What caused ‘vapedemic’

Before lawmakers adjourned for the filing of certificates of candidacy  (COCs) for next year’s elections, two landmark legislations passed by the 19th Congress became new laws of the land. President Ferdinand “Bongbong” Marcos Jr. (PBBM) signed into law one after the other these vital legislative measures that complemented one another.

PBBM signed last week Republic Act (RA) 12022, or the Anti-Agricultural Economic Sabotage Act which, among other things, imposed higher fines and longer jail terms on those convicted smugglers of agriculture products. The other was RA 12023, or the Value-Added Tax (VAT) on Digital Services Law that covers both local and foreign digital service providers (DSPs).

The first law seeks to plug loopholes in our existing criminal laws causing tax leakages due to smuggling and other forms of illicit activities in the importation of agricultural products. The latest law is a new tax net to capture a once untapped huge source of revenues, estimated to generate about P100 billion more for the government.

At the Kapihan sa Manila Bay news forum last Wednesday, we were told that manufactured cigarette products are considered agriculture products. Both the Bureau of Customs (BOC) and the Bureau of Internal Revenue (BIR) informed us the rampant smuggling of cigarette products is a major source of revenue leakage for the government. Mostly “Made in China,” these cigarette products are perennially smuggled through our country’s unguarded back doors in southern Philippines.

Government authorities though reassured the public the necessary safeguards are embedded in the existing rules and regulations to strictly enforce and implement the letter and spirit of the laws. In particular, BIR commissioner Romeo Lumagui Jr. referred to RA 11900, or the Vaporized Nicotine and Non-Nicotine Products Regulation Act. Called the Vape Law for short, this prohibits the sale and promotion of vape products within 100 meters of activity areas frequented by minors below 18 years old.

By virtue of the Vape Law, Lumagui cited the BIR has been closely monitoring the sale of vape products, whether online or physical, because of billions of pesos of revenue coming from the industry. Just last week, Lumagui disclosed the BIR joined with other government agencies that conducted a “VapeFest” that raided vape parlors and shops in Metro Manila that were found selling unregistered, uncertified vape products that were evidently imported illegally and therefore untaxed.

The BIR chief pointed out vape and cigarette products are covered by the Sin Tax Law that subjects these items to higher rates of excise tax on top of the 12 percent VAT. Thus, Lumagui clarified the legitimate vape products are not among those covered by the new law on DPS being sold online.

The revenue loss estimates were confirmed during the same news forum by Bienvenido Oplas, head of the tax reforms advocates group called the Minimal Government Thinkers Inc. According to the government’s reported revenue collections for this year, Oplas projected as much as P5 billion to P10 billion of taxes that could have been collected by the government might be lost due to the combined impact of smuggling of vape and cigarette products.

At the same Kapihan sa Manila Bay news forum, Leon Mogao, head of the BOC investigation and intelligence division services, recalled as much as P1.4 billion worth of vape products were confiscated from a warehouse in Valenzuela City last year. The Department of Justice prosecutors filed smuggling charges against its corporate officers. Just last August, Mogao added, the BOC closed down a vape shop in San Pedro, Laguna for the vape products found inside without the required importation papers.

On top of smuggling, Joey Dulay, president of the Philippine E-Cigarette Industry Association (PECIA), echoed the laments of the local vape industry that they are “hurting” due to the heavy competition posed by the unscrupulous retailers/sellers of popular vape products being peddled online.

Vaping became popular during the pandemic period while there was no Vape Law yet. But RA 11900 actually lapsed into law on July 25, 2022.The Vape Law was among the enrolled bills approved by the previous Congress but were not acted upon by Malacañang during the watch of former president Rodrigo Duterte. Barely a month into office then, PBBM did not veto but let RA 11900 lapse into law without his signature.

Thus online selling of unregistered vape products proliferated and led to the so-called “vapedemic.”

It was the Department of Trade and Industry (DTI) that was mandated to draft the implementing rules and regulations (IRR) for the Vape Law. It took the DTI to issue its Administrative Order No.22, Series of 2022 to enforce the IRR on the Vape Law on Dec. 5 of that year.

The IRR covers vapor products/refills, vapor product devices, heated tobacco products (HTPs), HTP consumables and devices. Under the same IRR, all manufacturers and importers of the covered products shall apply for product registration and certification with the DTI-Bureau of Philippine Standards (BPS) by submitting information of their products’ conformity with the technical regulations of the laws. It further required the BPS, in consultation with the Food and Drug Administration (FDA), to set the product standards for the safety, consistency and quality of the covered products.

In this regard, the Department of Health (DOH) shall have jurisdiction over the issuance of the Graphic Health Warning on all packages of these products. The IRR applies to all, “whether locally manufactured or imported, in an online or offline platform, or purchase or use of the vape and HTP products, as well as to all those responsible for ensuring compliance on public use and in designated vaping areas.”

Speaking in behalf of the 300 members of the PECIA, Dulay attested they are compliant with all of these requirements of the law as legitimate manufacturers and sellers/retailers of vape products being sold nationwide. However, Dulay rued their industry is still being overburdened by the long “transition” of these laws.

The time lag before the IRR for the Vape Law was put together, the sale of “uncertified” vape products lapsed only last Sept. 7, 2024. Finally, the DTI ban against uncertified vapes sold online took effect.