Challenges and Opportunities for Electronic Cigarettes Going Global

The electronic cigarette, which has been running blindly for a long time, has encountered multiple interceptions from various sides.

On July 28th, the first standing committee of the Legislative Assembly of Macau discussed for the first time an amendment to the "Regulation of Smoking Prevention and Control" that would prohibit carrying electronic cigarettes in and out of the country. After the meeting, committee chair Li Jingyi and secretary Song Biqi summarized that the revised law would also ban e-cigarette components and oils from entering or exiting the country, with violators facing fines.

As early as May of this year, Hong Kong China has fully banned the sale, manufacture, importation, or promotion of electronic cigarettes and heated tobacco products.

The compulsory national standard for electronic cigarettes, also known as the "new national standard" within the electronic cigarette industry, will take effect on October 1. The standard stipulates that electronic cigarette products are prohibited from presenting flavors other than tobacco.

The e-cigarette industry has been using the term "going abroad" frequently in recent months, as multiple obstacles have arisen domestically. According to the "2022 Blue Book of E-cigarette Industry Export," the global e-cigarette market will surpass $108 billion in 2022, with China's e-cigarette exports reaching about RMB 186.7 billion, growing at a rate of around 35%. Although the overseas market has promising prospects, exporting e-cigarettes is not a smooth path.

Electronic cigarette kiosk.

In an interview with a journalist from Huaxia Times, Zhou Di, a senior engineer at Fang Rong Technology and a national technology expert from the Ministry of Science and Technology, stated that when expanding into international markets, companies must adapt to varying regulations, cultural differences, and consumer habits. Popular flavors in China may not be well received abroad, and nicotine content regulations differ between countries. Global regulations for e-cigarettes also vary; the United States and European Union adopt a federal regulatory approach, while some countries in Southeast Asia and the Middle East lean towards implementing e-cigarette bans. This requires manufacturers to develop appropriate measures and research based on the specific conditions of each region.

Exporters also face regulation.

A reporter from Huaxia Times visited offline stores and contacted online micro-businesses selling electronic cigarettes. Sales staff all reported that flavored e-cigarettes have not been sold since October and manufacturers have gradually stopped production, with current sales consisting mostly of stockpiled goods. The reporter observed that some popular flavors are already out of stock, in stark contrast to the fully stocked shelves at the beginning of the year. Mr. Zhong (pseudonym), a store clerk from a certain brand, told Huaxia Times that the policy impact on the entire industry is significant. Some smaller manufacturers have chosen to exit the market and some manufacturers have stopped production altogether.

When asked about the export of electronic cigarettes, Mr. Zhong expressed his opinion to a reporter from Huaxia Times, saying "The amount of goods available, profit margins, and government policies are all uncertain. In my opinion, it is quite difficult for electronic cigarette companies to expand in the direction of export.

One salesperson stated that exporting goods does not necessarily mean everything is smooth sailing, as there are regulatory issues to face as well. In fact, some countries have even stricter regulations.

During an interview with a reporter from the Chinese newspaper Huaxia Shibao, Zeng Huabin, the Vice President of MOTI's domestic business unit, stated that electronic cigarette regulation policies and compliance requirements vary across different countries and regions worldwide. This makes the market particularly complex.

According to data from the "2021 Electronic Cigarette Industry Blue Book," the top three destination countries or regions for Chinese electronic cigarette exports are the United States, the European Union and the United Kingdom, and Russia, accounting for 53%, 22%, and 9% respectively. For the United States, which has the highest proportion, it began prohibiting the sale of flavored closed-system e-cigarettes, which are popular among youths, as early as February 2020. Applying for PMTA before the launch of electronic cigarettes is currently one of the most important regulatory steps for the US Food and Drug Administration (FDA) in regulating electronic cigarettes. The PMTA assessment in the United States determines whether electronic cigarette brand manufacturers can continue to sell electronic cigarettes in the country. Countries such as Malaysia, Thailand, and Egypt are also adjusting their regulations on electronic cigarettes.

Over 40 countries or regions have enacted legislation or officially announced a ban on the sale of electronic cigarettes, including Brazil, Singapore, and India. More may follow suit in the future. These countries have stricter regulations on tobacco products, effectively blocking the e-cigarette market in those regions.

Source of Data: "2021 Blue Book of Electronic Cigarette Industry Exports

According to Zhou Di, over 95% of electronic cigarettes produced globally and their products come from China, with 70% of that coming from Shenzhen. Previously, 40% of electronic cigarettes exported from Shenzhen were shipped to Hong Kong, then distributed worldwide. However, in May, Hong Kong announced a ban on electronic cigarettes.

In this context, manufacturers are forced to seek new export routes. A journalist from Hua Xia Times, posing as an e-cigarette manufacturer, consulted a logistics company in Shenzhen. They said, "Previously, most products were exported via Hong Kong. Since Hong Kong banned e-cigarettes in May, most have been channeled to South Korea. Especially in recent months, many people have sought our advice.

When asked if a batch of electronic cigarettes could be shipped to the United States, the person in question appeared hesitant and repeatedly confirmed the total quantity of goods with the journalist. "Many countries prohibit the shipment of electronic cigarettes. UPS in the United States cannot ship them. If necessary, we have other channels. But if the product certification issue leads to the goods being seized by customs or other issues, we will not compensate or refund shipping fees," the person added. "If this affects our company, we will hold the customer responsible.

Hope for export policy support

Although the export of electronic cigarettes currently faces many obstacles, some top companies in the industry, such as Yooz, Moti, Platinum, and Xiaoye, have already laid out their overseas market plans. In 2019, Yooz established "Yooz International" to focus on its overseas business. In 2020, Platinum submitted an electronic atomized cigarette and oil PMTA application to the US FDA. Chen Qian, the CEO of Yooz International, publicly announced earlier this year that the company plans to launch at least 20 new disposable products for the overseas market by 2022.

Zeng Huabin announced that this year, the Magic Flute's overseas business has expanded from covering 35 countries and regions worldwide to 57. Going forward, the company will continue to study the relevant policies and regulations of each country and region in order to maintain compliance in its operations.

The journalist has noticed that standards and solutions related to the export of electronic cigarettes are being further developed and implemented. The Shenzhen airport has stated that they have established an enterprise recognition standard for electronic atomization products, as well as differentiated air cargo export security inspection guidelines. They plan to build Shenzhen airport into a global electronic cigarette transit hub in the future.

Zhou Di proposed that the government should provide support in managing the supply chain and logistics of electronic cigarettes, while encouraging the development of non-nicotine fruit-flavored vaping products. Key areas such as Shenzhen Bao'an can become global centers of vaping technology, constantly expanding the boundaries of electronic cigarette applications for treatment, beauty and other fields, as well as continuously expanding overseas markets. This will facilitate the convenience of electronic cigarette exports and reduce reporting and application procedures. After all, electronic cigarettes have a rapid turnover rate and are fast-moving consumer goods. If the official reporting and application process is followed smoothly, it still takes 6 months to 1 year, which affects the company's orders as well as product updates.

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