products to electronic cigarettes; and, extends current licensing requirements for manufacturers, importers, distributors, wholesalers, and retailers of tobacco products to electronic cigarettes. (Assembly G.O. Committee - Held in committee without recommendation) SB 438 (Hill) of 2015. Requires all cartridges for electronic cigarettes and solutions for filling and refilling an electronic cigarette to be in child-resistant packaging. (Pending in Assembly G.O. Committee) SB 591 (Pan) of 2015. Imposes an additional excise tax of $2.00 per package of 20 cigarettes. This bill also (1) imposes an equivalent one-time "floor stock tax" on the cigarettes held or stored by dealers and wholesalers, and (2) indirectly increases the tobacco products tax. (Ordered to inactive file on Senate Floor) Prior legislation : AB 1500 (Dickinson) of 2014. Would have prohibited a delivery seller, as defined, from selling or delivering an electronic cigarette to a person under 18 years of age. (Failed passage in the Assembly Appropriations Committee) SB 438 Page 18 SB 648 (Corbett) of 2013. Would have restricted electronic cigarettes from being sold in vending machines. (Failed passage in the Assembly Appropriations Committee) SB 568 (Steinberg) Chapter 336, Statues of 2013. Prohibits an operator of an Internet Web site, online service, online application, or mobile application, as specified, from marketing or advertising electronic cigarettes to a minor. SB 882 (Corbett), Chapter 312, Statutes of 2010. Made it unlawful, to the extent not preempted by federal law, for a person to sell or otherwise furnish an electronic cigarette to a person less than 18 years of age. SJR8 (Corbett) of 2009. Would have requested that the US Food and Drug Administration prohibit sale of electronic cigarettes until they are deemed safe. (Failed passage in the Assembly) REGISTERED SUPPORT / OPPOSITION: SB 438 Page 19 Support None on file Opposition None on file Analysis Prepared by:Kenton Stanhope / G.O. / (916) 319-2531