New E-cig Regulation in China

China’s SMTA to implement New E-cig Measures on May 1, 2022

China’s vape industry has been hit with another round of legislation. The State Tobacco Monopoly Administration, abbreviated as STMA, has released new electronic cigarette measures effective on May 1, 2022. The regulation that was drafted last year and officially announced and introduced to the public on March 11 applies to companies that engage in the manufacture and operation of electronic cigarette(ecig) products within China and cover all types of vaping products.

1.Manufacture and Quality

  • The local tobacco administrative departments should conduct regular and ad-hoc inspections of companies and individuals with licenses to sell ecig products.
  • The ecig brand owners shall manage and supervise the manufacturers’ behavior and be responsible for the quality of the products
  • A unified ecig product traceability system needs to be established to strengthen the management from production to sale
  • Companies must receive approval and obtain a license before they can establish businesses to manufacture e-cigarettes; Manufacturers must reapply for a license if their scope of business changes and obtain approval from the STMA if they intend to expand production capacity

2.Sales and Marketing

  • All ecig transactions should ONLY take place on the nation’s unified ecig management platform
  • Ecig wholesalers shall not provide ecig products to businesses or individuals that are not qualified to engage in ecig retail business; The tobacco products used by manufacturers to produce e-cigarette products and nicotine must be purchased from a company with the right to operate and may not be purchased from an illegal seller.
  • It is prohibited to hold exhibitions, forums, expositions, etc. to promote ecig products
  • ONLY tobacco flavors are allowed, other flavours are banned
  • Open rather than closed devices are prohibited, like refillable/ DIY pods
  • The current ecig specialty stores, such as stores of certain ecig brands, shall not exist. Ecig stores is not able to sell only one type/brand of ecig products but will have to sell a collection of multiple types/brands of ecig products
  • Only companies that already have tobacco wholesale licenses are qualified to be engaged in ecig wholesale business
  • There will be a limit on the shipment of ecig products. However, the exact limit is vague and not specified in the document
  • Ecig retailers may not be located close to any schools for minors to whom the ecig products are not allowed to be sold. It is also prohibited to sell ecig products through any self-service mechanism like self-vending machines

3.Cross-border Trade

  • The packaging of ecig products exclusively for export shall meet the requirements set by the STMA
  • Ecig products that are not sold in China and are only for export shall comply with the regulations of the destination country or region; If there are no specific regulations there, they shall comply with the regulations in China
  • Imported vape products can also only be sold to domestic wholesalers or producers through the unified ecig transaction platform. Overseas suppliers of ecig products are also allowed to sell products to domestic manufacturers or wholesalers only through this channel.

Summary and Insights

  • This regulation mainly applies to businesses that conduct activities within China
  • Regulation about nonnicotine eliquid is not specified in this file. So there exists a vague explanation about 0% nicotine products. This shows that 0% nicotine products are in grey area
  • The vaping products discussed in this document also cover “other new tobacco products“, including those of solid form
  • The new measures might lead to an uncertain future and significantly less profit for the domestic vaping market in China
  • The measures only explicitly prohibit the sale of flavored vapes in China but did not mention the production or export of flavored juices. This will leave room for more explanation on export business. According to many experts, the Chinese government encourages companies that focus on export business
  • The ecig transaction platform could be a major headwind for the vaping industry. The platform indicates that e-cigarettes will be subject to the same pricing and quota requirements as traditional tobacco products
  • The requirements of having an adequate amount of capital and facilities are immense entry barriers for new and small players. This is extremely beneficial to those established players
  • This regulation favours the notion that consumers should get more reliable, higher-quality, and safer products from the upstream producers and sellers who are expected to take more responsibility