House File 2677 - Introduced HOUSE FILE 2677 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HSB 682) A BILL FOR An Act relating to the regulation of vapor products, and 1 providing penalties. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 5259HV (2) 90 pf/jh
H.F. 2677 Section 1. Section 453A.19, Code 2024, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 5. For the purpose of enabling the 3 department to determine compliance with subchapter III, the 4 department shall have the right to inspect any premises of the 5 holder of an Iowa permit located within the state of Iowa where 6 vapor products are stored, transported, sold, or offered for 7 sale or exchanged, to examine all stocks of vapor products of 8 the permit holder, and to examine all of the records required 9 to be kept or any other records that may be kept incident to 10 the conduct of the vapor products business of the permit holder 11 or any other person dealing in vapor products. It shall be 12 unlawful for any such permit holder to fail to produce upon 13 demand of the department any records required to be kept, or to 14 hinder or prevent in any manner the inspection of the records 15 or the examination of the premises or stock as specified in 16 this subsection. 17 Sec. 2. Section 453A.35, subsection 1, paragraph b, Code 18 2024, is amended to read as follows: 19 b. The revenues generated from the tax on cigarettes 20 pursuant to section 453A.6, subsection 1 , and from the tax on 21 tobacco products as specified in section 453A.43, subsections 22 1, 2, 3, and 4 , and from the fees and penalties specified in 23 subchapter III shall be credited to the health care trust fund 24 created in section 453A.35A . 25 Sec. 3. Section 453A.35A, Code 2024, is amended to read as 26 follows: 27 453A.35A Health care trust fund. 28 1. A health care trust fund is created in the office of 29 the treasurer of state. The fund consists of the revenues 30 generated from the tax on cigarettes pursuant to section 31 453A.6, subsection 1 , and from the tax on tobacco products 32 as specified in section 453A.43, subsections 1, 2, 3, and 4 , 33 and from the fees and penalties specified in subchapter III, 34 that are credited to the health care trust fund, annually, 35 -1- LSB 5259HV (2) 90 pf/jh 1/ 13
H.F. 2677 pursuant to section 453A.35 . Moneys in the fund shall be 1 separate from the general fund of the state and shall not be 2 considered part of the general fund of the state. However, the 3 fund shall be considered a special account for the purposes 4 of section 8.53 relating to generally accepted accounting 5 principles. Moneys in the fund shall be used only as specified 6 in this section and shall be appropriated only for the uses 7 specified. Moneys in the fund are not subject to section 8.33 8 and shall not be transferred, used, obligated, appropriated, 9 or otherwise encumbered, except as provided in this section . 10 Notwithstanding section 12C.7, subsection 2 , interest or 11 earnings on moneys deposited in the fund shall be credited to 12 the fund. 13 2. Moneys in the fund shall be used only for purposes 14 related to health care, substance use disorder treatment and 15 prevention, and tobacco use prevention, cessation, and control , 16 including but not limited to the administration and enforcement 17 of subchapter III . 18 Sec. 4. NEW SECTION . 453A.52 Vapor products directory 19 established requirements. 20 1. By August 1, annually, following the date the director 21 first makes the vapor products directory available as specified 22 in section 453A.52A, every vapor products manufacturer where 23 vapor products are sold in the state, whether directly or 24 through a distributor, wholesaler, retailer, or similar 25 intermediary or intermediaries, shall certify under penalty of 26 perjury on a form and in the manner prescribed by the director, 27 that the vapor products manufacturer agrees to comply with this 28 subchapter and to one of the following: 29 a. That the vapor products manufacturer has received a 30 marketing authorization or similar order for the vapor product 31 from the United States food and drug administration pursuant 32 to 21 U.S.C. 387j. 33 b. That the vapor product was marketed in the United 34 States as of August 8, 2016, the vapor products manufacturer 35 -2- LSB 5259HV (2) 90 pf/jh 2/ 13
H.F. 2677 submitted a premarket tobacco product application for the vapor 1 product to the United States food and drug administration 2 pursuant to 21 U.S.C. 387j on or before September 9, 2020, 3 and the application either remains under review by the United 4 States food and drug administration or a final decision on the 5 application has not otherwise taken effect. 6 2. A vapor products manufacturer shall submit a 7 certification form that separately lists each of the vapor 8 products manufacturers vapor products sold in this state. 9 3. Each initial and annual certification form required to 10 be submitted under this section shall be accompanied by both 11 of the following: 12 a. A copy of the marketing authorization or other order 13 for each vapor product issued by the United States food and 14 drug administration pursuant to 21 U.S.C. 387j, or evidence 15 that the premarket tobacco product application for each vapor 16 product was submitted to the United States food and drug 17 administration and a final authorization or order has not yet 18 taken effect. 19 b. A payment of one hundred dollars for each vapor product 20 listed in the certification. 21 4. A vapor products manufacturer required to submit a 22 certification form under this section shall notify the director 23 within thirty business days of any material change to the 24 certification form, including the issuance or denial of a 25 marketing authorization or other order by the United States 26 food and drug administration pursuant to 21 U.S.C. 387j, or 27 any other order or action by the United States food and drug 28 administration that affects the authorization of the vapor 29 product to be introduced or delivered into interstate commerce 30 for commercial distribution in the United States. 31 5. a. The director shall maintain and make publicly 32 available a vapor products directory that lists all 33 vapor products manufacturers and vapor products for which 34 certification forms have been submitted. 35 -3- LSB 5259HV (2) 90 pf/jh 3/ 13
H.F. 2677 b. The director shall make the directory available on the 1 departments internet site. 2 c. The director shall update the directory as necessary in 3 order to correct mistakes, ensure accuracy, and add or remove 4 vapor products on at least a monthly basis. 5 6. a. The director shall provide a vapor products 6 manufacturer with notice and an opportunity to cure 7 deficiencies before removing the vapor products manufacturer or 8 a vapor product from the directory. 9 b. The director shall not remove a vapor products 10 manufacturer or the vapor products manufacturers vapor product 11 from the directory until at least fifteen business days after 12 the vapor products manufacturer has been given notice of an 13 intended action. Notice shall be sufficient and be deemed 14 immediately received by a vapor products manufacturer if the 15 notice is sent either electronically or by facsimile to an 16 electronic mail address or facsimile number, as applicable, 17 provided by the vapor products manufacturer in the vapor 18 products manufacturers most recent certification filed under 19 this section. 20 c. The vapor products manufacturer shall have fifteen 21 business days from the date of service of the notice of 22 intended action to establish that the vapor products 23 manufacturer or the vapor product should be included in the 24 directory. 25 d. A determination by the director to not include or to 26 remove a vapor products manufacturer or a vapor product from 27 the directory shall be subject to review by the filing of a 28 civil action for prospective declaratory or injunctive relief. 29 7. If a vapor product is removed from the directory, each 30 retailer, distributor, and wholesaler shall have twenty-one 31 business days from the day such vapor product is removed from 32 the directory to remove the vapor product from its inventory 33 and return the vapor product to the vapor products manufacturer 34 for disposal. After twenty-one business days following removal 35 -4- LSB 5259HV (2) 90 pf/jh 4/ 13
H.F. 2677 from the directory, the vapor products of a vapor products 1 manufacturer identified in the notice of removal are contraband 2 and are subject to seizure, forfeiture, and destruction, and 3 shall not be purchased or sold in the state. The cost of such 4 seizure, forfeiture, and destruction shall be borne by the 5 person from whom the vapor products are confiscated. 6 Sec. 5. NEW SECTION . 453A.52A Vapor products 7 requirements. 8 Beginning October 1, 2024, or on the date the director 9 first makes the vapor products directory available for public 10 inspection on the departments internet site, whichever is 11 later, all of the following shall apply to vapor products in 12 this state: 13 1. A person shall not sell or offer for sale a vapor product 14 in this state that is not included in the vapor products 15 directory, and a vapor products manufacturer shall not sell, 16 either directly or through a distributor, wholesaler, retailer, 17 or similar intermediary or intermediaries, a vapor product 18 in this state that is not included in the vapor products 19 directory. 20 2. A retailer shall purchase vapor products for resale to 21 consumers only from a distributor or subjobber with a valid 22 license issued pursuant to this chapter. 23 Sec. 6. NEW SECTION . 453A.52B Penalties. 24 1. A retailer, distributor, or wholesaler who sells or 25 offers for sale a vapor product in this state that is not 26 included in the vapor products directory established in 27 this subchapter shall be subject to all of the following, as 28 applicable: 29 a. A civil penalty of three hundred dollars per day for each 30 vapor product offered for sale in violation of this subsection 31 until the offending vapor product is removed from the market 32 or until the offending vapor product is properly listed on the 33 directory. 34 b. For a second violation within a period of two years, a 35 -5- LSB 5259HV (2) 90 pf/jh 5/ 13
H.F. 2677 retailer shall be assessed a civil penalty of one thousand five 1 hundred dollars or the retailers permit shall be suspended for 2 a period of thirty days. 3 c. For a third violation within a period of three years, a 4 retailer shall be assessed a civil penalty of one thousand five 5 hundred dollars and the retailers permit shall be suspended 6 for a period of thirty days. 7 d. For a fourth violation within a period of three years, a 8 retailer shall be assessed a civil penalty of one thousand five 9 hundred dollars and the retailers permit shall be suspended 10 for a period of sixty days. 11 e. For a fifth violation within a period of four years, the 12 retailers permit shall be revoked. 13 2. A vapor products manufacturer whose vapor products are 14 not listed in the vapor products directory and are sold in this 15 state, whether directly or through a distributor, wholesaler, 16 retailer, or similar intermediary or intermediaries, is subject 17 to a civil penalty of one thousand dollars per day for each 18 vapor product offered for sale in violation of this subsection 19 until the offending vapor product is removed from the market 20 or until the offending vapor product is properly listed on the 21 directory. 22 3. Any vapor products manufacturer that knowingly makes a 23 false representation in any of the information required by this 24 subchapter is guilty of a serious misdemeanor for each false 25 representation. 26 4. Knowingly shipping or receiving vapor products in 27 violation of this subchapter is an unfair practice and a 28 violation of section 714.16. 29 5. In any action brought by the state to enforce this 30 subchapter, the state shall be entitled to recover the costs 31 of investigation and prosecution, expert witness fees, court 32 costs, and reasonable attorney fees. 33 Sec. 7. NEW SECTION . 453A.52C Compliance checks. 34 1. Each distributor or retailer that distributes or sells 35 -6- LSB 5259HV (2) 90 pf/jh 6/ 13
H.F. 2677 vapor products in this state shall be subject to unannounced 1 compliance checks conducted by the department or peace officers 2 as defined in section 801.4 for purposes of enforcing this 3 subchapter. Peace officers who conduct compliance checks 4 pursuant to this section shall forward the results of any 5 compliance check to the department in a manner prescribed by 6 the department within thirty business days after the compliance 7 check is conducted. 8 2. Any unannounced follow-up compliance checks of a 9 noncompliant retailer or distributor shall be conducted within 10 thirty business days after any violation of this subchapter. 11 3. The director shall publish the results of all compliance 12 checks performed under this section at least annually and shall 13 make the results available to the public upon request. 14 Sec. 8. NEW SECTION . 453A.52D Agent for service of process. 15 1. A nonresident vapor products manufacturer that has not 16 registered to do business in the state as a foreign corporation 17 or business entity shall, as a condition precedent to being 18 included or retained in the vapor products directory, appoint 19 and continually engage without interruption the services of 20 an agent in this state to act as agent for service of process 21 on whom all process, and any action or proceeding against the 22 vapor products manufacturer concerning or arising out of the 23 enforcement of this subchapter, may be served in any manner 24 authorized by law. Such service shall constitute legal and 25 valid service of process on the vapor products manufacturer. 26 The vapor products manufacturer shall provide the name, 27 address, telephone number, and proof of the appointment and 28 availability of such agent to the director. 29 2. The vapor products manufacturer shall provide notice 30 to the director thirty calendar days prior to termination of 31 the authority of an agent and shall further provide proof to 32 the satisfaction of the director of the appointment of a new 33 agent no less than five calendar days prior to the termination 34 of an existing agent appointment. In the event an agent 35 -7- LSB 5259HV (2) 90 pf/jh 7/ 13
H.F. 2677 terminates an agency appointment, the manufacturer shall notify 1 the director of the termination within five calendar days and 2 shall include proof to the satisfaction of the director of the 3 appointment of a new agent. 4 3. A vapor products manufacturer whose vapor products 5 are sold in this state, who has not appointed and engaged 6 the services of an agent as required by this section, shall 7 be deemed to have appointed the secretary of state as its 8 agent for service of process. However, the appointment of the 9 secretary of state as agent shall not satisfy the condition 10 precedent for the vapor products manufacturer to be included or 11 retained in the vapor products directory. 12 Sec. 9. NEW SECTION . 453A.52E Proceeds paid to health care 13 trust fund. 14 The revenues generated from the payment of fees and 15 penalties provided for under this subchapter shall be credited 16 to the health care trust fund created in section 453A.35A and 17 used for the administration and enforcement of this subchapter. 18 Sec. 10. NEW SECTION . 453A.52F Annual reports. 19 By January 15, annually, following the date the director 20 first makes the vapor products directory available as specified 21 in section 453A.52A, the director shall submit a report to the 22 general assembly regarding the status of the vapor products 23 directory, vapor products manufacturers, the vapor products 24 included in the directory, revenue and expenditures related to 25 administration of this subchapter, and enforcement activities 26 undertaken pursuant to this subchapter. 27 Sec. 11. NEW SECTION . 453A.52G Adoption of rules. 28 The director shall adopt rules pursuant to chapter 17A to 29 administer this subchapter. 30 Sec. 12. CODE EDITOR DIRECTIVES. 31 1. The Code editor is directed to create a new subchapter IV 32 in chapter 453A as follows: Subchapter IV shall be entitled 33 Uniform Application of Chapter. 34 2. The Code editor shall transfer section 453A.56 to the new 35 -8- LSB 5259HV (2) 90 pf/jh 8/ 13
H.F. 2677 subchapter IV. 1 3. The Code editor is directed to create a new subchapter 2 III in chapter 453A as follows: Subchapter III shall be 3 entitled Vapor Products Directory and Regulation and include 4 sections 453A.52A through 453A.52G. 5 4. The Code editor may modify subchapter titles if necessary 6 and is directed to correct internal references in the Code as 7 necessary due to enactment of this section. 8 EXPLANATION 9 The inclusion of this explanation does not constitute agreement with 10 the explanations substance by the members of the general assembly. 11 This bill relates to the regulation of vapor products in 12 the state. The bill directs the Code editor to create a 13 new subchapter in Code chapter 453A (cigarette and tobacco 14 taxes and regulation of alternative nicotine products and 15 vapor products) to be entitled Vapor Products Directory and 16 Regulation. 17 The bill requires that by August 1, annually, following the 18 date the director first makes the vapor products directory 19 publicly available, every vapor products manufacturer whose 20 vapor products are sold in the state, whether directly or 21 through an intermediary, shall certify under penalty of 22 perjury on a form and in the manner prescribed by the director 23 (director) of the department of revenue (DOR), that the vapor 24 products manufacturer agrees to comply with the new Code 25 subchapter and has either received a marketing authorization 26 or similar order for the vapor product from the federal food 27 and drug administration (FDA); or that the vapor product was 28 marketed in the United States as of August 8, 2016, the vapor 29 products manufacturer submitted a premarket tobacco product 30 application for the vapor product to the FDA on or before 31 September 9, 2020, and the application either remains under 32 review by the FDA or a final decision on the application has 33 not otherwise taken effect. 34 The certification must separately list each of the vapor 35 -9- LSB 5259HV (2) 90 pf/jh 9/ 13
H.F. 2677 products manufacturers vapor products sold in the state. 1 Each initial and annual certification form required to 2 be submitted shall be accompanied by a copy of either the 3 FDA marketing authorization or other order for each vapor 4 product; or evidence that the premarket tobacco product 5 application for each vapor product was submitted to the FDA 6 and a final authorization or order has not yet taken effect. 7 The certification must also be accompanied by a payment of 8 $100 for each vapor product listed in the certification. A 9 vapor products manufacturer required to submit a certification 10 form shall notify the director within 30 business days of 11 any material change to the certification form, including any 12 change in the federal authorization for the vapor product. The 13 director shall maintain and make publicly available a vapor 14 products directory that lists all vapor products manufacturers 15 and vapor products for which certification forms have been 16 submitted. The directory shall be available on DORs internet 17 site, and the director shall update the directory on at least a 18 monthly basis. 19 The director shall provide a vapor products manufacturer 20 with notice and an opportunity to cure deficiencies before 21 removing the vapor products manufacturer or a vapor product 22 from the directory. The bill provides the process and time 23 frames for removing a vapor products manufacturer or vapor 24 product from the directory. A determination by the director 25 to not include or to remove a vapor products manufacturer or 26 a vapor product from the directory shall be subject to review 27 by the filing of a civil action for prospective declaratory 28 or injunctive relief. If a vapor product is removed from the 29 directory, the bill provides the process and time frames by 30 which a retailer, distributor, or wholesaler must remove the 31 vapor product from inventory and return the vapor product to 32 the vapor products manufacturer for disposal. After the time 33 frame specified, the vapor products in the notice of removal 34 are contraband and are subject to seizure, forfeiture, and 35 -10- LSB 5259HV (2) 90 pf/jh 10/ 13
H.F. 2677 destruction, and shall not be purchased or sold in the state. 1 The bill provides that beginning October 1, 2024, or on the 2 date the director first makes the vapor products directory 3 available for public inspection on DORs internet site, 4 whichever is later, a person shall not sell or offer for sale 5 a vapor product in this state that is not included in the 6 vapor products directory and a vapor products manufacturer 7 shall not sell, either directly or through an intermediary, 8 a vapor product in this state that is not included in the 9 vapor products directory; and a retailer shall purchase vapor 10 products for resale to consumers only from a distributor or 11 subjobber with a valid license issued pursuant to Code chapter 12 453A. 13 The bill provides for civil penalties and licensee 14 discipline for a retailer, distributor, or wholesaler who sells 15 or offers for sale a vapor product in this state that is not 16 included in the vapor products directory, based on the number 17 of violations in a period of years. 18 A vapor products manufacturer whose vapor products are not 19 listed in the vapor products directory and are sold in this 20 state, whether directly or through an intermediary, is subject 21 to a civil penalty of $1,000 per day for each vapor product 22 offered for sale in violation of the bill. A vapor products 23 manufacturer that knowingly makes a false representation in 24 any of the information required by the new Code subchapter is 25 guilty of a serious misdemeanor for each false representation. 26 A serious misdemeanor is punishable by confinement for no more 27 than one year and a fine of at least $430 but not more than 28 $2,560. 29 Under the bill, knowingly shipping or receiving vapor 30 products in violation of the new Code subchapter is an unfair 31 practice and a violation of Code section 714.16 (consumer 32 frauds). 33 The bill provides that each distributor or retailer that 34 distributes or sells vapor products in the state shall be 35 -11- LSB 5259HV (2) 90 pf/jh 11/ 13
H.F. 2677 subject to unannounced compliance checks conducted by DOR 1 or peace officersfor purposes of enforcing the new Code 2 subchapter, and that any unannounced follow-up compliance 3 checks of a noncompliant retailer or distributor shall be 4 conducted within 30 business days after any violation of the 5 new Code subchapter. The director shall publish the results 6 of all compliance checks performed at least annually and shall 7 make the results available to the public upon request. 8 The bill requires a nonresident vapor products manufacturer 9 that has not registered to do business in the state as a 10 foreign corporation or business entity to, as a condition 11 precedent to being included or retained in the vapor products 12 directory, appoint and continually engage without interruption 13 the services of an agent in this state to act as agent for the 14 service of process. The bill provides the requirements for 15 instances in which a vapor products manufacturer terminates 16 the authority of an agent or an agent terminates an agency 17 appointment. If a vapor products manufacturer whose vapor 18 products are sold in the state has not appointed and engaged 19 the services of an agent as required, the vapor products 20 manufacturer is deemed to have appointed the secretary of state 21 as its agent for service of process. However, the appointment 22 of the secretary of state as agent shall not satisfy the 23 condition precedent for the vapor products manufacturer to be 24 included or retained in the vapor products directory. 25 The bill provides that the revenues generated from the 26 payment of fees and penalties provided for under the new Code 27 subchapter shall be credited to the health care trust fund and 28 used for the administration and enforcement of the new Code 29 subchapter. The bill makes conforming changes in Code section 30 453A.35 (proceeds made to general fund health care trust 31 fund) and Code section 453A.35A (health care trust fund) to 32 reflect this provision. 33 The bill also makes a conforming change in Code section 34 453A.19 (examination of records and premises) to authorize 35 -12- LSB 5259HV (2) 90 pf/jh 12/ 13
H.F. 2677 DOR, in determining compliance with the new Code subchapter, 1 to have the right to inspect any premises of the holder of 2 an Iowa permit located within the state of Iowa where vapor 3 products are stored, transported, sold, or offered for sale 4 or exchanged, to examine all stocks of vapor products of the 5 permit holder, and to examine all of the records required to 6 be kept or any other records that may be kept incident to the 7 conduct of the vapor products business of the permit holder or 8 any other person dealing in vapor products. 9 The bill requires that by January 15, annually, following 10 the director first makes the vapor products directory 11 publicly available, the director shall submit a report to the 12 general assembly regarding the status of the vapor products 13 directory, vapor products manufacturers, the vapor products 14 included in the directory, revenue and expenditures related 15 to administration of the new Code subchapter, and enforcement 16 activities undertaken pursuant to the new Code subchapter. 17 The bill requires the director to adopt administrative rules 18 to administer the new Code subchapter, and provides Code editor 19 directives to provide for creation of the new Code subchapter, 20 a conforming transfer, and other modifications necessitated by 21 the bill. 22 -13- LSB 5259HV (2) 90 pf/jh 13/ 13