May 2022
Karl Zhang and Teresa Huang
On March 11, 2022, the State Tobacco Monopoly Administration announced the Measures for the Administration of Electronic Cigarettes (hereinafter, the “Measures”), which will go into effect on May 1, 2022. The Measures are highlighted below:
I. Scope of application and definition
The Measures apply to the production and operation of electronic cigarettes and their supervisory and administrative activities in the People’s Republic of China. The electronic cigarettes referred to in the Measures include products such as vape pods, vape devices, and products consisting of their combinations for distribution.
II. Production and quality management
The establishment of electronic cigarette manufacturing enterprises (including enterprises that engage in product production and outsourced processing and hold brands; the same below), atomizer production enterprises, enterprises producing nicotine for electronic cigarettes, etc., can obtain the establishment approval pursuant to the relevant requirements of the state only after obtaining the approval of the administrative authority for tobacco monopoly review under the State Council. The establishment of the above enterprises requires the approval of the administrative authority for tobacco monopoly review under the State Council in order to obtain a tobacco monopoly production enterprise license and register with the market regulation authorities. The separation, merger, and cancellation of such enterprises require the approval of the administrative authority for tobacco monopoly review under the State Council and relevant registration with the market regulation authorities. For failure to obtain a tobacco monopoly production enterprise license, the market regulation authorities will not approve the registration.
The following conditions should be met for those who engage in production and operation activities related to electronic cigarettes, atomizers, and nicotine for electronic cigarettes, and obtain a` tobacco monopoly production enterprise license: (1) there shall be funds appropriate to the production; (2) there shall be the technologies and equipment conditions required for the production; (3) the electronic cigarette industrial policy requirements of the state should be met; and (4) other conditions required by the tobacco monopoly review authority under the State Council should be met. If licenses issued by other related authorities are required, the above production enterprises should also obtain corresponding licenses. For enterprises holding an electronic tobacco brand and applying for a tobacco monopoly production enterprise license, the applicant should not only meet the conditions set forth in Subparagraphs (1), (3) and (4) above but also submit application related materials to entrusted tobacco operation agreement. The applicant should be responsible for the legality, authenticity, and completeness of the application materials.
III. Sales administration
An enterprise that obtains a tobacco monopoly wholesale enterprise license should obtain the approval of amending the scope of the license from the authorities for tobacco monopoly review before engaging in the wholesale business of electronic cigarette products. To engage in the retail business of electronic cigarettes, it is necessary to apply to the administrative authorities for tobacco monopoly review for a tobacco monopoly retail license or to amend the scope of license pursuant to law. Sales outlets of electronic cigarette products shall not be established around general primary and secondary schools, special education schools, secondary vocational schools, specialized schools, and kindergartens.
The administrative authority for tobacco monopoly review under the State Council will establish a national unified administrative platform for electronic cigarette transactions. Electronic cigarette manufacturers, atomizer manufacturers, electronic cigarette nicotine manufacturers, electronic cigarette wholesalers, and electronic cigarette retail business entities that have obtained tobacco monopoly licenses in accordance with law shall trade through the administrative platform for electronic cigarette transactions. Electronic cigarette products that have not passed the technical review shall not be put on the market and sold. Electronic cigarette products put on the market and sold should remain consistent with the product information that passed the technical review. The administrative authority for tobacco monopoly review under the State Council should organize a professional organization to conduct technical review of electronic cigarette products based on application materials such as examination and test reports.
IV. Import and export trade and foreign economic and technical cooperation
Enterprises holding a tobacco monopoly wholesale enterprise license can engage in the wholesale business of imported products only after obtaining the approval of amending the scope of license from the administrative authority for tobacco monopoly review under the State Council. For the importation of electronic cigarette products, atomizers, and nicotine for electronic cigarettes, etc., the needs should be submitted to the administrative authority for tobacco monopoly review under the State Council and relevant state requirements should be satisfied. Imported electronic cigarette products, atomizers, and nicotine for electronic cigarettes, etc., should be sold to electronic cigarette wholesale enterprises, electronic cigarette product manufacturers, and electronic cigarette brand holding enterprises through the administrative platform for electronic cigarette transactions stipulated under the Measures. Imported electronic cigarette products sold in China should pass the technical review and use trademarks registered in China.
V. Supervision and inspection
Administrative authorities for tobacco monopoly will review, supervise and inspect the enforcement status of the Measures, investigate and handle cases involving violation of the Measures, and investigate and handle acts of producing and selling counterfeit and substandard electronic tobacco products, atomizers, and nicotine for electronic cigarettes, infringing intellectual property rights, illegal operations, smuggling, etc., in conjunction with relevant authorities.
For individuals, legal persons, and other organizations that violate the Measures, the administrative authorities for tobacco monopoly review may initiate regulatory conversations, suspend the platform trading qualifications, order the suspension of production and business operations, or conduct rectification until their qualifications for engaging in the production and business operations of electronic cigarette products, atomizers, and nicotine for electronic cigarettes are revoked in accordance with law. The administrative authorities for tobacco monopoly review should establish a credit management system to include dishonest market entities as focused targets of supervision and inspection to strengthen the regulation. Meanwhile, the information about dishonest market entities will be included in the National Credit Information Sharing Platform and the National Enterprise Credit Information Disclosure System for disclosure pursuant to law.