Is It Illegal to Sell IQOS Tobacco Sticks?

Is it illegal to sell IQOS tobacco sticks? Smoking is harmful to health, which is an undeniable fact. However, recently, a new type of e-cigarette that claims to have the real taste of cigarettes without producing tar and other carcinogenic substances has gained popularity among smokers. The service of purchasing e-cigarettes online has sprung up like mushrooms after rain, but the prosecutor wants to remind everyone that selling this new type of e-cigarette could lead to serious legal issues.

Case Summary

From December 2017 to March 2018, the defendant, Lu, purchased IQOS-type heated tobacco products (commonly known as "tobacco sticks") from other sources without obtaining a retail license for tobacco sales. He then resold them at a markup through WeChat or Taobao, earning a profit. The total sales amount for the aforementioned brands exceeded 70,000 yuan. Law enforcement officers seized un-sold Heets and Marlboro tobacco sticks worth over 60,000 yuan from Lu's home and the courier company.
The People's Procuratorate of Baoshan District, Shanghai, prosecuted Lu for illegal business operations. The Baoshan District People's Court sentenced Lu to one year and two months in prison and fined him 50,000 yuan.

Question: Are the new type of e-cigarettes "tobacco sticks" classified as "tobacco products" under Chinese laws and regulations?

New type e-cigarettes generally consist of a charging case, an e-cigarette rod (heating stick), and special "tobacco sticks." The working principle is to heat rather than burn tobacco, using the heating stick to raise the temperature to over 300 degrees, evaporating the smoke without producing ash.

The "Tobacco Monopoly Law" defines cigarettes, cigars, tobacco leaves, and re-dried tobacco leaves as "tobacco products."

The "Implementation Regulations of the Tobacco Monopoly Law" state that the tobacco quality inspection stations designated by the State Council and the provincial, autonomous region, and municipal governments are responsible for the identification and testing of tobacco products.

In 2017, the National Tobacco Quality Supervision and Inspection Center released technical materials for four types of new cigarette products (IQOS, GLO, PLOOM, REVO), providing a list of physical samples and technical materials for the identification and testing of new cigarettes.

The Shanghai Tobacco Quality Supervision and Inspection Station issued an "Identification and Testing Report" confirming that the Heets and Marlboro held by the defendant Lu are genuine cigarettes; and that the filling material of IQOS sticks is classified as a tobacco product.

Conclusion: The new type of e-cigarettes "tobacco sticks" are classified as "tobacco products" under Chinese laws and regulations.

"Smuggling of ordinary goods and items"

The "Tobacco Monopoly Law" and the "Implementation Regulations of the Tobacco Monopoly Law" stipulate that engaging in wholesale and retail of tobacco monopoly products, as well as the import and export of tobacco monopoly products, must apply for a tobacco monopoly license according to the above regulations. Article 225 of the Criminal Law states that operating monopoly items without permission, if the circumstances are serious, constitutes illegal business operations.

The defendant Lu sold "tobacco sticks" through WeChat and Taobao without obtaining a tobacco monopoly license. The total amount of sales, both sold and unsold, exceeded 50,000 yuan, which is considered serious and should be held criminally liable for illegal business operations.

Currently, there are no companies in China producing this type of e-cigarette, and the involved "tobacco sticks" are mostly imported from Japan and South Korea. The services for purchasing "tobacco sticks" on Taobao, Xiaohongshu, and other websites are emerging one after another. It is not illegal for individuals to purchase a small amount of e-cigarettes abroad within the legal framework and declare them to customs upon returning to China.

According to the "Implementation Regulations on Administrative Penalties for Customs" in the People's Republic of China, evading customs supervision and selling customs-controlled goods domestically constitutes smuggling. Smuggling items that evade significant tax liabilities constitute the crime of smuggling ordinary goods and items under Article 153 of the Criminal Law. If both crimes are committed, the more severe penalty will apply.
Prosecutor's Reminder

Purchasing e-cigarettes is different from commonly purchasing cosmetics. China implements unified management of the production, sale, and import and export of tobacco monopoly products. Some buyers may think they are just making a profit and are not committing illegal business operations. However, according to judicial interpretations, if the sales or purchase prices can be clarified, the illegal business amount can easily reach the 50,000 yuan threshold for criminal liability.

Even if one holds a retail (wholesale) license for tobacco monopoly, selling e-cigarette "tobacco sticks" is still not allowed. According to the "Implementation Regulations of the Tobacco Monopoly Law of the People's Republic of China," enterprises or individuals holding a tobacco monopoly retail license must purchase from local tobacco monopoly wholesale enterprises and accept supervision and management from the issuing authority of the tobacco monopoly license.