Proposed amendments to certain provisions in 7 electronic cigarette regulatory policy documents, involving total volume management, capacity verification, and so on

Seven electronic cigarette regulatory policy documents are set to be amended.

On April 2, according to the official website of the State Tobacco Monopoly Administration, in order to implement the requirements of the restrictive industry policy for electronic cigarettes and improve the systematic, overall, and coordinated nature of the electronic cigarette regulatory policy system, a notice was published on soliciting public comments on the “Notice of the State Tobacco Monopoly Administration on Soliciting Public Comments Regarding the Proposed Amendment of Certain Electronic Cigarette Regulatory Policy Documents (Draft for Comments).”

Overall, this “Draft for Comments” makes amendments to certain provisions of the seven electronic cigarette regulatory policy documents, namely: the “Several Policy Measures on Promoting the Legalization and Standardization of the Electronic Cigarette Industry (Trial),” the “Detailed Rules for the Management of Fixed-asset Investment in Electronic Cigarettes,” the “Detailed Rules for the Implementation of Technical Evaluation for Electronic Cigarette Products,” the “Detailed Rules for the Management of Traceability of Electronic Cigarette Products,” the “Detailed Rules for the Management of Import and Export Trade and Foreign Economic and Technological Cooperation of Electronic Cigarettes,” the “Detailed Rules for the Management of the Establishment, Division, Merger, and Dissolution of Electronic Cigarette-related Manufacturing Enterprises,” and the “Notice of the Office of the State Tobacco Monopoly Administration on Printing and Distributing the Standards for the Integrated Government Services Platform Electronic Certificates and the Tobacco Monopoly Production Enterprise License (Part 2: Electronic Cigarettes).”

According to reporters’ statistics, the amendments to these 7 electronic cigarette regulatory policy documents and newly added provisions exceed 20 in total, covering areas such as total quantity management of electronic cigarettes, capacity verification, product traceability, and import/export compliance.

Among them, the “Several Policy Measures on Promoting the Legalization and Standardization of the Electronic Cigarette Industry (Trial)” (Guo Yan Ban [2022] No. 43) has a total of 3 amendments. Specifically, it changes the first article to: “The electronic cigarette industry shall be incorporated into regulation in accordance with law; the industry layout shall be scientifically rational; the market operation shall be stable, orderly, and well-managed; resource allocation shall be more efficient; and total quantity management under dynamic supply-and-demand balance shall be achieved.” The previous wording before the amendment was “achieving supply-and-demand balance under total quantity management.”

Article 11 is revised to: “In order to achieve supply-and-demand balance in the electronic cigarette market, total quantity management shall be conducted for electronic cigarette-related production enterprises, and production capacity and production scale shall be verified in accordance with law and regulations. The tobacco monopoly administrative department under the State Council shall comprehensively consider factors including tobacco control, verified production capacity, market demand, enterprise orders, and legality and compliance, and categorize and verify the annual production scale, which shall be controlled as the upper limit of the production transaction volume for the corresponding product category in the natural year. The provincial tobacco monopoly administrative departments shall organize electronic cigarette wholesale enterprises within their respective administrative regions to carry out business activities within the annual targets for domestic sales volume in the province (autonomous region/municipality).”

Before this amendment, it was only “total quantity management of sales of electronic cigarette products within the territory,” and the comprehensive factors for total quantity control included “economic development, changes in population, and market conditions.” After the amendment, these three factors were removed, while factors including “verified production capacity, enterprise orders, and legality and compliance” were added. It also requires that the annual production scale be categorized and verified, and controlled as the upper limit of the production transaction volume for the corresponding product category in the natural year.

This shows that the regulatory object shifts from managing the total volume of domestic sales to managing the production capacity and production scale of production enterprises, and that regulation is pushed further upstream—from control at the terminal sales end to constraints at the production source.

The “Detailed Rules for the Management of Traceability of Electronic Cigarette Products” has been amended in five places. In particular, Article 9 originally provided that “Electronic cigarette production enterprises (including product manufacturing, contract manufacturing/processing, brand-holding enterprises, etc., the same applies hereinafter) and electronic cigarette wholesale enterprises, when applying for, uploading, and querying QR codes for electronic cigarette products, shall use the electronic cigarette traceability platform.” After the amendment, it requires “shall through the electronic cigarette traceability platform.”

Article 14 is revised to: “Electronic cigarette production enterprises and electronic cigarette wholesale enterprises shall establish and improve supporting systems and necessary facilities for implementing traceability management, when applying for and using QR codes for electronic cigarette products within the scope of permits approved by the tobacco monopoly administrative department under the State Council, within the verified production capacity (brand-holding enterprises are excluded from this item), and within the verified production scale.” Previously, Article 14 only required that “electronic cigarette production enterprises and electronic cigarette wholesale enterprises shall establish and improve supporting systems and necessary facilities for implementing traceability management,” with no more detailed requirements.

The “Detailed Rules for the Management of Import and Export Trade and Foreign Economic and Technological Cooperation of Electronic Cigarettes” has been amended in one place. The revised Article 10 requires that electronic cigarette production enterprises (including product manufacturing, contract manufacturing/processing, brand-holding enterprises, etc.), e-liquid production enterprises, and electronic cigarette nicotine production enterprises, etc. (hereinafter referred to as electronic cigarette-related production enterprises) shall produce and operate electronic cigarette products and raw materials for export within the verified scope of permits, verified production capacity (brand-holding enterprises are excluded from this item), and verified export production scale. If there is demand from overseas orders that exceeds the verified export production scale, the enterprise may organize the relevant production and sales only after completing the relevant procedures on the electronic cigarette transaction management platform in accordance with the rules of the State Tobacco Monopoly Administration and obtaining approval.

Compared with before the amendment, the revised Article 10 adds a verified production capacity constraint for export production, and it tightens the handling of export orders beyond scale by changing it from a filing-based system to an approval-based system, resulting in stricter regulation.

The amendments to the “Detailed Rules for Fixed-asset Investment Management of Electronic Cigarettes” involve five places. Among them, Item 3 in Article 10 tightens the circumstances under which approval will not be granted: if an electronic cigarette enterprise’s actual output in the past 12 months has not reached 85% of the equipment production capacity most recently reported to the tobacco monopoly administrative department under the State Council, and if its actual output in the past 36 months has not reached 85% of the production capacity verified by the tobacco monopoly administrative department under the State Council, the application will not be approved. The tobacco monopoly administrative department under the State Council shall not approve the applications that are accepted.

In addition, in Article 22 of the “Detailed Rules for the Management of the Establishment, Division, Merger, and Dissolution of Electronic Cigarette-related Manufacturing Enterprises,” a new provision is added: “After the division or merger of electronic cigarette-related production enterprises, if the fixed-asset investment, verified production capacity, and verified production scale involving electronic cigarette-related matters are involved, they shall handle the relevant matters in accordance with the relevant provisions of the tobacco monopoly administrative department under the State Council.” The “Notice of the Office of the State Tobacco Monopoly Administration on Printing and Distributing the Standards for the Integrated Government Services Platform Electronic Certificates and the Tobacco Monopoly Production Enterprise License (Part 2: Electronic Cigarettes)” requires changing the license label “production scale” to “verified production capacity.”