China brings e-cigarettes to tobacco monopoly law
The tobacco industry in China, which numbers more than 300 million cigarette smokers, is controlled by the world’s largest tobacco company, the China National Tobacco Corporation (CNTC). CNTC’s dominant global market share is almost entirely the result of its monopoly over the Chinese tobacco industry. When fulfilling its regulatory role, the CNTC is also referred to as the National Tobacco Monopoly Administration (STMA), which is a government-granted monopoly established by China’s Tobacco Monopoly Law. Under the Tobacco Monopoly Law, STMA controls virtually all stages of the production, sale, import, export and distribution of tobacco products in China. The Tobacco Monopoly Law (Article 2) historically extended the monopoly control of the STMA to the following traditional tobacco and tobacco-related products: cigarettes, cigars, cut tobacco, dried leaf tobacco, leaf tobacco, cigarette paper, filter sticks, filter cables and equipment exclusively for use in the manufacture of tobacco products.
Finally, after years of speculation, on November 26, 2021, the Chinese State Council released its final decision to amend the Tobacco Monopoly Law Enforcement Regulations, which subjects electronic cigarettes to the same monopoly requirements as traditional fuel cigarettes. STMA and the Chinese Ministry of Industry and Information Technology (MIIT) first proposed the amendment in March 2021, stressing their belief that âelectronic cigarettes and traditional cigarettes are homogeneous in terms of ‘basic ingredients, product functions and consumption methods’.
Specifically, a new Article 65 is added to the Implementing Regulation as follows: â(The management of) new tobacco products such as electronic cigarettes are implemented with reference to the relevant requirements for cigarettes in this Regulation. This new article essentially places all “new” tobacco products, including electronic cigarettes, under the same monopoly as cigarettes with respect to manufacture, sale, import and export, and so on. how exactly the existing monopoly system on cigarettes in China will apply to electronic cigarettes.
Pursuant to the amended implementing regulations, on December 2, 2021, the STMA published the project on its website Management rules for electronic cigarettes for public comment.
The draft business rules define âelectronic cigarettesâ as an electronic distribution product that produces an aerosol containing nicotine for human inhalation. The definition does not include âheated cigarettesâ (that is, non-smoldering tobacco products) which are already regulated as cigarettes and subject to the Tobacco Monopoly Act. The draft business rules specify that electronic cigarettes must be regulated as tobacco products by the STMA and its local agencies and provide that electronic cigarettes must comply with the national standard on electronic cigarettes (see more details below). below). In particular, the registration prior to the marketing of electronic cigarettes is required during a security examination by the STMA. In addition to pre-market registration requirements, the production and sale of electronic cigarettes in China will be subject to the same tobacco monopoly licenses as traditional cigarettes.
According to the draft business rules, a unified national electronic cigarette trading platform will be set up by STMA, and producers and sellers should trade on this platform, including imported electronic cigarettes. The draft management rules also contain various requirements designed to protect minors, such as age restrictions, and generally require that the relevant warning and labeling requirements be met.
Registration and production license requirements for Chinese manufacturers
The regulation of electronic cigarettes in China is of critical importance to the global electronic cigarette industry, as the vast majority (over 95%) of electronic cigarette equipment, including devices, components and parts, is made in Shenzhen. Many of these companies operate solely for the purpose of manufacturing products by original equipment manufacturers (OEMs) for sale not in China, but worldwide. Under the draft management regulations, however, all Chinese electronic cigarette manufacturing facilities are subject to registration and production licensing requirements, even though the products produced are ultimately intended for export only.
GB Standard on Electronic Cigarettes
As we previously reported, in 2019, China notified the World Trade Organization (WTO) of the first draft Guobiao (GB) National Standard on Electronic Cigarettes. On November 30, 2021, STMA released the updated draft GB standard for comments.
Compared to the previous version, the draft GB standard, entitled âElectronic Cigaretteâ, is shortened from 68 pages to 26 pages. The structure of the draft GB standard and a brief description of the content are as follows:
Section 1 – Scope
Section 2 – Referenced standards
Section 3 – Definitions. This section provides the definition of electronic cigarettes which is basically the same as the draft business rules. Electronic vapor materials, e-liquids, e-cigarette devices, e-cigarette modules, cartridges, etc., are also defined.
Section 4 – Design and raw materials. This section focuses on the general safety of the device and raw materials. For example, mouth contact materials, e-vapors and emissions from e-cigarettes should meet the requirements of food contact materials, nicotine should be extracted from tobacco with at least 99% purity , etc.
Article 5 – The technical requirements. This section provides technical requirements for the main risk points of e-cigarettes, e-vapors, etc. For example, the concentration of nicotine in e-vapors should not exceed 20 mg / kg. Limitations on 2,3-butanedione, heavy metals (as Pb) and arsenic (as As) in electronic vapors, as well as limitations on carbonyl compounds in electronic cigarette emissions, are also provided in this section.
Article 6 – Test methods
Article 7 – Labeling and accompanying documents
Annex A – List of Exceptions to Restricted Substances in Electronic Cigarette Materials
Appendix B – Substances whose use is temporarily authorized as additives in the field of e-vapors
Annexes C to F – Methods of determination, etc.
Taking into account the new regulations and the GB Standard, the STMA announced on December 2, 2021 a transition period from now until the finalization and implementation of the Management Rules and the GB Standard. It is not yet known when they will be finalized and implemented, but STMA indicated in the announcement of the draft GB standard that the plan is to implement the GB standard “three to five months after its publication”.
More specifically, during the transition period, existing companies producing and operating electronic cigarettes may continue to carry out production and operation activities. However, investors are not allowed to invest in newly established electronic cigarette production and operation companies; existing e-cigarette production and operation entities are not allowed to build or expand their production capacity, establish new e-cigarette retail outlets, and market new products. âNew imports of electronic cigarettesâ will also be suspended during this period.
STMA also publishes an “Electronic Cigarette Information Reporting System” on its website and urges companies producing and operating electronic cigarettes to report company and product information from December 6 to 21. December 2021.
Comments are ending soon
The public consultation period for the draft management rules ends on December 17, 2021, fifteen days after its publication, and the public comment period for the draft standard ends on January 29, 2022.