Tag: China

  • Broughton: China Vapor Laws is Opportunity

    Broughton: China Vapor Laws is Opportunity

    Photo: Smoore

    Recent amendments to China’s Tobacco Monopoly Law present an opportunity for responsible companies to demonstrate how alternative high-quality products are an important and appropriate element of tobacco harm reduction, according to Broughton.

    Writing on the website of the contract research organization, Broughton’s head of regulatory affairs, Lloyd Smart, and regulatory consultant Xiangyin Wei summarize China’s tobacco monopoly law changes and explain what they means for electronic nicotine delivery systems (ENDS).

    On Nov. 26, 2021, China’s State Council amended the country’s tobacco law, giving the State Tobacco Monopoly Administration jurisdiction over e-cigarettes. Next-generation products will now be managed in the same way as combustible cigarettes.

    Among other things, this means that ENDS companies, including exporters, will need to apply for a license. A single transaction platform will be implemented for product distribution and all products must comply with a new national standard. Regulation of products likely to be introduced following an initial transition period of between three and five months, during which no new products may be brought to market. Products with synthetic nicotine will be banned in China.

    According to Broughton, the recently announced changes to e-cigarette regulation in China offer an excellent business opportunity for companies that want to build consumer trust by showcasing their product’s high quality and safety standards.

    “As with all regulatory requirements, the most important initial step is to understand fully what’s needed—to provide reassurance or identify gaps that need to be addressed. And to act quickly; seizing the opportunity while making sure you don’t get left behind as the market changes,” write Smart and Xiangyin.

  • UKVIA Director General to Appear on China TV

    UKVIA Director General to Appear on China TV

    John Dunne (Photo: UKVIA)

    The U.K. Vaping Industry Association’s (UKVIA) director general has been invited to talk on national TV in China to give his thoughts on recent proposed regulation changes in China and their potential impact on the Chinese vaping industry both domestically and globally.

    China recently amended its tobacco laws to include e-cigarettes, meaning they will now be regulated like conventional tobacco products.

    The regulation of e-cigarettes in China is of critical importance to the international vaping industry because over 95 percent of e-cigarette hardware is manufactured in that country, leaving the sector keen to see whether this latest regulation change will reshape that global industry.

    To look at these questions, John Dunne will be interviewed on the China Global Television Network to offer his perspective based on many years immersed in both U.K. and international regulatory environments for the vaping sector.

    Speaking ahead of his interview, Dunne described “reasonable regulation” as a “good thing,” adding, “However, while regulation has the ability to raise standards, ensure products are safe for consumers and restrict minors access, in its current form, it could have a massive detrimental influence both domestically and internationally.”

    The UKVIA, together with several other organizations, has outlined its concerns and suggestions to make the regulation more effective and less restrictive in a letter that is being submitted to the State Tobacco Monopoly Administration to consider.

    During the interview, Dunne will also get the chance to speak to the Chinese media about the latest vaping developments in the U.K., such as it being potentially the first country in the world to prescribe e-cigarettes.

    “We know here in the U.K. that what kills people is the combustion and the tar and not nicotine,” he said in a statement. “Our government sees vaping as the solution to a smoking problem and not the problem itself.”

    He added, “I hope the Chinese government and STMA [State Tobacco Monopoly Administration] are open to listening to the industry leaders both domestically and internationally to help shape these regulations so that China can, like the U.K., seize the public heath prize that vaping offers without damaging a very large and vital export business.”

  • Vapor Companies Brace for Radical Change

    Vapor Companies Brace for Radical Change

    Photo: Taco Tuinstra

    China’s domestic e-cigarette market is going to look very different next year. On Nov. 27, the State Council gave the State Tobacco Monopoly Administration (STMA) jurisdiction over vapor products. Shortly after, the STMA issued draft rules for the sector.

    While much remains unclear, the draft does offer some insights, according to an industry source who spoke to Tobacco Reporter’s sister publication, Vapor Voice, on the condition of anonymity because he didn’t have permission to speak on the matter.

    For starters, China will allow only closed pod systems with tobacco-derived nicotine and tobacco-derived nicotine salts. Flavors will be permitted, and cartridges can’t leak, according to a translated copy of the proposed rules.

    Unlike some other countries, China will allow only tobacco-derived nicotine. The rules do not allow for a synthetic nicotine. “Nicotine extracted from tobacco should be used, and the purity should not be less than 9 percent,” the standards state. “Benzoate, tartrate, lactate, levulinate, malate and citrate of nicotine are allowed, and nicotine for preparing the above nicotine salts shall meet the requirements of [the previous statement].”

    However, synthetic nicotine will still be allowed in products for export. What isn’t clear is if that synthetic nicotine must be shipped into China premixed in PG and/or VG and held in bond or if a pure synthetic can be imported.

    “There’s no legal imports of nicotine as far as we can tell,” the Vapor Voice source said. “There’s seems to be no leeway for legal imports of a pure synthetic nicotine. However, we think if people import e-liquids with nicotine as a certain percent of that, that’s okay.”

    “We don’t know if it’s 10 percent or 20 percent and it can only be brought into the country to be manufactured for re-export—that appears to be okay. That is just how we are interpreting the rule though, maybe someone else is seeing it differently.”

    It also seems that the proposed rules also do not allow for a company to import finished vaping products into China and then sell them domestically without having a license and being registered with STMA. However, the country will continue to encourage exports, and wants domestic manufacturers to develop markets overseas.

    “What they’ve really done is they’re clamping down on anything that is destined for the domestic market,” the source said. “They’ve also tapped into the tax department. Any time a manufacturer wants to manufacturer an e-cigarette or parts for an e-cigarette, they have to have a local representative from the taxation bureau there. And each day’s production that they run, they have to pay tax on those products at the end of that day. They’re clamping down in terms of what people can do as well as trying to ensure that they collect relevant taxes from all the manufacturers.”

    Chinese vapor manufacturers are still waiting to understand what needs to be done officially for a company to produce vaping products for either the international or domestic market. “We’re still waiting on that,” the source told Vapor Voice.

    “The important piece isn’t the product standards. What I’m really interested in is the registration process, who’s allowed to do what, who has to issue licenses, because now there’s an emergency management bureau involved, not just STMA, so it’s a lot of people. We’re also trying to figure that piece out.”

    China’s product standards do clarify what types of products China will allow domestically. The country will only allow closed-pod systems to be sold, stating that “devices and cartridges using e-liquid should have a closed structure to prevent artificial filling.”

    Additionally, while flavors are approved only under a “temporary permit for additive in e-vapor matter” and any substance or flavor not listed “shall be used only after being proved to be safe and reliable by risk assessment,” the standards state. The listed additives include flavoring extracts such as coffee, cocoa, prune and vanilla bean.

    The standards allow for a maximum of 20 mg nicotine per milliliter (mL).

    The outlook for China’s domestic manufacturers the outlook is grim, according to the Vapor Voice source. While international players will likely survive, they are confused about what will expected when the rules are finalized.

    In Shenzhen, the capital of global vapor manufacturing, the industry is said to be in a state of shock. “Everybody, from big to small, is scrambling to try and find out how this relates to them,” the source said. “They all have to register immediately with State Tobacco Monopoly to continue doing business. They have to register what they’re going to be manufacturing, what their exports are, where they are going. It’s a complete disaster.”

  • Cullip: China Could Revolutionize THR

    Cullip: China Could Revolutionize THR

    Martin Cullip (Photo: Tobacco Reporter archive)

    China has the potential to revolutionize global tobacco harm reduction now that its government has asserted authority over e-cigarettes, according to consumer advocate Martin Cullip.

    On Nov. 26, China’s State Council on Nov. 26 amended the country’s tobacco monopoly law to include vapor products, which means that vaping products and their manufacturers will be regulated by the Chinese government under the same process as cigarettes.

    The announcement triggered feverish speculation about the impact of the new rules, with some commentators fretting that tobacco rules would put vapor companies out of business and others welcoming the prospect of enhanced product safety and quality.

    Writing in Filter, Cullip points not only to the vapor industry’s economic significance to China, but also to the potential domestic health benefits of sensible regulation. China, argues Cullip, has a lot to gain from financially from domestic harm reduction, when the country’s high smoking prevalence in an aging population creates heavy costs in health care and lost productivity.

    Cullip is also encouraged by China’s willingness and ability to stand up the World Health Organization, which remains ideologically opposed to tobacco harm reduction.

    While the government would seem to have much to gain from blocking the growth of safer alternatives such as e-cigarettes and tobacco-heating products—the state-owned CNTC sells more than 40 percent of the world’s cigarettes—there are many incentives for the government to push things in an entirely different direction, according to Cullip.

    China manufactures the vast majority of the world’s vape products. More than 170,000 businesses engage in e-cigarette production and the supply chain, employing around 3 million people. The CNTC is also the world’s biggest holder of tobacco harm reduction patents, owning almost 27 percent of all related patent publications.

    “It is difficult to imagine the government strangling the market—even if this is motivated more by profit than by its citizens’ health,” writes Cullip.

  • Chinese Regulations to Reverberate Globally

    Chinese Regulations to Reverberate Globally

    Photo: Cultura Allies

    China’s recently announced intention to regulate e-cigarettes as tobacco products will reverberate around the world, according to an analyses published on Keller And Heckman’s The Continuum of Risk blog.

    On Nov. 26, 2021, China’s State Council announced it would amend the country’s tobacco monopoly law to subject e-cigarettes to the same requirements as traditional cigarettes. On Dec. 2, the State Tobacco Monopoly Administration (STMA) published on its website the draft management rules for e-cigarettes for public comment.

    The draft rules define “e-cigarette” as an electronic delivery product that produces nicotine-containing aerosol for human inhalation. The definition does not include heat-not-burn tobacco products, which are already regulated as combustible cigarettes in China, according to Keller and Heckman. The draft rules make clear that e-cigarettes should be regulated like tobacco products by STMA and its local agencies and provide that e-cigarettes must comply with the e-cigarette national standard.

    Among other things, e-cigarettes will be subject to premarket registration upon a safety review by the STMA under the draft rules. Producers and sellers of e-cigarettes in China must obtain the same tobacco monopoly licenses as traditional cigarette manufacturers. In addition, all vapor product companies will be required to trade on a national e-cigarette platform to be set up by the SMTA. The draft rules also contain requirements to protect minors such as age-restrictions and warning labels.

    Because the draft rules’ registration and production licensing requirements apply to all e-cigarette manufacturers operating in China, they will also impact products sold abroad. China manufactures more than 95 percent of the world’s e-cigarette hardware.

    In 2019, China notified the World Trade Organization about its first national standard on e-cigarettes, which covers raw materials, technical requirements, testing methods and labeling, among other topics. On Nov .30, 3021, China published updated draft of the standard for comment.

    According to Keller and Heckman, the STMA plans to implement the standard “three to five months after its publication.”

    During the transition period, existing enterprises can continue manufacturing and operational activities. However, investors are banned from investing in new e-cigarette enterprises; existing e-cigarette production and operation entities must refrain from constructing or expanding production capacity, and they may not establish new e-cigarette retail outlets and market new products. “New import of e-cigarettes” will also be suspended during this period.

    The public comment period for the draft management rules closes on Dec. 17, 2021, 15 days after its publication, and the public comment period for the draft standard closes on Jan. 29, 2022.

  • E-Cig Leaders Welcome China Tobacco Rules

    E-Cig Leaders Welcome China Tobacco Rules

    Photo: Timothy S. Donahue

    China’s recently announced regulatory framework for e-cigarettes should secure the vapor industry’s future in that country, according to leading players in the business.

    On Nov. 26, China’s state council amended the tobacco monopoly law to include vapor products, meaning that, going forward, e-cigarettes will be managed like combustible cigarettes.

    With more than 300 million smokers—27 percent of adults—China is the world’s largest tobacco market. It also produces about 90 percent of the world’s e-cigarettes, primarily in the technology manufacturing hub Shenzhen.

    The government and the tobacco industry are, essentially, one entity in China, with the State Tobacco Monopoly Administration regulating the industry and China National Tobacco manufacturing tobacco products.

    To date, the vapor industry in China has operated in a legal grey area. Regulation had been widely anticipated, but many feared that it would wipe out the sector. The Nov. 26 announcement, however, was welcomed by leading players in the business. Industry representatives say it removes uncertainty and will weed out bad actors.

    In background article on the recent news from China, Filter cited Smoore global PR manager Frankie Chen, who expects national mandatory standards to significantly improve product safety and provide global vapers with better products.

    “Since the standards set higher requirements for vaping manufacturing, it is expected that only the responsible manufacturer with comprehensive safety management can be compliant,” Chen was quoted as saying.

    RLX Technology, too, welcomed the new regulatory framework. “We believe the sector will enter a new era of development—an era marked by enhanced product safety and quality, augmented social responsibilities, and improved intellectual property protection,” said RLX Technology chairperson and CEO Ying Wang at the presentation of the company’s third quarter results.

    RLX Technology Chief Financial Officer Chao Lu said the company is well prepared for the new operating environment. “The investments we made in products, talents, research, and compliance in the third quarter and beyond will place us in advantageous positions under the new regulatory paradigm,” he said.

  • China Rules to Require Industry Licensing

    China Rules to Require Industry Licensing

    Photo: chokniti

    China’s State Tobacco Monopoly Administration issued new draft rules governing e-cigarettes on Dec 1, reports Reuters. The move follows a decision by China’s cabinet last week to give the country’s tobacco monopoly oversight over the e-cigarette business.

    According to the draft rules, companies selling e-cigarettes in China must meet national standards in order to register with the tobacco authority and do business legally. Companies engaged in the production of e-cigarettes must also receive a special license from the tobacco authority, provided they can prove that they have the funds for production and a facility with equipment that meets standards.

    The tobacco authority said that it will establish a “unified national electronic cigarette transaction management platform” that all licensed e-cigarette wholesalers and retailers “must sell products through.” Tax collection and payment of e-cigarettes, meanwhile, “shall be implemented in accordance with national taxation laws and regulations,” the regulator wrote.

    China’s e-cigarette sector has been growing rapidly following the international success of vapor products. Market leader RELX Technology went public in New York in January.

    The vapor business in China operated in a legal grey zone thus far. Analyst had been expecting the government to assert control over the sector for some time now, and the recent announcements end months of speculation over what regulations might look like.

    China’s cigarette industry works under a state-run monopoly directly controlled by the tobacco regulator, which dictates pricing and distribution for brands and generates tax income for the government.

  • China Orders Arrest of Former STMA Inspector

    China Orders Arrest of Former STMA Inspector

    Photo: Oleg

    Chinese provincial authorities have ordered the arrest of Pan Jiahua, a former senior disciplinary inspector at China’s State Tobacco Monopoly Administration, for suspected bribe-taking, reports Xinhua.

    Pan’s case was transferred to the Anhui Provincial People’s Procuratorate following an investigation by the National Supervisory Commission and the Communist Party’s Central Commission for Discipline Inspection (CCDI).

    The joint probe found that “Pan has lost his ideals and convictions, betrayed the responsibilities and duties he was entrusted with, and desecrated his position as a disciplinary inspector by engaging in discipline-violating activities.”

    According to the investigators, Pan abused his position to seek benefits for owners of private tobacco businesses, took overseas trips sponsored by private business owners, arranged jobs for relatives and friends in the tobacco system, and allowed his relatives to use his influence to profiteer from the tobacco business. Pan accepted large amounts of money and valuables in return for securing interests for others in business operations, according to the CCDI.

    Pan has also been expelled from the Communist Party of China for his actions.

  • China Places ENDS Under Monopoly

    China Places ENDS Under Monopoly

    Photo: watman

    China’s State Council on Nov. 26 amended the country’s tobacco monopoly law to include vapor products, reports The Global Times. According to the amendment, new types of tobacco products, such as e-cigarettes, will be managed like combustible cigarettes.

    Among other things, this means that manufacturers of new tobacco products will be required to reveal ingredients, warn consumers about the health risks presented by their products and pay higher tax rates. They will also be banned from opening stores near schools, analysts said.

    To date, the vapor business in China has operated in a legal grey area.

    China’s vapor business was valued at CNY8.38 billion ($1.31 billion) in 2020, according to the data from iimedia. China’s e-cigarette market experienced a compound annual growth rate of 72.5 percent between 2013 and 2020, the report said.

    China is also the world’s leading manufacturer of vapor product hardware. In 2021, China’s e-cigarette exports will hit CNY100 billion, according to China’s Electronic Cigarette Industry Committee (ECIC).

    While government regulation may hurt some e-cigarette businesses in the short term, some expect greater regulatory clarity to benefit the industry in the long run.

    The State Council statement may speed up the introduction of a detailed e-cigarette national standard to raise the industry entry thresholds, which benefits leading companies with compliance advantages, TF Securities told Shine.

    And it may bring more tax income in China, TF Securities said.

    The growing e-cigarette market will usher in a healthy development under standardized supervision, said Shi Fanke, an analyst of Zheshang Securities.

    Vapor market leader RELX said that it “firmly supports” amendment of the law and will actively implement regulation requirements later, according to media reports.

    China’s tobacco industry is controlled entirely by a government monopoly, and strict controls determine which companies and retailers can produce and sell cigarettes.

    The government outlawed the sale of e-cigarettes to minors in 2018 and banned online sales the following year, while Chinese state media have warned of the health and safety risks of using the products.

  • COEE Completes A-Round Funding

    COEE Completes A-Round Funding

    Photo: alswart

    The China-based vapor company COEE has recently completed A-round financing of several million yuan, led by QF Capital investment, followed by investments from other financial groups.

    “We mainly use A-round of financing to focus on improving our production R&D, layout in the global market channel and user development as benefits of maintaining our product competitiveness and market influence,” said Tongliang Gao, co-president of COEE, in a statement. “We are upholding the core values of long-termism, adopt[ing] innovative ‘manufacturer to sale integration’ channel strategy, consistently respond[ing] and embrac[ing] policy supervision from the government, follow[ing] to the bottom line of protecting minors, and striv[ing] to become a marathon runner in the market.”

    Established in January 2021 in Shenzhen, COEE is a user-focused vape company that integrates with vape industry supply chains and strong market channel partners, according to the release. COEE has become the standing director unit of the E-Cigarette Industry Committee and China Electronic Chamber of Commerce.

    COEE products include its first-generation “Meet” series that was launched in April. The device now offers 17 pod flavors. COEE stores have covered 30 provinces and 180 cities in the China mainland, and various stores and sales points have reached nearly 5,000. Qiyuan Liu, head of consumption investment for QF Capital, said that COEE’s core operation team previously worked in the mobile phones market.

    “COEE has unique experience in channel construction and terminal management,” Qiyuan said. “Capitals recognize COEE team capabilities very much, and we are seeing COEE consistently put efforts in responding and cooperating with the supervision of the government. We are optimistic about the future development prospects of the project driven by demand.”