Event:
On March 11, 2022, the State Tobacco Monopoly Administration issued the measures for the administration of electronic cigarettes, which is expected to come into force on May 1, 2022; The content of this version is changed compared with the measures for the administration of electronic cigarettes (Exposure Draft) issued in November 2021.
Core content: further implementation of production, marketing and import and export trade policies
The production threshold is increased, and the raw materials are included in the purchase and sales plan: 1) the establishment of production enterprises such as e-cigarettes, aerosols and nicotine for e-cigarettes shall obtain a tobacco monopoly production license and submit it to the competent department of tobacco monopoly administration under the State Council for examination and approval. 2) The initial public offering and listing of the above-mentioned enterprises shall be reported to the competent department of tobacco monopoly administration under the State Council for examination and approval. 3) The competent department of tobacco monopoly administration shall issue purchase and sales plans for tobacco monopoly products such as tobacco leaves, redried tobacco leaves and cut tobacco.
Sales management tends to be integrated: 1) e-cigarette wholesalers / retailers need to obtain tobacco monopoly wholesale / retail licenses respectively on the premise of meeting relevant requirements before they can engage in corresponding sales business. 2) A national unified e-cigarette trading management platform has been established, and all links from production to sales must be carried out in the e-cigarette trading management platform. 3) It is prohibited to sell flavored e-cigarettes other than tobacco flavor and e-cigarettes that can add atomization by themselves.
Import and export products need to be reported in advance: the demand for imported e-cigarette products, aerosols and nicotine for e-cigarette should be reported to the tobacco monopoly Bank of the State Council first. After meeting the regulations, they can be sold to e-cigarette wholesale enterprises, e-cigarette product production enterprises and e-cigarette brand holding enterprises through the e-cigarette transaction management platform.
Comments: the industry threshold has become higher, and the implementation of policies ushers in standardized management
The industry threshold becomes higher to benefit the existing compliant Enterprises: the capital, technical equipment, industrial policies and other requirements required by the production license designed by the production enterprises have raised the entry threshold of the industry, and the listing threshold of the new e-cigarette production enterprises in the administrative measures has been raised through the examination and approval of the tobacco monopoly bank; It is expected to be beneficial to the existing compliant enterprises in the industry.
Unified management ensures the stable development of the industry: tobacco monopoly products have a unified purchase and sales plan, which represents that the whole industry is included in the plan management and the development speed is controllable; The establishment of a national unified transaction management platform represents the controllable links from production to wholesale and retail to circulation. Unified management represents that the industry is gradually on the right track, which is conducive to its steady development.
Tax laws and regulations remain to be seen: the regulations on tax in the draft for comments issued in November 2021 (the tax collection and payment of e-cigarettes shall be implemented in accordance with national tax laws and regulations) have been deleted in this administrative measures. At present, there are no e-cigarettes in China’s tax laws, and the introduction of corresponding laws and regulations remains to be seen.
The market is stable in the short term or limited in taste. In addition to the restrictions on taste in the administrative measures, the content of the national standard for electronic cigarettes (second exposure draft) published at the same time has changed from 122 to 101 kinds of permitted additives, and the reduced categories are mainly seasoning additives, so as to prevent inducing to minors. With reference to the FDA’s taste ban, the market will stabilize and recover after a short-term decline, and the Chinese market may also experience short-term pain.
Investment advice
Suggestions: China Tobacco Hong Kong, China Bolton, Shenzhen Jinjia Group Co.Ltd(002191) , Anhui Genuine New Materials Co.Ltd(603429) , Shanghai Shunho New Materials Technology Co.Ltd(002565) , Shantou Dongfeng Printing Co.Ltd(601515) , smore international, Xiamen Intretech Inc(002925) .
Risk tips
Covid-19 epidemic impact; The impact of business conditions; Risk of policy changes.
