Zhongyin lawyers explain criminal liability for illegal production and sale of e-cigarettes

The authors of this article are Zheng Mingwei and Jiang Yubin of BOC (Shenzhen) Law Firm. The following is the main text:

Since 2023, the State Tobacco Administration hase-cigarette industryA strong supervision model has been launched, and many places have disclosed today's news about illegal production and sales.e-cigarettesSevere crackdowns on enterprises and retail entities. Tobacco belongs to monopolized, monopolized or other items whose trading is restricted as stipulated by laws and administrative regulations, and has always been a key regulatory object of the country. Although e-cigarettes are different from traditional tobacco in terms of composition, according to the State Council's revision of the "Regulations for the Implementation of the Tobacco Monopoly Law of the People's Republic of China" in 2021, e-cigarettes have been officially included in the scope of supervision of cigarette products. Therefore, units and individuals engaged in the e-cigarette industry should promptly guard against legal risks during the production, transportation and operation processes.

This article will combine practical jurisprudence to interpret the current relevant laws and regulations in the e-cigarette industry and explore the issues of liability for illegal production and sales that may occur in the e-cigarette industry. (The sales and transportation referred to in this article only refer to the sale and transportation of e-cigarettes within the country)

1. Current situation of e-cigarette supervision in my country

my country's current regulatory framework for e-cigarettes adopts a "1+2+N" model, which is based on the "Regulations on the Implementation of the Tobacco Monopoly Law of the People's Republic of China", based on the "Measures for the Management of E-Cigarettes" and the mandatory national standards of "E-Cigarettes"(GB41700 -2022), and supported by multiple policy documents. Under this regulatory framework, key links such as access, production, sales, and transportation of the e-cigarette industry are subject to strict supervision.

#p#Pagination Title #e#(1) Production control of e-cigarettes

According to Article 8 of the "Measures for the Administration of Electronic Cigarettes", the establishment of e-cigarette production enterprises (including product production, agent processing, brand holding enterprises, etc., the same below), aerosol production enterprises and nicotine production enterprises for e-cigarettes, etc., shall be approved by the State Council's tobacco monopoly administrative department, obtain a tobacco monopoly production enterprise license, and be approved and registered by the market supervision and management department.

In terms of product production, the national standard for "Electronic Cigarette"e-cigarette productsThe nicotine concentration and additive concentration are specified in detail. For example, the aerosol should contain nicotine at a concentration no higher than 20 mg/g. The national standard for "Electronic Cigarettes" also clearly stipulates that the production of flavored e-cigarettes other than tobacco flavors is prohibited. This regulation is mainly to prevent inducement to minors. In addition, the packaging specifications of e-cigarette products should be strictly implemented in accordance with the provisions of the "Implementation Rules for the Packaging of E-Cigarette Products".

(2) Control on the sale of e-cigarettes

Like the production of e-cigarettes, the sales of e-cigarettes also have strict access requirements. The "Regulations for the Implementation of the Tobacco Monopoly Law of the People's Republic of China" stipulate that those engaged in the wholesale and retail business of tobacco monopoly commodities, as well as the import and export business of tobacco monopoly commodities and the purchase and sale of foreign tobacco products must apply for a tobacco monopoly license.

Regarding the types of e-cigarettes sold, the "E-Cigarette Management Measures" prohibit the sale of flavored e-cigarettes other than tobacco flavors and e-cigarettes that can be added with aerosol by themselves.

#p#Pagination Title #e#On June 15, 2022, the national unified e-cigarette transaction management platform established by the Tobacco Monopoly Administration Department of the State Council was officially launched, and all business activities related to e-cigarettes were included in the platform management. E-cigarette product manufacturers that have obtained tobacco monopoly licenses in accordance with the law,e-cigarette brandsHolding companies and others should sell e-cigarette products to e-cigarette wholesale companies through the e-cigarette transaction management platform. Enterprises or individuals that have obtained a tobacco monopoly retail license and are qualified to engage in e-cigarette retail business shall purchase e-cigarette products from local e-cigarette wholesale enterprises through the e-cigarette transaction management platform, and shall notexclusive operationElectronic cigarette products on the market. The "Measures for the Management of Electronic Cigarettes" stipulate that it is prohibited to use self-service sales methods such as vending machines to sell or sell e-cigarette products in disguise. No individual, legal person or other organization may sell e-cigarette products through information networks other than the e-cigarette transaction management platform stipulated in these Measures. Cigarette products, aerosolized substances and nicotine for e-cigarettes, etc.

(3) Transportation of e-cigarettes

The "E-Cigarette Management Measures" also stipulates the supervision of the transportation of e-cigarettes. Article 34 stipulates that the tobacco monopoly administrative department or the tobacco monopoly administrative department, in conjunction with relevant departments, may inspect and deal with illegal transportation of e-cigarette products, aerosols and nicotine for e-cigarettes in accordance with the law; Article 24 stipulates that the transportation of e-cigarette products, aerosols, nicotine for e-cigarettes, etc. shall be subject to the supervision of the tobacco monopoly administrative department. Limiting management shall be implemented for the delivery and carrying of e-cigarette products, aerosolized substances, and nicotine for e-cigarettes, and shall not exceed the limits stipulated by the relevant competent departments of the State Council. On June 2, 2022, the State Tobacco Monopoly Administration issued the "Release Rules for the Logistics Management of E-Cigarette", which clearly stipulates the logistics management of e-cigarette production, wholesale, import and export.

2. Criminal accountability for illegal operation of e-cigarettes

(1) Crime of illegal business operations

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According to the "Regulations for the Implementation of the Tobacco Monopoly Law", e-cigarettes belong tonew tobaccoProducts, refer to the relevant regulations on cigarettes. "Interpretation of the Supreme People's Court and the Supreme People's Procuratorate on Several Issues Concerning the Specific Application of the Law in Handling Criminal Cases such as Illegal Production and Sale of Tobacco Monopoly Goods"(Fa Shi [2010] No. 7)(hereinafter referred to as the "Interpretation") stipulates that in violation of national tobacco monopoly management laws and regulations, without the permission of the tobacco monopoly administrative department, without a tobacco monopoly production enterprise license, a tobacco monopoly wholesale enterprise license, a special tobacco monopoly business enterprise license, or a tobacco monopoly retail license and other license certificates, if the circumstances are serious, they shall be convicted and punished for the crime of illegal business operation in accordance with the provisions of Article 225 of the Criminal Law. If the circumstances of the crime of illegal business operation are serious, they shall be sentenced to fixed-term imprisonment of not more than five years or criminal detention, and shall also or shall only be sentenced to a fine of not less than one time but not more than five times the illegal income; if the circumstances are particularly serious, they shall be sentenced to fixed-term imprisonment of not less than five years and also be fined not less than one time but not more than five times the illegal income or confiscated property.

In the case of illegal business crimes such as Yan and Li, No. 59, Shanghai 0151 (2020), the court held: "The business behavior of the crime of illegal business includes various manifestations such as production, acquisition, transportation, storage, and sales. As long as the person implements one of these links, it is a business behavior. Defendant Li purchased, transported, and stored e-cigarettes without permission for the purpose of making profits. This behavior disrupted the order of the cigarette market and infringed on the national tobacco monopoly system. It should constitute the crime of illegal business operation. Whether e-cigarettes are sold only cause different degrees of harmful consequences and can be considered as sentencing circumstances."

The subjective elements of the crime of illegal business operations are intentional and have the purpose of seeking illegal profits. If the perpetrator does not aim to seek illegal profits, but buys and sells business licenses because he does not understand laws and regulations, the competent department shall hold him for administrative responsibility. Although the crime of illegal business operations is an administrative offense, the perpetrator's wrong understanding of illegality can hinder liability. However, in judicial practice, the threshold for judging the perpetrator's lack of subjective intention is high. In (2020) Liao 02 Criminal Judgment No. 61, the court pointed out that the e-cigarette involved in the casethe cartridgeIt belongs to tobacco monopoly products, and the audience of the e-cigarette cartridges involved in the case is smokers. The purpose of smoking is also to achieve the same or similar purpose as smoking traditional cigarettes. Therefore, the court found that the defendant's behavior of engaging in the sale of tobacco monopoly products without obtaining a tobacco monopoly retail license had the subjective intention of illegal business operation and constituted the crime of illegal business operation.

The legal interest protected by the crime of illegal business operations is the market order of business activities that restrict business operations stipulated by national economic administrative laws and regulations. That is, the market allows the economic activity to be carried out, but it must be approved. Therefore, those who engage in business activities such as the production, acquisition, transportation, storage, and sale of e-cigarettes without permission may be suspected of illegal business operations.# p#pagination title #e#

(2) Crime of producing and selling fake and inferior products

According to Article 140 of the Criminal Law, producers or sellers adulterate or adulterate products, pass fake products for authentic products, pass inferior products for good products, or pass substandard products for qualified products, and the sales amount is not less than 50,000 yuan but not less than 200,000 yuan, shall be sentenced to fixed-term imprisonment of not more than two years or criminal detention, and shall also or shall only be fined not less than 50% but not more than twice the sales amount; If the sales amount is more than 200,000 yuan but less than 500,000 yuan, he shall be sentenced to fixed-term imprisonment of not less than two years but not more than seven years and shall also be fined not less than 50% but not more than twice the sales amount; if the sales amount is more than 500,000 yuan but less than 2 million yuan, he shall be sentenced to fixed-term imprisonment of not less than seven years and shall also be fined not less than 50% but not more than twice the sales amount; If the sales amount is more than 2 million yuan, he shall be sentenced to 15 years of fixed-term imprisonment or life imprisonment, and shall also be fined not less than 50% but not more than twice the sales amount or confiscated of property. The first paragraph of Article 1 of the Interpretation stipulates that anyone who produces and sells counterfeit cigarettes, cigars and other tobacco monopoly goods with a sales amount of more than 50,000 yuan shall be convicted and punished for the crime of producing and selling counterfeit products in accordance with the provisions of Article 140 of the Criminal Law.

Therefore, according to the relevant provisions of the "Measures for the Management of Electronic Cigarettes" and the national standards for "Electronic Cigarettes", the production and sale of electronic cigarettes that do not meet national standards may be suspected of producing and selling counterfeit products.

(3) Crime of drug trafficking

In recent years, synthetic cannabinoid substances have been dressed in e-cigarettes. Because of their relatively low price and camouflage, they have been sought after by drug and drug traffickers. However, synthetic cannabinoids have been included in the Supplementary Catalogue of Controlled Varieties of Non-Medicinal Narcotic Drugs and Psychotropic Substances on July 1, 2021. Therefore, selling e-cigarettes containing cannabinoid substances will constitute a crime of trafficking in drugs. Depending on the amount of drugs involved in the case, the perpetrator will face a minimum penalty of less than three years and a maximum of 15 years in prison, life imprisonment or death.

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In the smuggling and drug trafficking case of Lu and Zuo and others [(2022) Xiang 0304 Xing Chu No. 50], the defendants Lu and Zuo purchased electronic products containing synthetic cannabinoids while knowing that synthetic cannabinoids were classified as drugs by the state.smoke oilAnd sold to drug users, the court ruled that Lu and Zuo both committed the crime of trafficking drugs.

(4) Crime of counterfeiting registered trademarks and other crimes

In the process of illegally operating e-cigarettes, the legal interests infringed by the perpetrator may sometimes exceed the market order of tobacco products. For example, according to the "Measures for the Administration of Electronic Cigarettes","Electronic cigarette products should use registered trademarks, and the use and management of tobacco product trademarks shall apply." After the amendment of the "Regulations for the Implementation of the Tobacco Monopoly Law", if the exclusive right to use the trademark of the registered trademark owner is infringed when producing and selling various types of e-cigarettes, the perpetrator will be suspected of counterfeiting the registered trademark or selling goods with counterfeit registered trademarks. It may also involve smuggling crimes. At this time, if the perpetrator commits a criminal act with one subjective intention and commits more than two crimes, it constitutes imaginary competition, and should be based on the following? Penalty in principle.

According to Article 213 of the Criminal Law, anyone who uses a trademark identical to the registered trademark on the same goods or services without the permission of the registered trademark owner, if the circumstances are serious, shall be sentenced to fixed-term imprisonment of not more than three years or criminal detention, and shall also or only be fined; if the circumstances are particularly serious, he shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years and shall also be fined; Article 214 stipulates that anyone who sells goods that are known to be counterfeit registered trademarks and the amount of illegal income is large or there are other serious circumstances shall be sentenced to fixed-term imprisonment of not more than three years and shall also, or shall only, be fined; if the amount of illegal income is huge or there are other particularly serious circumstances, he shall be sentenced to fixed-term imprisonment of not less than three years but not more than ten years and shall also be fined.

To sum up, the supervision of the production and sales of e-cigarettes is on the right track. Especially since March 1, 2023, provincial tobacco monopoly bureaus, together with local governments, public security, municipal supervision and other departments, have launched a two-month regulation nationwide.e-cigarette marketIn the special inspection of order, the e-cigarette industry is facing intensive and normalized supervision. Coupled with the fact that my country's current governance framework for the e-cigarette industry has been relatively complete, there will be no escape for illegal and criminal activities involving e-cigarettes. Therefore, relevant companies should understand in advance the national laws, regulations and policies related to e-cigarettes and promptly prevent potential criminal legal risks.# p#pagination title #e#