Thursday, May 30, 2024

What’s the tax rate change of vapes in the trade war between China and the United States?


The earliest tax increase on electronic cigarettes in the United States can be traced back to August 23, 2018, when the tariff on electronic cigarette kits increased by 25% from 2.6%.

On September 24, 2018, the tax on electronic cigarette accessories increased from 0.6% to 10.6%.

On May 10, 2019, electronic cigarette accessories tax rate increased from 10.6% to 25.6%.

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What measures have China enterprises taken for the tax increase?

Before the new tax increase in August 2018, many Chinese vape exporters were looking for a more reliable way to deal with it.

At that time, because there was no tax increase on electronic cigarette accessories, the common way was to split electronic cigarettes, declare in the form of accessories, then process, assemble and heat shrinkage film through the local workers in the United States, and then sell it to the end-user, the vape price did not increase much. There are also some enterprises risk it with a sense of luck, ship the electronic cigarette accessories in its original package to declare it in the form of accessories.

In fact, this way is “gambling”. Customs has a certain inspection rate. If it is not found, it will be exempted from 25% of the tax. Once it is found, it will face a series of severe penalties from the United States Customs.

trade war usa china

The U.S. Customs has a five-year retrospective period. If there are violation records, the Customs will strictly check the goods, possibly involving the sales of products in the U.S. and the credit records of brands.

Since September last year, many companies have declared their origins as transit third-party countries to evade tariffs. Of course, there are also some companies that set up factories in Thailand, Vietnam etc. locally to avoid the tax increase in the United States.

However, even if the factory is located in Southeast Asia, as long as the battery core of electronic cigarette still uses the one from China, the country of origin of electronic cigarette can hardly be identified as these Southeast Asian countries, because the main value of electronic cigarette comes from the battery core.



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