What You Don’t Know May Destroy Your Tobacco Business

Jan 14, 2015

Are you an online tobacco retailer? Then you may be subject to steep FDA penalties if your tobacco products are not compliant with the FD&C Act. Last year, six online retailers received warning letters from the FDA for selling “across state lines a tobacco product subject to a Not Substantially Equivalent (NSE) Order.”  If your business receives this letter, your products will be deemed “misbranded and adulterated,” and won’t be eligible for sale on the market. Unfortunately too many tobacco retailers are unaware of the status of their products. This could mean that their tobacco is at risk of being in violation of the FD&C Act.

The FDA issues a NSE order when a retailer’s SE Report does not have enough information to indicate that a specific product is substantially equivalent to a predicate tobacco item. Once a retailer receives a NSE Order, it is illegal to sell, distribute, or import their tobacco product in the United States. If the retailer continues to distribute the product, they are subject to seizures and injunctions.

Navigating the complex world of the FD&C Act in relation to the online sale of tobacco can be tricky, which means that many businesses can be cited without knowing why. If your online tobacco business has received a NSE Order, you may be spared harsh penalties like injunction and monetary punishment, by taking swift and corrective action.

The FDA does recognize that many retailers will lose significant sums of money by disposing of all of their inventory. Therefore the FDA draft guidance, called, “Enforcement Policy for Certain (“Provisional”) Tobacco Products that FDA Finds Not Substantially Equivalent ,” states that the FDA will wait to take enforcement action for 30 calendar days from the date the NSE order is issued. During this 30 day period, retailers should contact their manufacturers or suppliers to discuss options for affected products in their current inventory.

If you have an online tobacco company, it is important to maintain compliance in every way. This includes ensuring that your online tobacco merchant account is properly managed and protected for you and your customers.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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