Hong Kong Considers Reversing E-cigarette Export Ban

On April 30, 2022, Hong Kong, China officially banned the export of electronic cigarettes and other heated tobacco products by land and sea routes (hereinafter referred to as the "prohibition"). Six months after the implementation of the prohibition, on October 18, an informed source revealed to the South China Morning Post that Hong Kong may cancel the prohibition before the end of the year to promote growth in government revenue.

Hong Kong is a major transfer point for China's electronic cigarette exports, and the lifting of the ban in Hong Kong will have a significant impact on the electronic cigarette industry. 2FIRSTS conducted an exclusive interview with the President of the Hong Kong Vaping Association, Chen Minhui, on this issue.

Chairman of the Hong Kong Electronic Cigarette Association, Chen Wenhui, visited the 2FIRSTS Shenzhen office. Image source: 2FIRSTS.

The ban on electronic cigarettes in Hong Kong, China has resulted in a loss of over 10 billion dollars.

According to a report from the South China Morning Post, Hong Kong's financial secretary, Paul Chan, has forecasted that the city's budget deficit this year will exceed HKD 100 billion (USD 12.7 billion), almost double the initial prediction, due to the impact of the pandemic and weak external economic environment. The main issue is Hong Kong's narrow tax base, and the government must find long-term solutions to expand revenue streams, otherwise many policies may need to be reversed.

The reversal of the ban on vaping products is facing a challenging situation. As early as November 2021, three legislators expressed opposition to the ban in Hong Kong's Legislative Council. Despite their objections, the ban on electronic cigarettes and their sale was officially enforced on April 30, 2022.

According to Chen Minhui's statement, conservative estimates suggest that Hong Kong has lost over HKD 10 billion (approximately RMB 9.341 billion) in expenses since the implementation of the ban over the past six months. "This is a considerable amount, and we believe that the Hong Kong government will want to retain this part of the revenue in Hong Kong.

President Chen Wenhui interviewed by 2FIRSTS, as seen in the photo.

Legislative Process for Repealing Hong Kong's Transit Ban

According to the South China Morning Post, an insider has revealed that Hong Kong plans to lift the ban on transit air passengers by the end of this year. However, as explained by Chan Ming-fai regarding the legislative process in Hong Kong, it will take at least six months for the lifting of the ban to come into effect.

Chen Minhui stated that "Our LegCo member, Yee Chih-ming, is currently preparing to submit a proposal to the Legislative Council. Once the proposal is received, it will undergo a first reading before being reviewed a second and third time during a plenary session before it can be passed. This process will take at least two to three months.

Even if the above process goes smoothly, the next step is to "publish the constitution". The so-called publishing of the constitution requires that the relevant laws and regulations of the Hong Kong Special Administrative Region must be published in the "Hong Kong Special Administrative Region Constitution" before they can take effect. After the publishing of the constitution, implementation could take at least three months. "Therefore, the entire process from proposal to execution would take at least six months.

Chen Min-hui said that in order for Hong Kong to lift the ban and continue logistics and transportation activities, it is necessary to negotiate specific cooperation methods with Shenzhen Airport and logistics industry.

The President of the Hong Kong Vape Association, Chen Wen-hui (pictured left), sourced from 2FIRSTS.

After the lifting of the ban, should electronic cigarettes be exported via "Hong Kong" or "Shenzhen"?

China exports around 500,000 tons of electronic cigarettes per year. Hong Kong serves as a key transportation hub with ample capacity, and follows the same security procedures as international airports in Europe, America, South Korea, and Singapore, providing great transportation convenience. Furthermore, as Hong Kong is adjacent to "foggy city" Shenzhen and enjoys close geographical proximity and convenient transportation, prior to the ban, approximately half of electronic cigarettes exported globally were shipped from Hong Kong.

After the ban was implemented, Shenzhen Airport established a whitelist enterprise recognition and differentiated security inspection policy, which helped e-cigarette companies solve the problem of exporting after the Hong Kong transit ban and also improved the convenience of e-cigarette exports. As of October 21, 35 companies have passed the "whitelist" review.

If Hong Kong were to revoke its ban on the export of e-cigarettes and heat-not-burn tobacco products, Chinese e-cigarette companies would face a choice of whether to base themselves in Shenzhen or Hong Kong.

Chen Minhui stated that the whitelist system at Shenzhen Airport is very convenient. However, out of the over 600 manufacturers with production licenses, only 35 are included in the whitelist. For the remaining 500+ manufacturers, they are unclear on how to proceed with exports. Therefore, with the lifting of the transit ban, these non-whitelisted companies may still prefer to export via Hong Kong.

The logistics equipment at Hong Kong International Airport is very well-equipped, which means that manufacturers can shorten their delivery times. This means that businesses can receive payments faster, and customers can place orders faster, which is beneficial for both merchants and manufacturers. Despite the obvious advantages of Hong Kong Airport, however, Chen Minhui has two concerns.

On one hand, the stability of government policy is a key factor. Even if the "vaping ban" is lifted in six months, is it possible that vaping could be banned again in the future? On the other hand, with Hong Kong implementing a ban on the sale of e-cigarettes, the question of how to prevent vaping products from entering the market is one that needs to be explored.

Will Hong Kong follow the lead of "new national standard" electronic cigarettes?

After the lifting of the ban on e-cigarette shipments, Chen Minhui believed that there were two ways to address the problem of these products entering Hong Kong and then entering the country illegally and fueling the black market.

Firstly, the use of technology is being explored. Chen Minhui stated that it is possible to install tracking chips in the logistics personnel or logistics boxes to achieve this. However, the transportation cost would increase compared to the current situation.

Another approach is to actively communicate with the government and search for breakthroughs in policy. "I believe that next year, when electronic cigarettes have been banned in Hong Kong for a year, we will recommend that the Hong Kong government investigate the public's attitude towards electronic cigarettes. Even our electronic cigarette association will strive to get Hong Kong to reopen electronic cigarettes and follow the national standard by selling pure tobacco-flavored electronic cigarettes, because Hong Kong is part of China.

When discussing the future of the tobacco and electronic cigarette industries, President Chen predicts that traditional tobacco will disappear around 2030 as smoking bans become stricter. Similarly, he believes that electronic cigarettes will no longer exist by around 2050. At that time, the electronic cigarette industry may have already transformed into a new medical pillar industry through "medical atomization.

The Hong Kong Vaping Association stated:

The Hong Kong Vaping Association is a harm reduction organization that aims to convert smokers. Currently, there are over 500 member companies in Hong Kong. In the future, the association will merge with the Asian Vaping Association and establish its headquarters in Hong Kong.

2FIRSTS will continue to monitor and report on the latest developments regarding the Hong Kong ban on the export of electronic cigarettes and heated tobacco products. We have reached out to relevant parties in Hong Kong and will provide real-time updates. Stay tuned for more information.

Interviewer: Luo Feng

Authors: Hou Yuhuan and Zhu Hongxu

Editor: Hou Yuhan

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