An Act to provide for vapor product certification requirements and to provide a penalty therefor.
Be it enacted by the Legislature of the State of South Dakota:
Section 1. That a NEW SECTION be added to title 10:
For purposes of this chapter, the term "vapor product" means a noncombustible product that produces vapor or aerosol for inhalation, from the application of a heating element to a liquid substance containing nicotine from any source. A vapor product includes a consumable nicotine liquid, suitable for use in a vapor product, whether the liquid is sold with the product or separately.
Section 2. That a NEW SECTION be added to title 10:
On or before August first of each year, the manufacturer of a vapor product that is sold in this state, whether directly or through a distributor, wholesaler, retailer, or similar intermediary, shall:
(1) Certify to the Department of Revenue, that the manufacturer, pursuant to 21 U.S.C. 387j (January 1, 2024), received a marketing authorization or similar order for the vapor product from the United States Food and Drug Administration; or
(2) Certify to the Department of Revenue, that:
(a) The vapor product was marketed in the United States on or before August 8, 2016;
(b) On or before September 9, 2020, the manufacturer, pursuant to 21 U.S.C. Section 387j (January 1, 2024), submitted to the United States Food and Drug Administration a premarket tobacco product application for the vapor product; and
(c) The application either remains under review by the United States Food and Drug Administration or a final decision on the application has not yet taken effect.
A separate certification is required for each type of vapor product sold by the manufacturer in this state.
It is a Class 1 misdemeanor for a manufacturer to knowingly misrepresent any information required by this section.
Section 3. That a NEW SECTION be added to title 10:
The certification required by section 2 of this Act must be accompanied by:
(1) A copy of the market authorization or order referenced in subdivision (1) of section 2 of this Act; or
(2) Documentation indicating that a premarket tobacco product application for the vapor product was submitted to and received by the United States Food and Drug Administration on or before September 9, 2020, and that:
(a) The application remains under review by the United States Food and Drug Administration; or
(b) A final authorization or order has not yet taken effect.
Section 4. That a NEW SECTION be added to title 10:
The initial certification required by section 2 of this Act, and each annual recertification, must be accompanied by a fee in the amount of five hundred dollars. The Department of Revenue shall retain the fee for purposes of administering sections 1 to 16, inclusive, of this Act.
Section 5. That a NEW SECTION be added to title 10:
Upon the occurrence of any material change in the certification information provided to the Department of Revenue in accordance with section 2 of this Act or in the accompanying documents required in accordance with section 3 of this Act, the manufacturer must, within thirty days, notify the department of the change.
For purposes of this section, the term "material change" includes:
(1) The issuance or denial of a marketing authorization or other order by the United States Food and Drug Administration, pursuant to 21 U.S.C. 387j (January 1, 2024); and
(2) Any order or action by the United States Food and Drug Administration that affects the ability of the vapor product to be introduced or delivered into interstate commerce for commercial distribution in the United States.
Section 6. That a NEW SECTION be added to title 10:
The Department of Revenue shall maintain, and make publicly available on the department s website, a directory listing of all vapor product manufacturers that provided certifications to the department in accordance with section 2 of this Act and the vapor products for which each manufacturer submitted a certification.
The department shall update the directory as necessary to ensure accuracy.
Section 7. That a NEW SECTION be added to title 10:
If the Department of Revenue becomes aware of any reason for which a vapor manufacturer or a vapor product may no longer be included in the directory, the department must, prior to removing the manufacturer or a product, provide to the manufacturer notice and an opportunity to cure any deficiency.
The department may not remove a manufacturer or a product from the directory for a period of at least fifteen days after the notice required by this section has been provided.
The department may provide notice under this section electronically, using the contact information included on the manufacturer's most recently submitted certification.
Section 8. That a NEW SECTION be added to title 10:
If the Department of Revenue removes a manufacturer or a vapor product from the directory, the department must publish a notice of the removal on the department s website.
During the twenty-one-day period following the date on which the department published the notice of the removal, each retailer and distributor or wholesaler must remove the vapor product from its inventory and return the product to the manufacturer for disposal.
Upon the conclusion of the twenty-one-day period following the date on which the department published the notice of the removal, any vapor product identified in the notice:
(1) Becomes contraband;
(2) Becomes subject to seizure, forfeiture, and destruction; and
(3) May not be sold or purchased in this state.
Section 9. That a NEW SECTION be added to title 10:
Beginning October 1, 2024, and except as otherwise provided in section 10 of this Act, a person may not offer for sale or sell a vapor product in this state unless the product is included in the directory compiled by the Department of Revenue in accordance with section 6 of this Act.
A person who violates this section is subject to a civil penalty in the amount of $1,000 per day for each vapor product offered for sale or sold.
If a retailer purchases a vapor product from a licensed distributor or a licensed wholesaler and the product is not included in the directory, the retailer is not subject to the civil penalty provided for in this section, unless the retailer had actual knowledge that the product was not included in the directory.
The department shall retain any civil penalty collected under this section for use in administering sections 1 to 16, inclusive, of this Act.
Section 10. That a NEW SECTION be added to title 10:
Beginning October 1, 2024, a vapor product manufacturer may not sell, either directly or through a distributor or wholesaler, retailer, or similar intermediary or intermediaries, a vapor product in this state unless the product is included in the directory compiled by the Department of Revenue in accordance with section 6 of this Act.
A vapor product manufacturer who violates this is subject to a civil penalty in the amount of $1,000 per day for each vapor product offered for sale or sold. The department shall retain any civil penalty collected under this section for use in administering sections 1 to 16, inclusive, of this Act.
Section 11. That a NEW SECTION be added to title 10:
A second or subsequent violation of sections 1 to 10, inclusive, of this Act, constitutes a deceptive act or practice, as defined in 37-24-6.
In any action brought to enforce sections 1 to 10, inclusive, of this Act, the state is entitled to recover the costs of investigation, expert witness fees, court costs, and reasonable attorneys' fees.
Section 12. That a NEW SECTION be added to title 10:
The Department of Revenue may, for the purposes of determining compliance with sections 1 to 10, inclusive, of this Act:
(1) Enter, during normal business hours, the premises of any distributor, wholesaler, or dealer and inspect the premises and all furnishings and fixtures located on the premises, including any desk, safe, or vault; and
(2) Examine the books, papers, and records of any distributor, wholesaler, or dealer.
If the department determines that any vapor products are being offered for sale in violation of sections 1 to 10, inclusive, of this Act, the department may declare the products to be contraband and may, without a warrant, seize the products or direct any law enforcement officer to seize the products.
Section 13. That a NEW SECTION be added to title 10:
In addition to the inspections authorized by section 12 of this Act, any retailer or wholesaler selling or distributing vapor products in this state is subject to unannounced compliance checks by the Department of Revenue. If a violation of sections 1 to 10, inclusive, of this Act is noted, the retailer or wholesaler is subject to additional compliance checks during the thirty-day period following a violation.
Section 14. That a NEW SECTION be added to title 10:
Any nonresident or foreign manufacturer that has not registered to do business in the state as a foreign corporation or business entity must, as a condition precedent to having its vapor products listed or retained in the directory, appoint and continually engage without interruption the services of an agent in the United States to act as the agent for the service of process upon whom all process, and any action or proceeding against it concerning or arising out of the enforcement of this section may be served in any manner authorized by law. Service under this section constitutes legal and valid service of process on the manufacturer. The manufacturer shall provide to the Department of Revenue the agent's name, address, and phone number, and proof of the agent's appointment and availability.
Section 15. That a NEW SECTION be added to title 10:
Beginning January 31, 2025, and annually thereafter, the Department of Revenue shall provide a report to the Legislature setting forth:
(1) The number of manufacturers listed in the directory required by section 6 of this Act;
(2) The number of vapor products listed in the directory required by section 6 of this Act;
(3) The nature and extent of the enforcement activities undertaken by the department in connection with sections 1 to 10, inclusive, of this Act;
(4) The amount of civil fines collected by the department in accordance with sections 9 and 10 of this Act; and
(5) The costs incurred by the department in administering sections 1 to 16, inclusive, of this Act;
Section 16. That a NEW SECTION be added to title 10:
The Department of Revenue may promulgate rules, in accordance with chapter 1-26, to:
(1) Develop the forms required by section 2 of this Act for the initial certification and for the annual renewal of the certification;
(2) Establish the time and manner in which initial and renewal certifications must be submitted to the department;
(3) Establish an administrative process pertaining to the renewal of a certification;
(4) Establish an administrative process pertaining to the appointment of an agent by a nonresident or a foreign manufacturer;
(5) Establish the criteria for compliance checks ;
(6) Establish the criteria by which certification deficiencies may be cured; and
(7) Establish criteria pertaining to the seizure and destruction of contraband.
Section 17. That 37-24-6 be AMENDED:
37-24-6. It is a deceptive act or practice for any person to:
(1) Knowingly act, use, or employ any deceptive act or practice, fraud, false pretense, false promises, or misrepresentation or to conceal, suppress, or omit any material fact in connection with the sale or advertisement of any merchandise, regardless of whether any person has in fact been misled, deceived, or damaged thereby;
(2) Advertise price reductions without satisfying one of the following:
(a) Including in the advertisement the specific basis for the claim of a price reduction; or