Recently, a client represented by Attorney Li Mingzhen of King&Capital Law Firm in a case involving alleged illegal business operations was released on bail pending trial after 37 days. The case arose when the client sold nicotine-free “e-cigarettes” on an e-commerce platform. The platform’s big data detected comments containing terms such as “e-cigarettes” and “vaping,” which raised suspicions of unlicensed sales of tobacco products. Consequently, the client was criminally charged with illegal business operations and detained.
I. Defense Outline
While the case itself was not complex, it involved contentious issues such as the legal classification of nicotine-free e-cigarettes, the scope of “violating state regulations,” and whether the defendant acted with knowledge of the violation. Therefore, the defense attorney meticulously analyzed the case, starting with the regulatory scope of “violating state regulations” to argue that, in the absence of amendments to higher-level laws, the scope of criminal regulation should not be expanded; Furthermore, the defense focused on arguing that the legal nature of the product in question is not that of an e-cigarette (nicotine-free). Although nicotine-free e-cigarettes are included in the e-cigarette regulatory framework and fall under state-monopolized products, the product in question differs fundamentally from nicotine-free e-cigarettes in terms of composition, purpose, and operational principles, and should not be classified as an e-cigarette. Additionally, whether the defendant acted with “knowledge” constitutes a major defense strategy in this case: the defendant obtained legitimate sales authorization from the manufacturer, and evidence demonstrates that prior to becoming an agent, the defendant had thoroughly vetted the manufacturer and fulfilled their duty of care; during the agency process, the defendant was never informed of any issues with the product. Although there is a record of penalties on a third-party e-commerce platform, the platform’s official customer service subsequently denied the product’s status as a prohibited item following an appeal; therefore, it is impossible for the defendant to have known of the illegality of the products they were selling. The defense counsel has presented a multi-faceted argument from the above perspectives to seek acquittal. The first step should be to change the coercive measure to release on bail, and ultimately, the defendant should be set free!
II. How Can the Sale of Nicotine-Free E-Cigarettes Constitute the Crime of Illegal Business Operations? — Acquittal vs. Conviction
(1) Prerequisite — Analyzing the Meaning of “State Regulations” and Strictly Adhering to the Principle of Legality
According to Article 225 of the Criminal Law, the establishment of the crime of illegal business operations is predicated on “violating state regulations” and must involve items subject to exclusive operation, monopoly, or restricted trade. Article 96 of the Criminal Law explicitly stipulates that “violation of state regulations” refers solely to violations of laws enacted by the National People’s Congress and its Standing Committee, administrative regulations formulated by the State Council, administrative measures prescribed by the State Council, and decisions and orders issued by the State Council. Among these, “administrative measures prescribed by the State Council” must be decided by the State Council and are typically stipulated in the form of administrative regulations or documents issued by the State Council. Documents issued in the name of the General Office of the State Council shall also be deemed “state regulations” under the Criminal Law if they meet the following conditions: (1) They have a clear legal basis or do not conflict with relevant administrative regulations; (2) They have been discussed and adopted at a meeting of the State Council’s Executive Meeting or approved by the State Council; (3) They have been publicly released in the State Council Gazette. II. In criminal trials, people’s courts at all levels must accurately determine whether a case involves a “violation of state regulations” in accordance with the provisions of relevant laws, administrative regulations, and judicial interpretations. Where provisions are unclear, determinations must be made with due caution in accordance with the requirements of this notice. Acts that violate local regulations or departmental rules shall not be deemed “violations of state regulations.” Where there is controversy regarding whether the defendant’s conduct constitutes a “violation of state regulations,” the matter shall be treated as an issue of legal application and referred step by step to the Supreme People’s Court for instructions......”
The above definition excludes departmental regulations, local regulations, and national standards from serving as grounds for criminal liability at the legislative level. The Supreme People’s Procuratorate has explicitly stated that using lower-level technical standards as grounds for criminal liability would “significantly increase the risk of criminal liability for illegal business operations,” thereby violating the principle of legality in criminal law.
It is important to note that the “Tobacco Monopoly Law” enacted by the Standing Committee of the National People’s Congress, the “Regulations on the Implementation of the Tobacco Monopoly Law” (hereinafter referred to as the “Regulations”) promulgated by the State Council, and relevant judicial interpretations currently constitute the “national regulations” governing China’s tobacco industry. Following the 2023 revision of the Regulations, new tobacco products such as e-cigarettes are to be governed by the relevant provisions concerning cigarettes set forth in the Regulations. However, the Tobacco Monopoly Law, its Implementing Regulations, and judicial interpretations currently do not include “nicotine-free electronic devices” in the list of monopoly products. Although the “Administrative Measures for E-cigarettes” (a general normative document with legal force lower than departmental regulations) formulated by the State Tobacco Monopoly Administration in 2022 stipulates that e-cigarette products must comply with mandatory national standards for e-cigarettes, The national standard for e-cigarettes (GB 41700-2022), formulated by the State Administration for Market Regulation and the Standardization Administration of China (agencies directly under the State Council) (which ranks below administrative regulations and constitutes a “departmental-level technical standard”), defines e-cigarettes as “electronic delivery systems used to generate aerosols for human inhalation,” thereby including nicotine-free e-cigarettes within the scope of this definition. It further requires that “the aerosol shall contain nicotine” (i.e., the sale of nicotine-free e-cigarettes is prohibited); On April 3, 2024, the State Tobacco Monopoly Administration issued the “Reply on Legal Issues Concerning New Types of E-cigarette Products” (hereinafter referred to as the “Reply”) (which ranks below administrative regulations and is a normative document), clarifying that products containing no nicotine, which are fully or partially vaporized into aerosol for human inhalation, sucking, chewing, or nasal inhalation, shall be managed in accordance with the regulations for e-cigarettes.
However, upon closer examination of the legal force of the aforementioned “Measures for the Administration of Electronic Cigarettes,” the national standard “Electronic Cigarettes,” and the “Reply,” none of them fall within the scope of the “state regulations” stipulated in Article 96 of the Criminal Law. This is because administrative normative documents issued by the Tobacco Bureau rank far below administrative regulations and departmental rules in terms of legal force and can only be used to guide law enforcement by subordinate tobacco administrative agencies. Furthermore, national standards serve as “technical support” rather than “legal norms”: The Standardization Law of the People’s Republic of China stipulates that mandatory national standards “must be implemented” but are not “legal norms.” Even if the national standard for e-cigarettes (GB 41700-2022) requires that “aerosols must contain nicotine” (i.e., prohibiting the sale of nicotine-free e-cigarettes), this requirement constitutes merely a technical threshold at the administrative regulatory level, not a “state regulation” in the criminal law sense.
In contrast, “national regulations” regarding traditional tobacco products and new tobacco products such as e-cigarettes are very clear: the core criterion is that only products manufactured from tobacco leaves (tobacco, nicotine) can be classified as tobacco products and subject to tobacco monopoly regulation; other products that do not contain nicotine are not tobacco products and cannot be treated as tobacco monopoly goods, regardless of whether they are superficially labeled as e-cigarettes. If criminal regulation is to be implemented, the Tobacco Monopoly Law must be amended. Furthermore, the “Reply on Legal Issues Concerning New Tobacco-Related Products” (Guo Yan Fa [2023] No. 166), issued by the State Tobacco Monopoly Administration on December 30, 2023, also upholds the principle that e-cigarette products must contain nicotine, and that these products should be regulated as e-cigarette aerosol products, as such aerosols are required by mandatory national standards to contain nicotine.
Although the “Opinions on Cracking Down on Tobacco-Related Criminal Activities Across the Entire Supply Chain” (State Council General Office Document [2025] No. 44), issued by the General Office of the State Council on December 12, 2025, can serve as a basis for determining criminal liability, the defense counsel argues that: There is no basis for criminal penalties regarding conduct occurring prior to the issuance of this administrative normative document. In particular, since the overarching “Tobacco Monopoly Law” and its implementing regulations have not amended the definition of e-cigarettes—that is, they have not explicitly stipulated that “products not containing nicotine... shall be managed as e-cigarettes”—then, in accordance with the principle of legality in criminal law, the defendant’s conduct should not be deemed a “violation of state regulations.”
(2) A Deep Dive into Product Classification: Not All Nicotine-Free Products Are E-Cigarettes
The presence or absence of nicotine is not the sole criterion for determining whether a product is an e-cigarette; the key lies in the following factors:
1. Presence of an electronic heating and vaporization mechanism: Powered by a battery, heating elements (heating coils/ceramic cores) convert the liquid into an inhalable aerosol.
2. Structure: Features typical e-cigarette components such as a mod (main unit), atomizer/cartridge, and mouthpiece;
3. Usage: Intended for inhalation through methods such as puffing, sucking, or nasal inhalation;
4. Ingredients: Primarily glycerol and propylene glycol.
5. Function: Primarily designed for inhalation, smoking cessation, craving relief, and social interaction.
In this specific case, the product sold by the defendant does not possess the aforementioned characteristics:
Regarding ingredients: The main ingredient is menthol API.
In terms of design: During the pre-agency inspection, the manufacturer’s staff explicitly opened the product cap and drank the liquid directly in front of the perpetrator, repeatedly emphasizing that it was safe to drink. Furthermore, the product packaging states that it can be consumed immediately upon opening, positioning it as a food-grade beverage derived from medicinal and edible plants rather than a tobacco product. This design for direct consumption differs significantly from the core design of e-cigarettes, which requires “vaping” or “inhaling” rather than “drinking.”
From the perspective of intended use: According to the “Test Report” for the product in question and the product descriptions on third-party sales platforms, the product is intended to refresh and invigorate the mind. It is a plant-based vaporized beverage derived from medicinal and edible sources that benefits human health, rather than a so-called “e-cigarette” that produces the core effects of tobacco products, such as addiction and dependence.
Therefore, the defense counsel focuses on analyzing and arguing the above core factors to demonstrate that the product in question is fundamentally different from “e-cigarettes” in terms of its core attributes.
(3) Argument Regarding the Pre-Incident, During-Incident, and Post-Incident Stages to Refute Subjective Knowledge
The defense counsel thoroughly argues that the defendant had no subjective awareness of any illegality by examining three aspects: sufficient pre-incident investigation, no opportunity to become aware during the incident, and no warning of illegality after the incident. During communications with the investigating authorities, the opposing side also focused on and inquired specifically about evidence regarding the defendant’s knowledge of the illegality. Based on the content of the meetings, the defense counsel submitted detailed and critical materials to the investigating authorities that could prove the absence of such knowledge, ultimately providing a strong basis for applying to change the coercive measures against the defendant.
III. Boundaries of Lawful Operation
(1) Obtaining Tobacco Monopoly/Wholesale/Production Licenses
According to the “Administrative Measures for E-cigarettes” and other relevant regulations: Engaging in e-cigarette retail, production, wholesale, or other related businesses requires approval from the competent tobacco monopoly administrative authorities and the acquisition of relevant tobacco licenses. For those engaged in e-cigarette retail, an application for a tobacco monopoly retail license may be submitted to the municipal or county-level tobacco monopoly bureau where the business premises are located; the scope of the license must explicitly include e-cigarette retail (existing tobacco licenses must be amended to include e-cigarettes).
Additionally, in accordance with Article 18 of the “E-Cigarette Management Measures,” the following requirements must be met: sufficient capital commensurate with the scale of operations; a fixed business premises separate from the owner’s residence; compliance with local requirements for the reasonable layout of e-cigarette retail outlets; location outside no-sale zones surrounding primary and secondary schools, kindergartens, and special education schools; and fulfillment of other conditions specified by the tobacco bureau.
(2) Product Compliance
Regardless of whether they contain nicotine, the sale of e-cigarettes must comply with the regulatory requirements for e-cigarettes mentioned in Part One: products must have tobacco flavors, possess e-cigarette traceability codes, and be sourced from the National E-cigarette Transaction Management Platform.
(3) Strictly Distinguishing Between Compliant E-cigarettes and “Counterfeit or Substandard E-cigarettes” — The Definition of “Counterfeit or Substandard Products” Under Criminal Law Should Be Grounded in Quality and Performance
In practice, many cases involve e-cigarettes being classified as counterfeit or substandard by tobacco authorities simply because they do not contain nicotine; however, a strict distinction must be made. The Supreme People’s Court’s judicial interpretation clarifies that “non-compliant products” under criminal law must fail to meet the quality requirements stipulated in Article 26, Paragraph 2 of the Product Quality Law—specifically, the requirement to “ensure human health and the safety of persons and property.” Conversely, the determination of substandard e-cigarettes must focus on testing for health-hazardous components such as nicotine and toxic additives; the mere absence of nicotine is insufficient to establish such a classification.
However, operators must also pay attention to product quality issues during compliant operations to avoid triggering other criminal charges.
IV. Conclusion
The criminal liability associated with selling nicotine-free e-cigarettes essentially stems from a conflict between the expansion of administrative oversight and the principle of legality in criminal law. However, for industry practitioners, lawful operation remains the top priority. Whether nicotine-free or flavored, any product classified as an e-cigarette falls under the scope of the sales ban. Therefore, businesses must operate in compliance with regulations and seek professional guidance to ensure long-term success!
Translated with DeepL.com (free version)
