On 28 April 2022, the Department of Health (DH) of the Hong Kong Special Administrative Region Government issued a press release to remind the public, incoming travellers and the trade that the Smoking (Public Health)(Amendment) Ordinance 2021, which comes into force on 30 April, prohibits the import, promotion, manufacture, sale or possession of alternative smoking products for commercial purposes. Offenders can be fined up to HK $50,000 and jailed for up to six months.
A total ban on e-cigarettes could hit Hong Kong's exports
"Alternative smoking products under the ban include e-cigarettes, heated cigarette products, herbal cigarettes and their accessories," a DEPARTMENT of Health spokesman said. Alcohol and Tobacco Inspectors will conduct inspections from Saturday (April 30), investigate complaints and take enforcement action."
Under the Ordinance, alternative smoking products shall not be imported into Hong Kong, including as parcels or goods, or carried into Hong Kong by incoming passengers. Articles carried by persons in transit through the Hong Kong International Airport without immigration clearance, air transhipment cargo and transit goods that remain on aircraft or on board are exempted. Passengers bringing the products into Hong Kong are required to declare them to the Customs, regardless of the quantity of the products or whether they are for personal use.
After the news was released, the share price of a contract manufacturer continued to fall, and even fell more than 17% at one point, approaching the historical low of HK $14.22.
Analysts said the company, which specializes in e-cigarette sales and will generate nearly 28 percent of its revenue from Hong Kong in 2021, will have a severe impact on its performance once the regulations are implemented. E-cigarette New Deal superimposed on the recent holdings of holdings and other bad news, the confidence of investors in the secondary market was suppressed, resulting in the situation of collective flight.
Industry insiders have been discussing whether the smoking (Public Health)(Amendment) Ordinance 2021 will deal a heavy blow to e-cigarettes going overseas.
Self-built overseas factories to make informed decisions and solid-state electronic cigarette brand of beauty, disposable is quite popular with the overseas market of krypton, optimal set, comprehensive foreign trade dealers fog dance to overseas market propaganda of frozen aliens, bolton's in play the relevant person in charge of firearms brands such as the brand has carried on the depth of communication, and preliminary conclusions: in the short term, may let go the goods slightly complicated formalities. In the longer term, higher tariffs due to the lapse of the grey pass could spur a wave of overseas warehouse building or factory building. Overall, the impact on overseas trade is limited.
Hong Kong transit is about to expire
Perhaps the biggest impact on the foreign trade sector from the implementation of the Smoking (Public Health)(Amendment) Ordinance 2021 will be the imminent demise of Hong Kong's role as a transit point.
He Zong, CEO of Wuwuyouji, told Gewu that previously there were hundreds of cross-border e-commerce companies in Shenzhen that built or rented warehouses in Hong Kong. E-cigarettes used to be heavily dependent on the logistics model for transport from inland cities to Hong Kong and then from Hong Kong airport to other countries. Statistics show that 40 percent of e-cigarettes exported to China are transported by air through Hong Kong airport.
After the public health regulations were issued, the import of e-cigarettes was banned and the warehouse itself lost its legal basis." It will definitely have an impact on foreign trade. Now everyone is taking back the goods from the warehouse in Hong Kong and storing them temporarily in the bonded area in the mainland. The next step may be direct shipment from Bao 'an Airport."
Another foreign trade service provider told The company that prior to the implementation of the public health regulations, relevant departments had issued a notice to clarify that Hong Kong could not ship goods recently. "The goods need to be shipped from Guangzhou or Shenzhen, but the formalities are troublesome."
The product manager of Vankr also told GrWU, "It is difficult to send samples to customers. We may ship the products from Busan first and try to direct them from Shenzhen Airport next."
Shenzhen Airport takes on more transport functions
But in general, the implementation of the public health regulations, the impact on the foreign trade industry is controllable.
On the one hand, the Smoking (Public Health)(Amendment) Ordinance 2021 clearly states that articles carried by persons in transit through the Hong Kong International Airport without immigration clearance, air transhipment cargo and transit articles left on aircraft or on board are exempted. That is to say, Hong Kong airport can still bear the transport function without entering the customs and only passing through and without landing goods.
On the other hand, Hong Kong is not a priority area for e-cigarette consumption as the Public Health (Amendment) Bill was passed in 2019 to ban the sale, distribution and promotion of e-cigarettes. Zhao Hailun, director of the firearms Marketing Department, told Golwu, "We also have customers in Hong Kong, but the proportion is very small, and the current local inventory has been basically digested."
Crucially, on April 22, in baoan district bureau of industry and member of the party group, the enterprise service center and shenzhen airport (group) under the push of, shenzhen airport has decided to speed up the establishment of the electronic cigarette products white list, simplified push electronic cigarette product export transportation detection process, increase the force of air transport, export to provide convenient conditions for electronic cigarette products.
Wang Suichu, deputy general manager of Shenzhen Airport (Group) Co., LTD., made it clear that it would "facilitate the export inspection of e-cigarette products as soon as possible, and at the same time, establish an exclusive channel for Shenzhen e-cigarette enterprises to ensure efficient and smooth delivery of e-cigarettes to the world."
In other words, the transport function carried by Hong Kong airport will be transferred to Shenzhen Airport to a large extent. Shenzhen, as the center of the global e-cigarette industry and home to 90 percent of the world's e-cigarette supply, may be better positioned to play that role.
But in the long run, the Hong Kong airport exit gradually, at the same time also means that after the ash off (not normal or not declare to the customs, to avoid tariffs) ceased to exist, and access to the white shut (truthfully declare to the customs, pay taxes), in order to reduce the cost of liquidity, some firms may choose to take positions in the overseas or a factory.
A foreign trade service provider told Golwu that he had a warehouse shared with other trading companies in Hong Kong before, but his next move is to set up a company in the Philippines and select a warehouse in Manila. "In the future, the brand will send the domestic goods to me directly and trade in DOLLARS. After the tax rebate, the tariff will be lower. And in some countries, there is a higher tolerance for grey passes."
Xiang Nan, general manager of Weibaile Commercial Management (Shenzhen) Co., LTD., which holds the frozen alien trademark, believes that the era of tax per order will gradually come as Shenzhen airport takes on more transportation tasks. Overseas warehouse is difficult to solve the tax problem, because the tax is paid in China, but overseas warehouse is easier to realize the collection of goods.
Hong Kong's e-cigarettes ban could hit hard
However, according to his prediction, overseas factories will become the choice of many major foreign trade brands. Wang Jing, CEO of Le Mei, also said that many brands will speed up the construction of overseas factories. "Factories located overseas will enjoy lower tariffs, logistics costs and labor costs."
Another brand, who declined to be named, told Grwu that the diminished role of Hong Kong airport transport could prompt an acceleration of e-cigarette factories in Southeast Asia.
Therefore, the implementation of the Smoking (Public Health)(Amendment) Regulations 2021 will make foreign trade enterprises feel a little uncomfortable in the short term, but in the long run, the establishment of electronic cigarette exclusive export channels at Shenzhen Airport will further improve the export efficiency of the industry.