Disclaimer:
1. This article is an expert opinion piece and has been published with the author’s authorization.
2. The views expressed herein are solely those of the expert and do not reflect the views of 2Firsts.
3. 2Firsts is sharing this article for the purpose of information dissemination and to encourage diverse perspectives. Readers are advised to exercise independent judgment when interpreting or citing the information and opinions presented herein.
Update Notice:
On June 20, 2Firsts received a letter from lawyer Liu Peiling requesting that the original reference to “*libarbar” be changed to “a certain brand X.”
Full Summary :
This article analyzes a cross-border logistics contract dispute stemming from a Chinese company’s export of e-cigarettes to Australia. In the case, Trading Company A collected goods from Domestic Manufacturer B and commissioned Logistics Company C to transport a large batch of e-cigarettes to Australia. However, the goods went missing during transit, prompting A to file a lawsuit against C for compensation. At the time of the incident, Australia had already imposed a nationwide ban on e-cigarette imports. The brand involved, a certain brand X had not obtained valid import licenses, and the export process failed to comply with China’s mandatory e-cigarette regulatory platform filings—raising serious questions about the legality of the products.
The central issue lies in whether the e-cigarettes should be deemed legal when the destination country explicitly prohibits them, and whether the logistics company should bear liability for the loss of goods. The article notes that Company A’s customs declaration documents were seriously flawed; the destination was deliberately falsified as South Korea or Malaysia to evade regulatory scrutiny. Furthermore, key materials such as production qualifications, trademark authorization, OEM contracts, and export filings were missing. The logistics provider, who had no full visibility into the product’s legality, now faces a disproportionate burden of proof and compensation risk—highlighting how regulatory risks associated with “gray clearance” are increasingly shifting downstream to logistics operators.
From a regulatory perspective, the case coincides with China’s efforts to build a full-chain oversight system for e-cigarette exports, including license approvals, contract registration, logistics traceability, customs declarations, and foreign exchange reporting—all under tighter scrutiny. Meanwhile, the Australian government has intensified diplomatic efforts to curb illicit vape imports and has implemented a phased import ban under the Customs (Prohibited Imports) Regulations. The outcome of this case may serve as a key signal for how the international community evaluates China’s enforcement of its tobacco control commitments and response to illegal e-cigarette trade.
The author recommends that cases of this nature first undergo investigation by administrative regulators to determine product legality before proceeding to civil adjudication, thus avoiding conflicts between judicial rulings and regulatory determinations. The article not only offers a legal risk analysis from a compliance perspective but also provides practical warnings for contract design, logistics execution, and risk management in the e-cigarette export industry under increasingly strict global policies.
Furthermore, this case provides an important reference for logistics contracts involving the illicit trade of e-cigarettes. Whether it involves “gray clearance” at the destination market, outright smuggling, or non-compliant export procedures within China, significant legal and compliance risks are present.
At both the domestic export stage and the overseas import stage, any breach of contract by downstream logistics providers—such as cargo being seized, going missing, or delayed—places them under a heavy burden of proof. Even a minor misstep could expose them to liability for the full value of the lost goods.
Disputes Over E-cigarette Exports Under Destination Country Bans: Legal Validity and Burden of Proof
Author: Liu Peiling, Attorney-at-Law
Case Summary:
Company A, a trading firm, collected goods from e-cigarette manufacturer B and entrusted logistics provider C to transport a large volume of e-cigarettes to Australia. However, the goods went missing, and Company A sued Company C, seeking compensation for the loss.
This is a textbook case in which e-cigarette exports targeted a country where such products are prohibited. The court identified a central issue: whether the e-cigarettes involved were legal. In response, a legal opinion from an industry-specialized attorney offers valuable insight and merit for reference.
I. Background of the Cross-Border Logistics Contract Dispute: Illicit Tobacco and E-cigarette Trade
This case concerns a cross-border logistics contract dispute, with the key point of contention being the legality of the e-cigarette products involved. In recent years, China has accounted for more than 90% of the world’s e-cigarette exports. In reality, nearly half of these products enter destination countries through non-compliant “gray customs clearance” methods, raising growing concern and scrutiny from the international community. Customs, tobacco regulators, border agencies, and police departments in multiple countries have issued repeated alerts about cracking down on China’s illegal e-cigarette exports. Governments such as the U.S. and Australia have strengthened enforcement to prevent unauthorized e-cigarette imports.
According to Australian Customs Notice No. 2023/51, effective January 1, 2024, all e-cigarette imports without both an e-cigarette importer license and a permit from the Therapeutic Goods Administration (TGA) are banned. Due to the severe situation involving illegal imports of Chinese e-cigarettes into Australia, the Australian Border Force met with officials from China’s State Tobacco Monopoly Administration (STMA) on May 6, 2024, to raise formal concerns. From June 15 to 18, during a state visit to Australia, leaders from both countries jointly declared a commitment to “strengthen cooperation in combating illicit tobacco and e-cigarette smuggling.”
The a certain brand X e-cigarettes involved in this case were shipped to Australia precisely during the enforcement phase of the country’s full import ban on such products, raising doubts about their legality.
Therefore, whether these China-to-Australia e-cigarette exports are deemed illegal will become a pivotal element in this ruling. It may even serve as a judicial reference for how the international community perceives and responds to China’s role in illicit e-cigarette trade.
II. Legal and Regulatory Requirements for China’s E-cigarette Exports
On November 10, 2021, the State Council issued Order No. 750 to amend the Implementing Regulations of the Tobacco Monopoly Law of the People’s Republic of China. The revision added Article 65: “New tobacco products such as e-cigarettes shall be regulated in accordance with provisions applicable to traditional cigarettes under this regulation.”
Based on that legal framework, and to strengthen e-cigarette supervision, regulate market order, and promote rule-of-law governance of the industry, the State Tobacco Monopoly Administration (STMA) released the “Administrative Measures for E-cigarettes” in March 2022. Article 33 of the Measures states: “E-cigarette products that are not sold domestically and are intended solely for export shall comply with the laws, regulations, and standards of the destination country or region; where no such laws or standards exist, China’s own laws and standards shall apply.”
In June 2022, STMA published the “E-cigarette Transaction Management Rules (Trial),” under which Article 5 stipulates: “E-cigarette products, atomized liquids, and nicotine used in e-cigarettes intended for export shall be filed for export recordation via the designated online platform by their respective manufacturers.”
Article 13 further requires: “The parties involved in e-cigarette transactions must sign a contract via the platform. The contract shall generally include the member names and codes, license numbers, addresses and contact information of the parties, as well as details on the subject matter—name, quantity, quality, price, packaging, inspection standards and methods, contract date, performance timeline and location, payment and transportation methods, contract validity, liability for breach, and dispute resolution methods.”
Article 15 adds: “All transaction entities shall conduct storage, sorting, and transportation in accordance with e-cigarette logistics management requirements and contractual agreements. Products or materials must be delivered to the agreed logistics warehouse or location within the specified time frame, and all relevant data and information must be collected and uploaded accordingly.”
In July 2023, the Office of the State Tobacco Monopoly Administration issued a notice titled “Guidelines on Establishing Quality Assurance Systems for Exported E-cigarette Products.” Article 10 of this document states: “The box and carton packaging of exported e-cigarette products shall display the production enterprise’s tobacco monopoly license number, product name, production batch number, and production date. For contract-manufactured products, the packaging must indicate the license number of the subcontracted production enterprise.”
Article 11 mandates: “Both domestic and international logistics for exported e-cigarettes must meet applicable safety requirements and ensure full traceability.” Article 12 adds: “When exporting e-cigarettes, enterprises must declare truthfully to customs in accordance with the law, and complete filing with the national e-cigarette transaction management platform within 30 days after export customs declaration.”
In August 2024, the STMA released an updated “E-cigarette Transaction Management Rules,” in which Article 16 specifies: “Before transporting exported e-cigarettes, atomized products, or nicotine, the relevant production enterprises must record such logistics with the designated platform. Failure to file in a timely manner will be handled in accordance with regulations. Logistics providers must not offer services designed to circumvent domestic or foreign regulatory systems.”
Accordingly, under China’s comprehensive, traceable supervision system for e-cigarette exports—covering licensing, quota approval, contract, finance, taxation, customs, foreign exchange, and public security—the compliant process for exporting e-cigarettes to Australia should follow these steps:
1. The Australian importer must obtain both an importer license for e-cigarette products and a product permit issued by the Therapeutic Goods Administration (TGA), and the products must be approved by Australian authorities;
2. The importer must hold or be authorized by the rightful trademark owner for the relevant e-cigarette brand in Australia;
3. The importer places an OEM (original equipment manufacturing) order with a Chinese manufacturer holding a tobacco monopoly license, and this license must list the relevant e-cigarette brand as an approved item;
4. The Chinese manufacturer produces the goods according to the OEM contract and files the export record via the national e-cigarette transaction platform;
5. The manufacturer prepares customs clearance documents, which should correspond across various systems including the Tax Bureau (for export rebates), foreign exchange (for inbound funds), Customs, and the STMA. The logistics and fund flows must align with the OEM contract;
6. The transport process must be recorded on the platform, and no services that evade domestic or international oversight are permitted;
7. After export declaration, the relevant information must be filed on the national platform within 30 days.
III. The E-cigarettes in Question Are Illegal Products in Both China and Australia
1. The a certain brand X E-cigarettes Are Prohibited Imports in Australia
According to Evidence No. 8 submitted by Logistics Company C—“Australian Customs Notice No. 2023/51: New Import Control on Vaping Goods”—the Australian government had already issued a relevant ban as early as December 13, 2023. The notice includes the following points:
(1) “In 2024, under new provisions of the Customs (Prohibited Imports) Regulations 1956, the importation of all vaping goods will be phased out. From January 1, 2024, disposable e-cigarettes will be prohibited. From March 1, 2024, all other e-cigarette products will also be banned.”
(2) “Under the new controls, only importers who hold both an import license for e-cigarette products and a product permit issued by the Therapeutic Goods Administration (TGA) will be allowed to import. These permits are only available to entities importing for one of the following purposes: manufacturing and supply (specifically to pharmacies), or scientific and medical research, such as clinical trials.”
Therefore, when Company A entrusted Company C to ship the a certain brand X e-cigarettes in May 2024, these products had already been classified as prohibited or restricted imports by Australian customs authorities.
2. Existing Evidence Further Suggests the E-cigarettes Were Illegal in Australia
While the logistics contract between Company A and Company C specified Australia as the destination for the e-cigarettes, the initial customs documents provided by Company A on May 5, 2024, listed South Korea as the declared destination.
Later, Company C forwarded these documents to Customs Brokerage Company D for processing. Company D amended the destination to Malaysia. Company C then shared the revised documents with Company A, which confirmed and approved the change.
In other words, throughout the entire shipping process, the customs declarations listed countries other than Australia, indirectly corroborating that Australia was a prohibited destination for the a certain brand X e-cigarettes. Otherwise, Company A could have directly stated “Australia” as the destination in the customs paperwork, rather than disguising it as “South Korea” or “Malaysia.”
3. The Deficiencies and Gaps in Evidence Provided by Company A Further Confirm the Illegality of the E-cigarettes Transported
(1) The tobacco production license of Guangdong Manufacturer B does not explicitly authorize production of the a certain brand X.
According to Article 11 of the “Regulations on E-cigarette Import-Export Trade and Foreign Economic Cooperation” issued by the State Tobacco Monopoly Administration, e-cigarette manufacturers (including brand holders, OEMs, etc.) must operate within the approved license scope and export capacity when producing e-cigarette products and raw materials for export.
In the evidence submitted by Company A—specifically the “Product Qualification Certificate and Air Transport Report”—the production license of Manufacturer B lists brands like “ BAR etc.” but omits the crucial attachment (the license appendix) that specifies detailed brand authorizations.
As such, the current evidence is insufficient to prove that Guangdong Manufacturer B was officially authorized by the STMA to produce the a certain brand X e-cigarettes.
Thus, the legal origin of this OEM order is questionable and may require further investigation by the administrative regulator to determine whether these products are illegal within China.
(2) The “Air Transport Dangerous Goods Identification Report” submitted by Company A merely assesses the safety of batteries used in a certain brand X e-cigarettes during air transport. It does not establish the legality of the product itself.
(3) Trademark Violation: The a certain brand X wordmark and its combined graphic trademark have not yet been successfully registered in China. According to the Administrative Measures for E-cigarettes, Manufacturer B must demonstrate that the order originated in Australia or that the intermediary transaction was clearly destined for the Australian market.
(4) Although Guangdong Manufacturer B holds a valid tobacco production license, Company A failed to provide supporting documents proving that this particular batch of e-cigarettes—destined for Australia—was lawfully produced, particularly the required filing on the national e-cigarette platform.
Manufacturer B did not submit any OEM contract or export filing records to demonstrate its legal authority to produce and export this brand.
This strongly indicates that the batch may be part of an illicit trade operation.
Company A was likely the actual operator behind this unlawful order, and the so-called “Australian client” was not Manufacturer B’s customer but a client of Company A.
Driven by the high profit margins in the Australian black market, Manufacturer B merely acted as a producer for Company A’s overseas order. The customs documents listed “South Korea” as the destination, while in reality, the goods exited regulatory oversight the moment they left the factory.
4. Logistics Company C Has Filed a Complaint with a Tobacco Regulatory Authority in an Attempt to Trigger Administrative Investigation into the Legality of the E-cigarettes
At present, the e-cigarette products involved in this case have attracted the attention of a relevant branch of the State Tobacco Monopoly Administration (STMA), which may intervene and launch an official investigation. Related information is referenced in “Appendix 1: Chat Record.”
Further, based on Evidence No. 10 submitted by Company C—namely, “On November 15, 2024, Shenzhen police and the STMA jointly cracked a major case involving counterfeit a certain brand X e-cigarettes”—there is preliminary indication that the a certain brand X products in this case are illegal within China.
IV. Broader Legal and Social Significance of This Case
(1) Upholding National Regulatory Order: This case reflects a typical pattern of cross-border e-cigarette smuggling. Should the court rule in favor of Company A, it may effectively encourage “gray clearance” practices that circumvent legal oversight. The existing “Administrative Measures for E-cigarettes” still require refinement to ensure comprehensive compliance enforcement from the source.
(2) International Judicial Cooperation: The Australian government has already lodged diplomatic complaints with China over illicit e-cigarette trade. The outcome of this case will likely become a key reference point for the international community in assessing China’s fulfillment of its obligations under the WHO Framework Convention on Tobacco Control (FCTC).
(3) Procedural Jurisdiction in Cross-border E-cigarette Disputes: This case highlights an urgent legal question—should the legality of the e-cigarettes be determined first through administrative investigation by tobacco regulatory authorities, or can courts directly adjudicate on such matters within a civil contract dispute? It is recommended that the court suspend proceedings and allow the STMA to complete its administrative inquiry before resuming the trial of the logistics contract dispute.
Author Bio:
Liu Peiling is an intellectual property lawyer at Tianyuan Law Firm, specializing in compliance consulting in the field of next-generation products (NGP). She is particularly skilled in patent search, analysis, invalidation, and litigation. (Contributed by Liu Peiling)
2Firsts welcomes article submissions, interview opportunities, or commentary. Please contact us at info@2firsts.com or connect with 2Firsts CEO Alan Zhao on LinkedIn.
Cover image generated by ChatGPT.
