Elf Bar and other e-cigarette manufacturers have been trying to evade US customs and taxes

Last week, U.S. authorities publicly announced the first seizure of some of the company's products, a seizure of 1.4 million illegal spices from Chinae-cigarettesPart of the action. Officials estimate the value of the items at $18 million, including Elf Bar and other brands.

In just two years, a small and colorful e-cigarette device called Elf Bar has become the world's most popular disposable e-cigarette, generating billions of dollars in sales and quickly becoming the first choice for underage teenagers in the United States.

But according to public records and court documents reviewed by The Associated Press, Elf Bar and other China e-cigarette manufacturers have imported hundreds of millions of dollars worth of products into the United States while repeatedly evading customs, tax avoidance and import fees.

Records show that disposable e-cigarette manufacturers often mistakenly label their shipments as items such as "battery chargers" and "flashlights", hindering efforts to stop products that are causing e-cigarette smoking problems among U.S. teenagers.

Eric Lindblom, a former Food and Drug Administration official, said: "The regulatory steps for single-use e-cigarettes are very weak, which is making the problem worse."

Shortly before China regulators banned flavored e-cigarettes last year, fruity and candy-flavored disposable e-cigarettes began to flood the United States. Officials said they were taking action to protect children's health, bute-cigarette industryExecutives and health experts point out that the ban was implemented after e-cigarettes began to threaten sales of traditional cigarettes, which generate US$200 billion in annual revenue to China's state-owned tobacco monopoly.

Disposable e-cigarettes may soon become a victim of their own success. Governments from Australia to England are considering banning these single-use products, citing underage use and environmental impact.

A global backlash could prompte-cigarette enterprisesHome countries are more focused on the U.S. market, where loopholes and lax enforcement have made it easy to disguise e-cigarettes in the thousands of cargo reached daily by sea and air.

"Hidden" shipments

Elf Bar is the main product of Shenzhen iMiracle, a privately owned company based in Shenzhen, a huge manufacturing center in China that produces more than 95% of the world's e-cigarettes.

According to industry analyst firm ECigIntelligence, Elf Bar, Lost Mary and several other iMiracle brands are expected to generate sales of US$3.5 billion to US$4 billion globally this year.

In the United States, iMiracle recently abandoned the Elf Bar name amid trademark disputes and regulators 'attempts to seize its imports. Instead, its products are sold under the EB Create brand, and flavors include watermelon ice and frozen custard.

A spokesperson for iMiracle said the company stopped shipping Elf Bar to the United States earlier this year and tried to comply with regulatory rules.

"All the Elf Bar-branded products you see in the U.S. are counterfeit, and I'm pretty sure of that," said Jacques Xiang Li, a senior executive director who added that he had only worked for iMiracle for three months and was still learning about its business.

When asked about EB Create e-cigarettes, he said: "I can't tell you anything about that."

Details about the company's U.S. sales and activities are emerging in court documents.

Earlier this year, iMiracle was forced to abandon the Elf Bar name after losing a trademark case against a smaller company that already sold its product as Elf vapes.

At a court hearing in 2022, U.S. distributors described rapid growth in sales.

Jon Glauser of Demand Vape, Buffalo, N.Y., told a federal judge that his company has sold more than $132 million of Elf Bar products, accounting for one-third of its annual profits.

"We were selling faster than we were getting in," Grosser said according to court records.

Grouser attributed Elf Bar's rapid rise to its profit margins. He said sellers can make about 30% of profits, which is twice as much as other disposable e-cigarettes.

iMiracle's parent company, Heaven Gifts, has previously described how it helps customers evade import fees and taxes. Tianci Gifts website promotes "hidden" delivery methods, including not mentioning e-cigarettes or company names on the packaging. Instead, the company said content would be labeled as "atomizer, coils, pipes, etc."

"We also mark lower values to avoid taxes," the website said, adding that customers can state their own values for the goods.# p#pagination title #e#

In June, Tianci Gifts announced that it would be "offline," and shortly after that, the U.S. Food and Drug Administration (FDA) directed customs officials to begin seizing the company's cargo.

Despite the updates, a company spokesperson said Tianci Gifts is still open and employees continue to use email accounts in their names. The spokesperson did not respond to multiple follow-up questions about the company's business.

According to customs data compiled by global trade analysis company ImportGenius reviewed by The Associated Press, neither Gifted Gifts nor iMiracle appeared in it.

The seizure announced last week may provide part of the answer: When cargo arrives at Los Angeles International Airport, air operators do not have to disclose the same detailed information about cargo as shipping ships do. These e-cigarettes were mistakenly labeled as toys, footwear and other items.

At a court hearing in 2022, U.S. distributors described a surge in sales.

Jon Glauser of Demand Vape in Buffalo, New York, told a federal judge that his company sold more than $132 million in Elf Bar products, accounting for one-third of its annual profits.

"We were selling faster than we were getting in," Grouser said based on court records.

He attributed Elf Bar's rapid rise to its high profit margins. He said sellers can make about 30% of profits, twice that of other disposable e-cigarettes.

iMiracle's parent company, Heaven Gifts, has previously described how it helps customers evade import fees and taxes. Tianci Gifts website promotes "hidden" delivery methods, including not mentioning e-cigarettes or company names on packages. Instead, the company said content would be labeled as "nebulizer, coil, tube, etc."

"We also mark lower values to avoid taxes," the website said, adding that customers can state their own value for the goods.

In June, Tianci announced that it would "go offline," and the U.S. Food and Drug Administration (FDA) directed customs officials to begin seizing the company's cargo.

Despite the updates, a company spokesperson said Tianci Gifts is still open and employees continue to use email accounts with their names. The spokesperson did not respond to multiple follow-up questions about the company's business.

According to customs data compiled by global trade analysis company ImportGenius reviewed by The Associated Press, neither Gifted Gifts nor iMiracle appeared in it.

The seizure announced last week suggests part of the answer: When cargo arrives at Los Angeles International Airport, air operators do not need to disclose cargo information in the same detail as shipping ships do. These e-cigarettes were mistakenly labeled as toys, footwear and other items.

American Tobacco said its e-cigarettes have been reviewed by the FDA and do not offer fruit flavors and cannot compete with lower-priced disposable e-cigarettes. In recent weeks, Reynolds American and Altria have filed legal cases against iMiracle, Esco Bars and other disposable e-cigarette manufacturers.

Reynolds 'filing with the U.S. International Trade Commission described the complex techniques of smuggling disposable e-cigarettes into the country.

A former FDA investigator who now works for Reynolds described in an affidavit that at a recent conference, e-cigarette exhibitors removed hidden e-cigarettes from flashlights,"consistent with fraudulent behavior by China manufacturers claiming products as flashlights."

Last week, the committee announced it would launch an investigation into the matter.

"There is no future for e-cigarettes in China"

The rise of e-cigarettes in the United States can be traced back to the actions of China regulators.

According to statistics from China Electronic Commerce Chamber of Commerce, the market value of China's e-cigarette industry is estimated to be US$28 billion, and the United States accounts for nearly 60% of China's e-cigarette exports.

China authorities encouraged these exports while sharply cutting the domestic e-cigarette business, which is controlled by hundreds of private companies.

government wille-cigarette companiesUnder the control of its state-owned Tobacco Administration, it began banning online sales in 2019 and ended with a complete ban on all flavors except tobacco.

The taste ban has caused domestic sales to fall by more than 50%, for large China manufacturers like RLX Technology. Many e-cigarette stores and small manufacturers also closed because they were unable to obtain government-issued operating licenses.

Authorities cited concerns about "unsafe additives, leaking electronic juice and inferior batteries." But experts who have worked in the country for years point to another reason: the erosion of e-cigarettes on government tobacco sales.

The State Tobacco Corporation of China is the world's largest tobacco company, and the state-owned monopoly body, cooperates with its regulator, the Tobacco Monopoly Bureau, to control the manufacturing, marketing and pricing of all tobacco products in China.# p#pagination title #e#

According to data company EuroMonitor, e-cigarette sales increased by more than 254% between 2017 and 2020. These sales revenue belongs entirely to e-cigarette entrepreneurs, not the government.

"The Tobacco Administration says,'Every e-cigarette sold means smoking one less,' so they are now strictly controlling e-cigarettes," said Dr. Ray Yip, a public health consultant and former director of the Bill and Melinda Gates Foundation's China program.

Euromonitor predicts that domestic e-cigarette sales in China will reach US$822 million this year, down more than 70% from the peak of nearly US$3 billion.

"Since the government ban, everyone in the industry has been affected because people like to flavor e-cigarettes," said Lin Jian, who owns an e-cigarette shop in Shenzhen. Lin Jian said he can't afford to hire employees to help work in the store now, and the store's income is only enough to cover his expenses.

Hu Leng, manager of an e-cigarette contract manufacturer in Shenzhen, said: "The domestic market has no future. All of our products are sold to Europe and we are doing very well so far."

exploit vulnerabilities

Elf Bar manufacturer Shenzhen iMiracle is one of the companies that relies entirely on exports to build their business.

In late 2021, the company began shipping products to the United States to exploit regulatory loopholes: the FDA banned reusable e-cigarettes with flavors that appeal to children (such asJUUL), but disposable products are not prohibited.

Entrepreneur Zhang Shengwei founded Tianci Gifts in 2004 as an e-commerce platform for e-cigarettes. Over the years, he has invested in companies up and down the supply chain-makers of batteries, nicotine solutions and other components. According to a spokesperson for iMiracle, around 2018, the company began manufacturing its own e-cigarettes. (Tianci Gifts and iMiracle share the same address in Shenzhen.)

Shengwei now owns more than six companies, including Hong Kong subsidiaries iMiracle HK Limited and VapeOnly Technology, which is listed as the manufacturer of Elf Bar on certain products. A company spokesperson declined to arrange for Zhang Shengwei to be interviewed.

E-cigarette industry analysts quickly aligned companies like iMiracle with companies likesmoore Distinguish established China manufacturers like International, which are different from global regulators ande-cigarette brandsHave a long-term cooperative relationship.

Sean Mack, head of nicotine research at EuromonitorJill"It's more like an opportunistic attempt to use Shenzhen's existing production capacity to quickly generate revenue," said Shane MacGuill, chief executive officer. I suspect the long-term perspective is not part of the strategic gameplay here."

A spokesman for the Tobacco Administration of China did not respond to multiple requests for comment, but the country's tobacco regulations stipulate that exporting e-cigarettes "shall comply with the laws, regulations and standards of the destination country." Since the FDA has declared Elf Bar illegal, iMiracle appears to have violated China law by continuing to ship products to the United States.

But experts say such rules have not been enforced.

"China basically doesn't care where the products go, as long as they are sold for export," said Patricia Kovacevic, a lawyer who specializes in tobacco regulations. "If it's for export, you don't need to follow any standards."

Global rebound

As brands such as Elf Bar spread around the world, more and more governments are taking steps to prevent their use, often citing the environmental cost of e-waste.

Australia announced a ban on disposable e-cigarettes in the summer. This month, French lawmakers unanimously passed a bill to ban disposable e-cigarettes.

Perhaps the strongest backlash has been in the UK, where health authorities have long promoted e-cigarettes as a less harmful alternative to adult smokers.

Britain's conservative government in October called for legislation aimed at reducing the use of e-cigarettes among minors, including a possible ban on single-use products.

E-cigarette advocates say single-use e-cigarettes have "greatly" damaged the industry's reputation.

"Six months ago, I had a government that was very supportive of e-cigarettes. Now I have a prime minister who spends his time fighting e-cigarettes,"said John Dunne of the British E-Cigarette Industry Association. "For me, this is a tsunami of change. The only thing that has changed is disposable e-cigarettes."

Dunn blamed some of the lapses on "a very small, inexperienced team of employees." He saw an improved picture, noting that iMiracle recently hired regulators to oversee compliance in Europe and the UK. The company also recently said it will abandon some flavors based on desserts and soft drinks.# p#pagination title #e#

But even though iMiracle appears to be reducing the promotion of disposable e-cigarettes in the UK market, the company has started promoting the new product.

Last month, e-cigarette shops began promoting a new product from iMiracle's UK subsidiary: TACJA nicotine bags.

These bagged products are similar to nicotine chewing gum and are cleaner than traditional chewing cigarettes. They come in colored plastic containers that showcase their taste, intensity and slogan: "Powered by Elf Bar."

An Instagram post typically showcased the new advertising campaign: "Enjoy the satisfaction and unparalleled convenience, all with the wonderful flavor of the Elf Bar you know and love."