As is well known, China implements a tobacco monopoly management system, which implements a monopoly license for the entire chain of production, sales, import and export of tobacco products. The "Tobacco Monopoly Law" and the "Regulations for the Implementation of the Tobacco Monopoly Law" stipulate the categories of tobacco monopoly products by way of enumeration, resulting in a regulatory gap for new tobacco products such as electronic cigarettes due to the lack of effective management basis before November 10, 2021.

The year 2018 is known as the first year of e-cigarettes. According to statistics, from 2018 to 2020, the scale of China's e-cigarette industry experienced explosive growth, with the domestic retail sales of e-cigarettes increasing from 5.152 billion yuan to 14.5 billion yuan, with a three-year growth rate of more than 100%. The export volume increased from 28.72 billion yuan to 49.4 billion yuan, with a growth rate of more than 50%. Last year, it reached a record high, with the export volume expected to reach 100 billion yuan. From the perspective of the global market, more than 90% of the global electronic cigarettes are manufactured in Shenzhen, and China has become the world's largest producer and exporter of electronic cigarettes.

With the continuous expansion of the industry, electronic cigarettes, originally aimed at reducing the harm of smoking and helping to quit smoking, have already broken through their original goal of reducing harm, and the attendant drawbacks have quickly emerged. Some products have quality and safety issues such as unclear nicotine (nicotine) content, unknown added ingredients, and tobacco oil leakage. New flavors such as floral, fruity, and plant flavors have a strong attraction for young people. The domestic public has called for stronger regulation of electronic cigarettes. Looking abroad, many countries have also implemented a trend of strict regulation of this emerging thing, electronic cigarettes.

1、 The Course of Strict Supervision of Electronic Cigarettes

（1） International Status Quo of Strict Supervision of Electronic Cigarettes

As the world's largest consumer of e-cigarettes, the United States has long regarded e-cigarettes as tobacco products for management, and all tobacco product manufacturers must submit an application to the FDA before they can produce them. In March 2019, the FDA of the United States has issued regulations prohibiting the sale of flavored electronic cigarette products other than tobacco and mint flavors in physical stores.

The European Union and the United Kingdom are open to HNB tobacco, while there are strict restrictions on electronic cigarette products in terms of market approval, usage occasions, and advertising marketing. In other countries, such as Brazil, Singapore, and Argentina, the import and sale of e-cigarettes are completely prohibited.

（2） The Course of Legalization of Electronic Cigarette under Strict Supervision in China

The electronic cigarette market has experienced a roller coaster development in just four years, from 2018, known as the first year of electronic cigarettes, to 2019, when online sales were banned, and to 2022, when only tobacco flavored electronic cigarettes were allowed to be sold. Before November 10, 2021, the regulation of electronic cigarettes cannot be relied on. Electronic cigarettes are traded as ordinary commodities. In order to protect the physical and mental health of minors, the National Tobacco Monopoly Administration and the State Administration of Market Supervision have issued multiple separate or joint documents prohibiting the sale of electronic cigarettes to minors.

On August 28, 2018, the State Administration of Market Supervision and Administration and the National Tobacco Monopoly Administration jointly issued the "Notice on Prohibiting the Sale of Electronic Cigarettes to Minors", recommending that e-commerce platforms remove electronic cigarette products containing the words "students", "minors", and not display electronic cigarette products to minors.
On October 30, 2019, the State Administration of Market Supervision issued the "Notice on Further Protecting Minors from Electronic Cigarettes", known as the "Online Prohibition Order" for Electronic Cigarettes.

On November 10th, 2021, the State Council promulgated and implemented the Decision on Amending the "Regulations for the Implementation of the Tobacco Monopoly Law of the People's Republic of China", which clearly states that "new tobacco products such as electronic cigarettes shall be implemented in accordance with the relevant provisions of these Regulations on cigarettes.". The implementing regulations belong to administrative regulations from the perspective of legal sources. The main body of formulation is the State Council, which has the force of law. Its effectiveness ranks second only to the Constitution and laws, and higher than departmental regulations and local regulations. This revised decision contains only one article, indicating the country's determination to standardize the management of electronic cigarettes, and realizing the initiative of incorporating electronic cigarettes into the standardized management of tobacco products with laws to follow.
On March 11, 2022, the National Tobacco Monopoly Administration issued the "Management Measures for Electronic Cigarettes" (hereinafter referred to as the "Management Measures"), which will come into effect as of May 1, 2022. The "Management Measures" stipulate the establishment of a nationwide unified electronic cigarette trading platform; It is prohibited to sell flavored electronic cigarettes other than tobacco flavors and electronic cigarettes that can be added with aerosols on their own; Electronic cigarette product sales outlets shall not be set up around the school; It is prohibited to hold exhibitions, forums, and expositions that promote electronic cigarette products in various forms; Electronic cigarette retail entities shall not exclusively engage in the sale of electronic cigarette products on the market.

On the same day, the National Tobacco Monopoly Administration issued the "National Standard for Electronic Cigarettes" (second draft for comment), which regulates the terms and definitions of electronic cigarettes, electronic cigarette design and raw materials, technical requirements, test methods, signs, and accompanying documents. It is expected to be officially released in the near future.
The "Management Measures" may bring disruptive changes to the electronic cigarette industry, proposing a stronger, stricter, more comprehensive, and more detailed regulatory model. One month before the formal implementation of the Measures, this article aims to provide electronic cigarette manufacturers, wholesale enterprises, retail enterprises, and individuals with a comprehensive understanding of the basic content of China's electronic cigarette management system through the interpretation of the "Electronic Cigarette Management Measures", so as to meet challenges, take timely actions, promote lawful and compliant operations, and achieve long-term sustainable development.

2、 Main Contents of the "Electronic Cigarette Management Measures"

The "Management Measures" include six chapters and 45 articles, including general provisions, production and quality management, sales management, import and export trade, foreign economic and technological cooperation, supervision and inspection, and supplementary provisions, which regulate the production, sales, transportation, import and export, and supervision and management of electronic cigarettes within China.

The main contents are as follows: First, clarify the definition and regulatory objects of electronic cigarettes; The second is to implement license management for the production, wholesale, and retail entities of electronic cigarettes. The license management of electronic cigarettes does not establish a new type of administrative license, but only adds corresponding items to the license scope of tobacco monopoly production, wholesale, and retail licenses; Third, implement channel management for electronic cigarette sales, establish an electronic cigarette transaction management platform, and standardize electronic cigarette sales methods; Fourth, conduct overall management of the quality of electronic cigarette products, and establish a mechanism for technical review and tracking of electronic cigarette products; The fifth is to supervise the transportation, import and export of electronic cigarettes according to law.

3、 Definition and regulatory objects of electronic cigarettes

1. Definitions related to electronic cigarettes

Article 3 of the Administrative Measures clearly states that the term "electronic cigarettes" as used in these Measures includes cigarette bombs, cigarette sets, and products sold in combination with cigarette bombs and cigarette sets. Article 40: Further provisions are made for smoke bombs, smoking utensils, aerosols, etc.

The National Standard for Electronic Cigarettes (second draft for comment), issued on the same day as the "Administrative Measures", states that electronic cigarettes refer to electronic transmission systems used to generate aerosols for human inhalation, etc. Note: Cigarettes are not included.

2. Supervision objects

According to the aforementioned statistical table on tobacco monopoly products, the regulatory objects of the "Management Measures" include electronic cigarettes and other new tobacco products, and the regulatory process includes the entire process management of production, wholesale, retail, import and export. In addition, the emerging new types of heated cigarette products are not applicable to this method, but are included in cigarette management. Article 2 of the Administrative Measures stipulates that these Measures shall apply to the production, operation, and supervision and management of electronic cigarettes within the territory of the People's Republic of China. Article 43 stipulates that heated cigarettes are included in cigarette management. Other new tobacco products shall be implemented in accordance with the relevant provisions of these Measures.

3. Electronic cigarettes are subject to mandatory national standards

According to the relevant provisions of the Standardization Law, standards include national standards, industry standards, local standards, group standards, and enterprise standards. National standards are divided into mandatory standards and recommended standards, while industry standards and local standards are recommended standards. Mandatory standards must be implemented. Article 5 of the Administrative Measures stipulates that electronic cigarette products shall comply with the mandatory national standards for electronic cigarettes. On the day of the issuance of the "Handling Measures", the National Tobacco Monopoly Administration issued the national standard for "Electronic Tobacco" (second draft for comment).

4、 Licensing system for electronic cigarette production, wholesale, and retail entities

The tobacco monopoly administrative license system is the core and foundation of tobacco monopoly management. Article 6 of the Regulations for the Implementation of the Tobacco Monopoly Law stipulates that those engaged in the production, wholesale, and retail businesses of tobacco monopoly products, as well as the import and export businesses of tobacco monopoly products, and the purchase and sale of foreign tobacco products, must apply for and obtain a tobacco monopoly license in accordance with the provisions of the Tobacco Monopoly Law and the implementing regulations. Tobacco monopoly licenses include: tobacco monopoly production enterprise license, tobacco monopoly wholesale enterprise license, and tobacco monopoly retail license.
"There is no new type of administrative license for electronic cigarette license management, but only corresponding entries are added to the license scope of tobacco monopoly production, wholesale, and retail licenses.". The "Management Measures" stipulate that those engaged in the production and operation of electronic cigarette products, aerosols, nicotine for electronic cigarettes, and other activities should obtain a tobacco monopoly production enterprise license; To engage in the wholesale business of electronic tobacco products, one should obtain a tobacco monopoly wholesale enterprise license; To engage in electronic cigarette retail business, one should obtain a tobacco monopoly retail license.

The entry threshold for production enterprises has been significantly raised, and the review and approval are under the centralized management of the National Tobacco Monopoly Bureau. Article 8 of the "Administrative Measures" stipulates that the establishment of electronic cigarette production enterprises (including product production, OEM, brand holding enterprises, etc., the same below), aerosol production enterprises, and electronic cigarette nicotine production enterprises shall be reported to the tobacco monopoly administrative department of the State Council for examination and approval before approval for project establishment in accordance with relevant national regulations. The establishment of the above-mentioned enterprises must be approved by the department of tobacco monopoly administration under the State Council, obtain a license for tobacco monopoly production enterprises, and obtain approval and registration from the market supervision and regulation department.

The establishment, division, merger, and revocation of a production enterprise are all premised on the license. As mentioned above, when the Market Supervision and Administration Bureau handles the establishment registration of production enterprises, it is prerequisite to obtain a license for tobacco monopoly production enterprises. "When a production enterprise is divided, merged, or dissolved, it must first obtain the approval of the National Tobacco Monopoly Administration before going through the relevant registration procedures with the market supervision and administration department.". Article 8 of the "Administrative Measures" stipulates that the market supervision and administration department shall not approve and register those who have not obtained a license for tobacco monopoly production enterprises.

5. The IPO of a production enterprise must be reported to the National Tobacco Monopoly Administration for review and approval. Article 8 (2) of the Administrative Measures stipulates that the initial public offering and listing of stocks shall be subject to examination and approval by the tobacco monopoly administrative department under the State Council. This regulation raises the entry threshold for production enterprises to be listed, but it will not have a negative impact on enterprises that have already been listed.

6. The manufacturer needs to apply for a new license to change the scope of the license. Article 10 of the "Administrative Measures" stipulates that an electronic cigarette business entity that holds a tobacco monopoly production enterprise license shall reapply for a tobacco monopoly license if it changes the scope of the license or meets other circumstances specified by the tobacco monopoly administrative department under the State Council; "If other registered items are changed, the tobacco monopoly license shall be changed in a timely manner.".

7. The expansion of production capacity by production enterprises requires the approval of the National Tobacco Monopoly Administration. Article 11 of the Administrative Measures stipulates that capital construction or technical transformation by electronic cigarette manufacturers, aerosol manufacturers, and nicotine manufacturers for electronic cigarettes to expand production capacity must be approved by the tobacco monopoly administrative department under the State Council.

"Wholesale enterprises engaged in import wholesale business need to change their licenses.". Article 28 of the Administrative Measures stipulates that enterprises holding a license for tobacco monopoly wholesale enterprises may engage in the wholesale business of imported products only after obtaining approval from the tobacco monopoly administrative department under the State Council and changing the scope of the license.

5、 Implement channel management for sales and establish an electronic cigarette transaction management platform
The National Tobacco Monopoly Bureau has established a nationwide unified electronic cigarette trading management platform. Article 19 of the Administrative Measures stipulates that the tobacco monopoly administrative department under the State Council shall establish a nationwide unified electronic cigarette trading management platform. Therefore, since May 1, electronic cigarette production enterprises, wholesale enterprises, and retail business entities should all pass through the electronic cigarette management and trading platform

The sales of imported products should be conducted through the electronic cigarette transaction management platform. Article 29 (2) of the Administrative Measures stipulates that imported electronic cigarette products, aerosols, and nicotine for electronic cigarettes shall be sold to electronic cigarette wholesale enterprises, electronic cigarette product manufacturers, and electronic cigarette brand holding enterprises through the electronic cigarette transaction management platform specified in these Measures.

Electronic cigarette products should use registered trademarks. "Without approval and registration, it shall not be produced or sold;"; The production and sale of tobacco products with counterfeit registered trademarks is prohibited; Imported electronic cigarette products sold in China shall use trademarks approved and registered in China.
4. It is prohibited to sell flavoring e-cigarettes other than tobacco flavors and e-cigarettes that can be self added with aerosols.

5. Electronic cigarette products should comply with relevant regulations on packaging labels and warnings for electronic cigarette products.

"Ordinary primary and secondary schools, special education schools, secondary vocational schools, specialized schools, and kindergartens are not allowed to set up sales outlets for e-cigarettes.".

7. It is prohibited to hold exhibitions, forums, expositions, etc. that promote electronic cigarette products in various forms.

It is prohibited to sell electronic cigarette products to minors. Electronic cigarette operators should set up signs in prominent locations that do not sell electronic cigarettes to minors; "For those who are difficult to determine whether they are minors, they should be required to produce their identity documents.".

"Enterprises or individuals that have obtained a tobacco monopoly retail license and are qualified to engage in electronic cigarette retail business should purchase electronic cigarette products from local electronic cigarette wholesale enterprises.".

10. Electronic cigarette retail entities shall not exclusively engage in the marketing of electronic cigarette products.

It is prohibited to use self-service sales methods such as vending machines to sell or sell e-cigarettes in disguised form.

12. The supervision and management of electronic cigarette advertising shall be governed by the provisions on tobacco advertising in relevant laws, regulations, and rules. That is, electronic cigarette advertising should meet the following requirements: (1) prohibit the use of the Internet to publish tobacco advertising; (2) It is prohibited to publish tobacco advertisements on the mass media or in public places, public transportation vehicles, or outdoors; (3) It is prohibited to send any form of tobacco advertising to minors; (4) It is prohibited to use advertisements or public service advertisements for other goods or services to promote the names, trademarks, packaging, decoration, and similar content of tobacco products; (5) Advertisements issued by producers or sellers of tobacco products for relocation, renaming, recruitment, etc. shall not contain the name, trademark, packaging, decoration, or similar content of tobacco products; (6) "If the trademark name and service item name of other goods and services are the same as the trademark name of tobacco products, the advertisement for such goods and services must clearly indicate the commodity name and service type in an easily identifiable manner, and must not contain any indication that the goods and services are related to tobacco products.".

6、 Full process management of product quality, establishment of technical review and traceability mechanism

1. The National Tobacco Monopoly Bureau conducts technical reviews on electronic cigarette products. The first paragraph of Article 7 of the Administrative Measures stipulates that the tobacco monopoly administrative department under the State Council shall organize professional institutions to conduct technical reviews of electronic cigarette products based on application materials such as inspection and testing reports. Paragraph 3 of Article 19 further stipulates that electronic cigarette products that have not passed the technical review shall not be marketed. The information of electronic cigarette products on the market should be consistent with the product information that has passed the technical review.

2. Certified electronic cigarette inspection and testing institutions shall specifically undertake supervision, management and testing related work. The second paragraph of Article 7 of the Administrative Measures stipulates that the electronic cigarette inspection and testing institutions certified by the tobacco monopoly administrative department of the State Council shall undertake the inspection, testing, monitoring, and evaluation work required for supervision and management.

3. Establish an electronic cigarette sampling and testing system. Article 7 (3) of the Administrative Measures stipulates that the tobacco monopoly administrative department shall establish a system of electronic cigarette sampling and testing, which shall regularly or irregularly inspect or inspect licensed enterprises, individuals, and their products.

4. The production and operation entities establish a quality assurance system. Article 15 (1) of the Administrative Measures stipulates that those engaged in the production and operation of electronic cigarettes should establish a product quality assurance system and be responsible for the quality of their products.

5. The electronic cigarette brand holding enterprise is responsible for the quality of the entrusted production products. The second paragraph of Article 15 of the Administrative Measures stipulates that in the case of entrusting the production of electronic cigarette products, the electronic cigarette brand holding enterprise shall be responsible for the quality of the electronic cigarette products entrusted for production, and strengthen the management of the production behavior of the entrusted processing enterprise to ensure that it produces in accordance with legal requirements.

6. Establish an electronic cigarette product traceability system to strengthen the entire process management. Article 16 of the Administrative Measures stipulates that the tobacco monopoly administrative department under the State Council should establish a unified electronic cigarette product traceability system to strengthen the entire process management of electronic cigarettes.

Domestic sales of imported products should pass the review. Article 29 (3) of the Administrative Measures stipulates that imported electronic cigarette products sold within China shall pass technical review and use trademarks approved and registered in China.

7、 Electronic cigarette transportation management

1. No special licensing system has been implemented for the transportation of electronic cigarettes. The "Regulations for the Implementation of the Tobacco Monopoly Law" stipulates that tobacco transportation requires the application for a transportation permit for tobacco monopoly products. The "Administrative Measures" do not establish a special licensing system for the transportation management of electronic cigarettes. The first paragraph of Article 24 of the Administrative Measures stipulates that the transportation of electronic cigarette products, aerosols, nicotine for electronic cigarettes, etc. shall be subject to the supervision of the tobacco monopoly administrative department.

2. Limited quantity management shall be implemented for delivery and carrying in different places. The first paragraph of Article 24 of the "Administrative Measures" stipulates that electronic cigarette products, aerosols, and nicotine used in electronic cigarettes shall be subject to limited quantity management in the mail and delivery, and shall not exceed the limits prescribed by the relevant competent department of the State Council.

3. The entry of individuals is subject to limited management. Article 25 of the "Administrative Measures" stipulates that individuals who enter China to carry electronic cigarette products shall be subject to limit management, which shall not exceed the limit set by the relevant competent department of the State Council.

8、 Supervise imports and exports according to law and encourage exports

Import products should be reported to the National Tobacco Monopoly Administration for demand. Article 29 of the Administrative Measures stipulates that the import of electronic cigarette products, aerosols, and nicotine for electronic cigarettes shall be reported to the tobacco monopoly administrative department under the State Council for demand, and shall comply with relevant national regulations.

"The sale of imported products shall pass the trading platform and technical review, and shall be applicable to trademarks registered in China.". The second and third paragraphs of Article 29 of the Administrative Measures stipulate that imported electronic cigarette products, aerosols, and nicotine for electronic cigarettes shall be sold to electronic cigarette wholesale enterprises, electronic cigarette product manufacturers, and electronic cigarette brand holding enterprises through the electronic cigarette transaction management platform specified in these Measures. Imported electronic cigarette products sold within China shall pass technical review and use trademarks approved and registered in China.

3. Encourage exports. The "Administrative Measures" delete the content in the draft for comment that "enterprises that produce electronic cigarette products that are not sold in China but are only used for export should register their products and obtain a tobacco monopoly production enterprise license in accordance with the provisions of these Measures." This means that after obtaining a production monopoly license for purely export enterprises, there is no need for additional registration and declaration of their products. Article 33 of the Administrative Measures stipulates that electronic cigarette products that are not sold in China and are only used for export should comply with the laws, regulations, and standards of the destination country or region; If the destination country or region does not have relevant laws, regulations, and standards, it should comply with the relevant requirements of China's laws, regulations, and standards.