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How will China’s existing cigarette monopoly system be applied to e-cigarettes?

As we all know, China is the world’s largest tobacco producer and consumer. There are more than 300 million smokers in China, accounting for nearly one-third of the total number of smokers globally. The China National Tobacco Corporation (CNTC) is the world’s largest tobacco control company in its tobacco industry. China National Tobacco Corporation (CNTC) in the global market is entirely the result of its monopoly of China’s domestic tobacco industry. In fulfilling its regulatory responsibilities, CNTC is also known as the State Tobacco Monopoly Administration (STMA), a government-granted monopoly organization established under China’s “Tobacco Monopoly Law.” According to the Tobacco Monopoly Law, STMA maintains control over almost all stages of the production, sale, import, export, and distribution of Chinese tobacco products. Since the STMA publicly solicited opinions on the “E-cigarette Management Measures” on December 2nd, it has become the focus of the global tobacco and e-cigarette-related industries. This move may change the world pattern of e-cigarettes. Next, we will open our brains to consider what changes its measures will bring to the e-cigarette industry or the tobacco industry:


What are the reasons for the China Tobacco Monopoly Administration to include e-cigarettes in the management category?

Due to regulatory gaps, the e-cigarette industry has developed disorderly. Some products have unclear nicotine (nicotine, the same below) content, unknown added ingredients, and e-liquid leakage. In particular, some operators mislead consumers and induce minors. As a result, human ingestion harms minors’ physical and mental health. All sectors of society have expressed vital feedback and continue to call for strengthened supervision. The Chinese government attached great importance to this and decided to amend the “Regulations for the Implementation of the Tobacco Monopoly Law of the People’s Republic of China” to strengthen the supervision of new tobacco products such as e-cigarettes under the law. To do an excellent job in e-cigarette supervision, perform supervisory duties in accordance with the law, regulate e-cigarette market order, protect people’s health and safety, and promote legalization and standardization of industrial governance, the State Tobacco Monopoly Administration issued this policy after many investigations and evaluations.

What is the main purpose of the “Administrative Measures on Electronic Cigarettes” of the State Tobacco Administration?

The main content has 8 aspects:

  • Clarify the definition of e-cigarettes and the objects of supervision.
  • Strengthen the management of e-cigarette production and establish an e-cigarette product quality and safety assurance system and an e-cigarette product traceability system.
  • Market entities engaged in the production, wholesale, and retail electronic cigarettes must obtain licenses issued by the tobacco monopoly administrative department accordingly.
  • Establish a unified national electronic cigarette transaction management platform to conduct transaction management on electronic cigarette products and nicotine used in electronic cigarettes.
  • E-cigarette products shall comply with the national standards for electronic cigarettes and the relevant regulations on packaging logos and warnings and use registered trademarks under the law.
  • E-cigarette advertisements are subject to the relevant regulations of tobacco advertisements.
  • Under the State Council, the administrative department of tobacco monopoly supervises and manages the import and export trade of electronic cigarettes and foreign economic and technological cooperation under the law.
  • Electronic cigarette tax collection is implemented following national tax laws and regulations.

What are the main contents of the “E-cigarette Management Rules” issued by STMA

To strengthen the management of e-cigarettes and standardize the order of the e-cigarette market, the “Administrative Measures on E-cigarettes” issued by STMA mainly include the following points:

1. Chapter 1: scope of management applications are those engaged in the production and operation of e-cigarettes within the territory of the People’s Republic of China.

2. Chapter 2: Production Management and Quality Safety

  • Enterprises engaged in e-cigarette production, e-cigarette substituting processing, and e-cigarette nicotine production must be approved by the tobacco monopoly administrative department of the State Council, obtain a tobacco monopoly production enterprise license, and be approved and registered by the
  • Tobacco leaves, dried tobacco leaves, shredded tobacco, etc., required for nicotine production for electronic cigarettes must be purchased from tobacco companies with operating rights.
  • Electronic cigarette product trademarks shall be printed by enterprises designated by the provincial market supervision and management department.
  • E-cigarette products shall comply with the relevant regulations on packaging labels and warnings of electronic cigarette products.
  • Those engaged in e-cigarette production activities shall establish a product quality assurance system and be responsible for the quality and safety of the e-cigarette products they produce or obtain registration, etc.

3. Chapter 3: Sales Management

  • Enterprises engaged in wholesale and retail electronic cigarettes need to obtain STMA approval.
  • E-cigarette manufacturers, e-cigarette processing companies, e-cigarette brand holders, e-cigarette nicotine manufacturers, e-cigarette wholesale companies, e-cigarette retail companies, and individuals with a tobacco monopoly license shall establish a unified e-cigarette transaction by the state Transactions in the management platform.
  • The tax base price shall be verified as required before e-cigarette products enter the unified e-cigarette transaction management platform.
  • E-cigarette sales outlets are not allowed in education schools, secondary vocational schools, kindergartens, and other locations around education.
  • Prohibit the use of vending machines to sell e-cigarette products
  • Prohibit the sale of e-cigarette products to minors

 4. Chapter 4: Import and Export Trade and Foreign Economic and Technical Cooperation

  • Enterprises holding a tobacco monopoly wholesale enterprise license can only engage in related import business after they have been approved by STMA and changed the license’s scope.
  • Imported e-cigarette products should comply with the relevant national e-cigarette management rules.
  • Duty-free imported e-cigarette products should be stored in a bonded warehouse designated by the customs. The number of duty-free imported e-cigarette products should be written off in batches upon approval of the duty-free import plan by the competent authority.
  • E-cigarette products exclusively for export should be marked with “exclusively for export” on the packaging.
  • E-cigarette products that are not sold in China but are only used for export shall comply with the destination country or region’s laws, regulations, and standards.

5. Chapter 5: Supervision and Inspection

  • Perform supervision and inspection following the law, and investigate and deal with violations of the manufacture and sale of electronic cigarette products, smuggling and trafficking, counterfeiting, and inferior products.
  • Electronic cigarette market entities with illegal and dishonest behaviors that are harmful, severe circumstances, and more significant social harm will be included in the list of targets for collective punishment for dishonesty.
  • The inspection and testing agency set up or designated by the competent authority shall conduct the product quality supervision and inspection of electronic cigarettes and the identification and testing of counterfeit registered trademark electronic cigarette products, counterfeit electronic cigarette products, etc.

6. Chapter 6:By-laws
Explain that e-cigarette category annotations and e-cigarette taxes are implemented following national tax laws and regulations.

What aspects are covered by the e-cigarette management measures

It only covers the management and supervision of the following 4 subjects:

  • Eelectronic cigarette manufacturing enterprise
  • Brand holding company
  • Brand distribution companies (including import agents)
  • E-cigarette retail store

How will it affect or reshape the global tobacco industry?

More than 95% of the world’s e-cigarettes are produced in China. Shenzhen, China has a complete e-cigarette supply chain. However, many of these companies only operate for original equipment manufacturers (OEMs). Products manufactured by OEMs are not sold in China but sold globally. Therefore, China’s regulation of e-cigarettes is of vital importance to the global e-cigarette industry. Only by strictly controlling the source of product quality can the industry or product continue in an orderly manner.

As the world’s largest tobacco company, STMA’s every move will more or less have a substantial impact on tobacco companies in other countries. Some time ago, the British government included e-cigarettes in the medical insurance reimbursement object and declared that the United Kingdom will realize the mission of a smoke-free city in 2030 has already affected the attitudes of other countries towards e-cigarettes. China’s attitude towards e-cigarettes soon makes more governments redefine e-cigarettes and learn from China’s management methods for e-cigarettes for e-cigarette management.

Let us wait and see how e-cigarettes will develop in the future!

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