Closed shops, empty shelves and higher prices. That's the current forecast of Indiana's vaping industry, which claims recent legislation has basically vaporized the e-liquid cigarette market throughout the state.
Signed into law by Gov. Mike Pence in April 2015, House Bill 1432 is aimed at regulating e-cigarette liquids, which critics claim can hold health hazards of their own even though they do not give off tobacco smoke. Proponents say e-cigarettes are a safe, effective way for people to quit smoking.
Blacksheep Vapors, previously of Highland, temporarily closed to move to a new location just over the border in Chicago Heights, Ill., to stop from going out of business altogether. Jazmin Esparza, general manager, said the move was "the hardest decision we have made," costing tens of thousands of dollars and weeks of paperwork.
Blacksheep Vapors mixes its own e-liquids and Esparza said HB1432 makes it impossible for her to continue to do business in Indiana.
"There is no way we would have been able to operate using our current model in Indiana without being in violation of HB 1432," Esparza said. "We would essentially have become a bootlegger of sorts, selling contraband products to our customers. Doing so would have put us at risk of severe financial penalties and would also have destroyed our reputation as a responsible and honest business."
The e-cigarettes sold in vape shops today are actually electronic cartridges, looking a little like fancy pens in some cases, that are filled with custom-blended e-liquids or "vape juices" that consist of a glycerin base and other ingredients, which can include nicotine.
Vape shops can buy the vape juices from bulk manufacturers or they can make their own, in which case they are regulated as a manufacturer under the new law.
E-cigarettes can be used as an aid in quitting smoking, but some people smoke them simply for the pleasure they find in it.
State Rep. Julie Olthoff, R-Crown Point, was one of four state representatives from Lake County who co-authored HB1432. Sen. Lonnie Randolph, D-East Chicago, sponsored the bill but could not be reached for comment.
"I feel people should have confidence that what they inhale is labeled properly and manufactured in a clean environment," Olthoff said in an email. "The FDA also sees that this new industry needs regulating and has issued their rules. We are waiting to see if our Indiana's rules will be pre-empted by the Federal rules."
Blacksheep Vapors is willing to comply with safety regulations and sees the need for industry standards, Esparza said. But the business is getting stuck in the red tape involving manufacture and mixing of e-liquids, just as are hundreds of other shops that produce their own product.
Since the law went into effect July 1, only six bulk manufacturers have had their products approved for sale in Indiana under the new regulations.
Without becoming a registered manufacturer, Blacksheep Vapors would have no choice but to sell only e-liquids produced by the six manufacturers, forcing it to compromise on the quality of their product, Esparza said. And those manufactured e-liquids are priced so high the company would not be able to maintain its profit margins.
The 2015 law mandates all e-liquid ingredients must be listed on packaging, includes random testing of the product, limits ingredients in e-liquids and bans sales to minors. It also calls for specific conditions for manufacturing such as cleanliness. This is not the cause of controversy, shop owners and industry advocates said.
Roy Story, CEO of the Tobacco Vapor Electronic Cigarette Association, said a stipulation in the law that all makers of e-liquids must hire a security firm is one of the largest stumbling blocks.
According to the law, the security firm must employ one or more people certified by the International Door Association as a rolling steel fire door technician and the Door and Hardware Institute, as an architectural hardware consultant. And the company has to have employed these certified persons one year before the regulations took effect in July.
Only one security firm in Indiana, based in Lafayette, met these requirements, meaning all vape manufactures whose products are sold in Indiana would have to hire it, Story said.
Olthoff acknowledged the law may need to be tweeked.
"No one intended a monopoly," she said.
"I feel for the manufacturers who weren't able to find a security firm to hire so they can meet their certifications," Olthoff said. "These regulations are new to the state and may need altering plus there are other issues in play, like the FDA rulings and their impact on Indiana's legislation. I'm sure the legislators will take another look to make improvements."
Story said he sees the need for regulation, but the current law has to be changed.
"Certainly we need oversight," Story said. "I am all for regulation, but responsible regulation and oversight."
It's not just small businesses getting stumped by the legislation's requirements. Even large companies with multiple FDA and Alcohol and Tobacco Association monitored products such as National Tobacco Co. of Louisville, Ky., are not making the grade in Indiana.
"It has been an issue with Indiana alone," said Brittani Cushman, National Tobacco Co. vice-president of external affairs. "No other states have instated this regulatory regime."
In 2015, Cushman testified regarding HB1432 during a Senate Public Policy committee hearing.
"It's shocking that the state has implemented this regime, where companies, large or medium in size, have no motivation or ability to comply," Cushman said.
Democratic gubernatorial candidate John Gregg, bill sponsor Sen. Ron Alting-R and other Indiana Senate leaders are now also calling for a review of the law.
So far the bill has been tried in one federal court case and it was determined HB1432 does not violate interstate commerce rules.
But Story hopes pending litigation in the U.S. District Court for the Southern District of Indiana, e-liquid company GoodCat LLC et al. v. Cook et al., will help put an end to the law.
"This is a product that has brought down the smoking rate for the past five years without any instances of harm," Story said.