The most comprehensive judicial analysis of criminal sentencing for the production, sale, and transp
This article is authored by Zheng Mingwei and Jiang Yubin from Zhongyin (Shenzhen) Law Firm. The following is the main text:
Since 2023, the National Tobacco Administration has initiated a strict regulatory mode for the electronic cigarette industry, with many regions publicly announcing severe crackdowns on illegal production and sales of electronic cigarettes. Tobacco is a key regulatory target of the state, as it is classified as a monopoly and restricted commodity by laws and administrative regulations. Although electronic cigarettes differ in composition from traditional tobacco, they have been officially included in the regulatory scope of cigarette products according to the revised "Implementation Regulations of the Tobacco Monopoly Law of the People's Republic of China" by the State Council in 2021. Therefore, entities and individuals engaged in the electronic cigarette industry must timely prevent legal risks during production, transportation, and operation.
This article will interpret the relevant laws and regulations of the electronic cigarette industry in conjunction with practical cases, exploring the responsibilities that may arise from illegal production and sales in the electronic cigarette industry. (The sales and transportation referred to in this article only pertain to the sale and transportation of electronic cigarettes within the territory.)
1. Current Regulatory Status of Electronic Cigarettes in China
China's current regulatory framework for electronic cigarettes adopts a "1+2+N" model, with the "Implementation Regulations of the Tobacco Monopoly Law of the People's Republic of China" as the foundation, the "Electronic Cigarette Management Measures" and the mandatory national standard for electronic cigarettes (GB 41700-2022) as the basis, and multiple policy documents as support. Under this regulatory framework, key aspects such as the entry, production, sales, and transportation of electronic cigarettes are subject to strict regulation.
(1) Production Control of Electronic Cigarettes
According to Article 8 of the "Electronic Cigarette Management Measures", establishing electronic cigarette production enterprises (including product production, processing, brand holding enterprises, etc.) and production enterprises for atomization materials and nicotine for electronic cigarettes requires approval from the State Council's tobacco monopoly administrative department, obtaining a tobacco monopoly production enterprise license, and registration with the market supervision department.
In terms of product production, the national standard for electronic cigarettes specifies detailed regulations on the nicotine concentration and additive concentration in electronic cigarette products. For example, atomization materials must contain nicotine, with a concentration not exceeding 20mg/g. The national standard for electronic cigarettes also explicitly prohibits the production of flavored electronic cigarettes other than tobacco flavor, primarily to prevent inducement to minors. Additionally, the packaging specifications for electronic cigarette products must strictly adhere to the "Implementation Rules for Electronic Cigarette Product Packaging".
(2) Sales Control of Electronic Cigarettes
Similar to the production of electronic cigarettes, there are strict entry requirements for the sale of electronic cigarettes. The "Implementation Regulations of the Tobacco Monopoly Law" stipulate that those engaged in the wholesale and retail of tobacco monopoly products, as well as the import and export of tobacco monopoly products and foreign tobacco products, must apply for a tobacco monopoly license.
Regarding the types of electronic cigarettes sold, the "Electronic Cigarette Management Measures" prohibit the sale of flavored electronic cigarettes other than tobacco flavor and electronic cigarettes that allow for the addition of atomization materials.
On June 15, 2022, the national unified electronic cigarette trading management platform established by the State Council's tobacco monopoly administrative department officially went online, and all business activities related to electronic cigarettes are now managed through this platform. Electronic cigarette product manufacturers and brand holders who have obtained a tobacco monopoly production license must sell electronic cigarette products to electronic cigarette wholesale enterprises through this trading management platform. Enterprises or individuals with a tobacco monopoly retail license and qualified to engage in electronic cigarette retail must purchase electronic cigarette products from local electronic cigarette wholesale enterprises through this trading management platform and are prohibited from engaging in exclusive sales of listed electronic cigarette products. The "Electronic Cigarette Management Measures" also prohibit the sale or disguised sale of electronic cigarette products through vending machines or other self-service sales methods, and no individual, legal person, or other organization may sell electronic cigarettes, atomization materials, or nicotine for electronic cigarettes through information networks outside the trading management platform specified in this measure.
(3) Transportation of Electronic Cigarettes
The "Electronic Cigarette Management Measures" also stipulate regulations for the transportation of electronic cigarettes. Article 34 states that the tobacco monopoly administrative department or the tobacco monopoly administrative department in conjunction with relevant departments may legally inspect and handle illegal transportation activities of electronic cigarettes, atomization materials, and nicotine. Article 24 states that the transportation of electronic cigarettes, atomization materials, and nicotine must be subject to the supervision of the tobacco monopoly administrative department. Delivery and cross-regional transportation of electronic cigarettes, atomization materials, and nicotine are subject to quantity management and must not exceed the limits set by the relevant authorities of the State Council. On June 2, 2022, the National Tobacco Administration issued the "Logistics Management Rules for Electronic Cigarettes", which clearly defined the logistics management for the production, wholesale, and import-export links of electronic cigarettes.
2. Criminal Accountability for Illegal Electronic Cigarette Operations
(1) Illegal Business Operations
According to the "Implementation Regulations of the Tobacco Monopoly Law", electronic cigarettes are classified as new tobacco products and are subject to the same regulations as cigarettes. The "Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Illegal Production and Sale of Tobacco Monopoly Products" (Fa Shi [2010] No. 7) stipulates that violations of national tobacco monopoly management laws and regulations, engaging in the illegal operation of tobacco monopoly products without permission from the tobacco monopoly administrative department, and lacking the necessary licenses such as tobacco monopoly production enterprise licenses, tobacco monopoly wholesale enterprise licenses, special tobacco monopoly operation licenses, and tobacco monopoly retail licenses, can be prosecuted for illegal business operations under Article 225 of the Criminal Law. If the illegal business operations are serious, the penalty can be imprisonment for up to five years or criminal detention, along with a fine of one to five times the illegal income; if the circumstances are particularly serious, the penalty can be imprisonment for more than five years, along with a fine or confiscation of property based on the illegal income.
In the case of (2020) Hu 0151 Criminal Initial 59, the court held that: "The business behavior of illegal operations includes various forms such as production, acquisition, transportation, storage, and sales. As long as the actor implements one of these links, it constitutes a business operation. The defendant, Li, engaged in the acquisition, transportation, and storage of electronic cigarettes for profit without permission, which disrupted the order of the cigarette market and infringed upon the national tobacco monopoly system, thus constituting the crime of illegal business operations. Whether the electronic cigarettes were sold only affects the degree of harm and can be considered as a sentencing factor."
The subjective element of the crime of illegal business operations is constituted by intent and the purpose of seeking illegal profit. If the actor does not intend to seek illegal profit but is simply unaware of the laws and regulations, they should be held administratively accountable by the competent authority. Although the crime of illegal business operations is an administrative offense, the threshold for determining the actor's lack of subjective intent is quite high in judicial practice. In the criminal judgment of (2020) Liao 02 Criminal Final 61, the court pointed out that the electronic cigarette cartridges involved in the case are tobacco monopoly products, and the audience for these electronic cigarettes is smokers, with the purpose of use being to achieve the same or similar effects as traditional cigarettes. Therefore, the court determined that the defendant had subjective intent for illegal business operations by engaging in the sale of tobacco monopoly products without obtaining a tobacco monopoly retail license.
The legal interest protected by the crime of illegal business operations is the market order of economic administrative laws and regulations that restrict business activities. That is, the economic activity is allowed to proceed, but it must be approved by the relevant authorities. Therefore, engaging in production, acquisition, transportation, storage, and sales of electronic cigarettes without permission may constitute illegal business operations.
(2) Producing and Selling Inferior Products
According to Article 140 of the Criminal Law, producers and sellers who mix, adulterate, or misrepresent products, selling amounts between 50,000 and 200,000 yuan, may face imprisonment for up to two years or criminal detention, along with a fine of 50% or more of the sales amount; for sales between 200,000 and 500,000 yuan, the penalty may be imprisonment for two to seven years, along with a fine of 50% or more of the sales amount; for sales exceeding 500,000 yuan but less than 2 million yuan, the penalty may be imprisonment for seven years or more, along with a fine of 50% or more of the sales amount; for sales exceeding 2 million yuan, the penalty may be imprisonment for 15 years or life imprisonment, along with a fine of 50% or more of the sales amount or confiscation of property. The first paragraph of Article 1 of the Interpretation states that producing and selling inferior cigarettes, cigars, and other tobacco monopoly products with sales amounts exceeding 50,000 yuan shall be punished according to Article 140 of the Criminal Law.
Therefore, according to the "Electronic Cigarette Management Measures" and the national standard for electronic cigarettes, producing and selling electronic cigarettes that do not meet national standards may constitute the crime of producing and selling inferior products.
(3) Drug Trafficking
In recent years, synthetic cannabinoid substances disguised as electronic cigarettes have gained popularity among drug users due to their relatively low prices and disguise. However, synthetic cannabinoids were included in the "Supplementary List of Non-Medicinal Narcotic Drugs and Psychotropic Substances" as of July 1, 2021. Therefore, selling electronic cigarettes containing cannabinoid substances will constitute drug trafficking. Depending on the quantity of the drugs involved, the offender may face imprisonment for a minimum of three years and a maximum of fifteen years, life imprisonment, or even the death penalty.
In the case of Lu and Zuo's smuggling and drug trafficking case [(2022) Xiang 0304 Criminal Initial 50], the defendants Lu and Zuo purchased electronic cigarette oils containing synthetic cannabinoids, knowing that these substances were classified as drugs by the state, and sold them to drug users. The court ruled that both Lu and Zuo were guilty of drug trafficking.
4) Trademark Infringement and Others
In the illegal operation of electronic cigarettes, the legal interests infringed upon may sometimes extend beyond the market order of tobacco products. For example, according to the "Electronic Cigarette Management Measures", "Electronic cigarette products must use registered trademarks and comply with the regulations on the use and management of trademarks for tobacco products." After the amendment of the "Implementation Regulations of the Tobacco Monopoly Law", if any infringement of the trademark rights of registered trademark owners occurs during the production and sale of various electronic cigarettes, the perpetrator may be suspected of trademark infringement or selling counterfeit registered trademark goods, and may also involve smuggling crimes. In this case, if the perpetrator commits a criminal act with subjective intent, violating two or more laws, it constitutes a case of concurrent offenses, and punishment should be based on the principle of heavier punishment.
According to Article 213 of the Criminal Law, using a registered trademark identical to that of the registered trademark owner without permission on the same type of goods or services, if the circumstances are serious, may result in imprisonment for up to three years or criminal detention, along with a fine; if the circumstances are particularly serious, the penalty may be imprisonment for three to seven years, along with a fine; Article 214 stipulates that selling goods known to be counterfeit registered trademarks, with significant illegal gains or other serious circumstances, may result in imprisonment for up to three years, along with a fine; if the illegal gains are enormous or other particularly serious circumstances exist, the penalty may be imprisonment for three to ten years, along with a fine.
In summary, the regulation of the production and sale of electronic cigarettes has entered a regularized phase. Especially since March 1, 2023, provincial tobacco monopoly bureaus, in conjunction with local governments and public security, market supervision, and other departments, have launched a two-month special inspection to standardize the order of the electronic cigarette market nationwide. The electronic cigarette industry is facing stringent and normalized regulation. Furthermore, the governance framework regarding the electronic cigarette industry in China has become relatively complete, and illegal activities related to electronic cigarettes will have nowhere to hide. Therefore, relevant enterprises should familiarize themselves with national laws, regulations, and policies related to electronic cigarettes in advance to timely prevent potential criminal legal risks.
