Top Takeaways:
- China’s State Tobacco Monopoly Administration released new draft rules in July 2025 to regulate tobacco in the domestic duty‑free market, effective January 1, 2026.
- Scope of regulation expands to include cut tobacco, and bans new products like e‑cigarettes and heated tobacco within duty‑free channels.
- New measures impose quota systems, state‑trade wholesale, digital traceability, catalogue requirements and severe penalties, significantly raising barriers for overseas brands
In a major regulatory shift, China’s State Tobacco Monopoly Administration (STMA) unveiled draft rules in July governing tobacco sold in the domestic duty‑free market. The draft regulations, which are open to public comment until August 1, are scheduled to take effect on January 1, 2026.
The draft expands regulated products beyond cigarettes and cigars to now include cut tobacco while explicitly forbidding the sale of heated tobacco products (HTPs), e‑cigarettes, and other new tobacco products within duty‑free channels.
Under the proposed system, all supply, wholesale, and retail activities must be conducted through STMA‑designated state‑trade wholesale enterprises, and brands must be listed in an official “Product Catalogue” to enter the duty‑free market, reports 2Firsts. Any sales above the assigned annual quotas would be considered invalid.
The draft introduces digital traceability, requiring QR codes marked “For Export Only” throughout the supply chain—from manufacturing to end-user sale—and mandates that all transactions take place on an STMA transaction platform, thereby eliminating grey-channel distribution.
Providers face tight pricing and marketing controls, and violations trigger a credit-based enforcement system with escalating penalties: minor infractions may result in temporary transaction suspension, while serious ones could see rights revoked for up to two years and future quota cancellations. Customs, police, and tax authorities will jointly enforce the rules.
