China’s STMA Issues Draft Rules on Domestic Duty-Free Tobacco: Mandating Traceability and Banning Sales of New Tobacco Products

Warnings：This article is for informational purposes only. The English translation is for reference only. Please refer to the official original text for all content.

Key points:

In July 2025, the State Tobacco Monopoly Administration (STMA) released the Administrative Measures on Tobacco Products in the Domestic Duty-Free Market (Draft for Comments), scheduled to take effect on January 1, 2026. This represents a major upgrade in STMA’s regulation of China’s domestic duty-free market following the 2018 version of the Administrative Measures on the Operation and Supervision of Duty-Free Cigarettes and Cigars. The key changes are as follows:

1. Expanded Scope of Regulation

● The scope of regulation has been extended from cigarettes and cigars to cigarettes (excluding heated cigarettes), cigars, and cut tobacco.

● Explicit ban: Heated tobacco products (HTPs), e-cigarettes, and other new tobacco products are prohibited in the duty-free market.

2. Upgraded Management Model

● Unified state-trade system: All supply, wholesale, and retail of duty-free tobacco products must be carried out through wholesale enterprises designated by the STMA.

● Quota-based plan: Annual sales and purchase quotas will be assigned by the STMA; any volume beyond the approved quota is invalid.

● Product catalogue system: Brands and SKUs not included in the official “Product Catalogue” may not enter the duty-free market.

3. Digital Traceability

● QR code–based traceability with “For Export Only” markings across the entire chain, from production and logistics to final sales.

● All transactions must be processed through the official transaction management platform, eliminating off-platform and grey-channel trading.

4. Pricing and Marketing Controls

● Duty-free pricing will be subject to STMA rules. Collusion, price manipulation, and misleading marketing are prohibited.

● Sales to consumers are strictly limited by quantity and may not exceed regulatory caps.

5. Stronger Penalties

● Suppliers, wholesalers, and retailers are all included in a platform-based credit/penalty system:

- Minor violations: suspension of transaction rights.

- Serious violations: revocation of transaction rights (up to two years).

- Retailers may have their following year’s purchase quota reduced or cancelled.

● Joint enforcement: Customs, police, and tax authorities will jointly combat smuggling and illegal circulation.

Implications for Overseas Companies

1.  Higher entry barriers for duty-free channels: Imported brands must work through designated state-trade wholesalers and complete product catalogue registration in advance.

2.  Reduced grey-channel opportunities: Unofficial or arbitrage-based duty-free circulation will become unsustainable.

3.  Restrictions on new tobacco products: E-cigarettes and HTPs are explicitly excluded from the duty-free channel and must seek alternative compliant channels.

Key Timeline

● July 2025: Draft for Comments released

● January 1, 2026: New measures take effect

Note:

The STMA announcement refers to the current regulatory document titled “Notice of the State Tobacco Monopoly Administration on Issuing the Administrative Measures on the Operation and Supervision of Duty-Free Cigarettes and Cigars” (STMA [2016] No. 81). However, 2Firsts has not been able to locate this document. Instead, a different version of the same title, dated 2018, was found on the website of the Haimen District Government in Nantong City. This article compares that 2018 document with the newly released draft. The content is for reference only; please refer to official announcements for authoritative information.

In an effort to further regulate the operation of tobacco products within the domestic duty-free market, safeguard national fiscal revenue, protect consumer rights, and establish a more scientific, efficient, and standardized tobacco market governance system, the State Tobacco Monopoly Administration (STMA) has drafted the "Measures for the Regulation of Tobacco Products in the Domestic Duty-Free Market (Draft for Public Comment)".

This draft has been formulated in accordance with the Tobacco Monopoly Law of the People's Republic of China, its implementing regulations, and other relevant laws and regulations governing foreign trade and duty-free product supervision. The STMA is now soliciting public feedback on the draft.

Interested parties are invited to submit their comments by 17:00 on August 1, 2025.

Contact Information:Department of Development Planning, State Tobacco Monopoly Administration
 

Phone: +86-10-63606495
 

Email: jh-jh@tobacco.gov.cn
 

Mailing Address:
Department of Development Planning,
State Tobacco Monopoly Administration,
No. 55 Yuetan South Street,
Xicheng District, Beijing 100045, P.R. China

Please indicate "Comments on the Draft Measures for the Regulation of Tobacco Products in the Domestic Duty-Free Market" clearly on the envelope or in the email subject line.

Annex 1:

Explanation on the “Measures for the Regulation of Tobacco Products in the Domestic Duty-Free Market (Draft for Public Comment)”

In order to implement the requirements of the State Council on strengthening the regulation of tobacco products in the domestic duty-free market, further standardize the operation of tobacco products in the domestic duty-free market, ensure national fiscal revenue, and protect the rights and interests of consumers, and based on the Tobacco Monopoly Law of the People's Republic of China and its Implementing Regulations, the Foreign Trade Law of the People's Republic of China, the Measures of the Customs of the People's Republic of China for the Supervision over Duty-Free Shops and Duty-Free Goods, and other relevant laws and regulations, the State Tobacco Monopoly Administration has studied and drafted the “Measures for the Regulation of Tobacco Products in the Domestic Duty-Free Market (Draft for Public Comment)” (hereinafter referred to as the “Measures”), and hereby provides the following explanation:

I. Background and Drafting Process

Currently, there are still numerous problems in the operation of tobacco products in the domestic duty-free market, such as irregular business practices by some enterprises, unclear sources of certain tobacco products manufactured overseas, lack of logistics traceability information, and related issues such as re-importation of exports, smuggling, and illegal mailing. These behaviors harm national tax interests, disrupt market order, and infringe upon consumers' legitimate rights and interests. It is necessary to strengthen regulation in a targeted manner to maintain a sound market order.

In accordance with the State Council’s requirements on strengthening the regulation of tobacco products in the domestic duty-free market, and in order to fulfill regulatory responsibilities according to the law, standardize market operations, ensure national fiscal revenue, protect consumer rights and interests, build a more scientific, efficient, and standardized tobacco market governance system, and promote the healthy and orderly development of the domestic duty-free tobacco product market, the State Tobacco Monopoly Administration, on the basis of in-depth investigation and research and extensive solicitation of opinions, has drafted the “Measures” by combining the characteristics of tobacco products in the domestic duty-free market with regulatory requirements.

II. Main Content

The “Measures” consist of five chapters and thirty-nine articles.

Chapter I is General Provisions, which clarifies the purpose and legal basis of the drafting, relevant concepts and definitions, and management principles.

Chapter II is Business Operation Management, which stipulates the qualifications and responsibilities that enterprises engaged in duty-free tobacco product business shall possess.

Chapter III is Traceability Management, which specifies the requirements for special markings and QR code-based traceability management of duty-free tobacco products.

Chapter IV is Supervision and Inspection, which sets out the handling methods for violations involving duty-free tobacco products.

Chapter V is Supplementary Provisions, which clarifies that new types of tobacco products such as heated cigarettes and electronic cigarettes shall not be sold in the domestic duty-free market, and also stipulates the right of interpretation and the date of implementation of the “Measures”.

Annex 2：Measures for the Regulation of Tobacco Products in the Domestic Duty-Free Market(Draft for Public Comment)