In November 2016 the Member States unanimously decided to classify e-liquids as Chemical Products in the Harmonised System of tariff nomenclature (HS).
The World Customs Organisation Review Sub-Committee (WCO RSC) has recently started to discuss potential changes to the HS for implementation in 2022 (HS 2022). Among the options discussed was classification under the heading ‘Tobacco and manufactured tobacco substitutes’.
The main criterion for customs classification is consideration of the physical characteristics of the product concerned.
1. Why does the Commission intend to support the WCO RSC proposal to reclassify e-liquids under the Tobacco chapter?
2. How does it justify the classification of e-liquids not containing any tobacco as tobacco products?
I can find no record of an answer but on 16th May the World Customs Organisation published a document in which it discusses shifting e-cigarettes and vape fluid out of the chemicals category (Chapter 38) and into the tobacco category (Chapter 24). The document isn't freely available online yet, although it has been published on the WCO's member website and has been distributed by the International Chamber of Commerce to its members. I quote the most relevant sections below.
It seems that the WCO has been prompted by the vape-hating Australian government and the World Health Organisation. US health agencies already classify e-cigarettes as tobacco for propaganda purposes and the EU implicitly does the same by regulating them under the Tobacco Products Directive. But they are not defined as such for the purposes of international trade and if the World Customs Organisation changed the classification, it would have several far-reaching repercussions.
Firstly, some countries use the WCO's classification as the legal basis for applying excise on tobacco products. In all Gulf Cooperation Council states, for example, goods in Chapter 24 are subject to a 100 per cent selective (excise) tax in addition to their import tariff.
Secondly, Chapter 24 is normally left out of trade deals, because the 'public health' lobby has successfully lobbied for a tobacco carve out. This means no cuts to tariffs on tobacco and, if e-cigarettes are included, it will mean no cuts to tariffs on vape products - and no protection from such tariffs in future trade deals.
Thirdly, Chapter 24 is excluded from investor protection under most new trade deals. So if you want to start an e-cigarette business in Spain, for example, don't expect any protection when the government suddenly moves the goal posts, cracks down on vaping, confiscates your stock and forces your shop to close.
Finally, it will send a negative message to governments about e-cigarettes. There is already more than enough orchestrated confusion about the health effects of vaping without a major international organisation lumping them in with cigarettes.
The current system works fine. Technically, e-cigarette products are classified in Chapter 38 as:
3824.90: 'chemical products and preparations of the chemical or allied industries (including those consisting of mixtures of natural products), not elsewhere specified or included'.
The EU has two further categories to make it more specific:
3824.99.5600: 'Cartridges and refills, filled, for electronic cigarettes; preparations for use in cartridges and refills for electronic cigarettes … containing products of subheading 2939791000'
3824.99.5700: 'Cartridges and refills, filled, for electronic cigarettes; preparations for use in cartridges and refills for electronic cigarettes'.
The USA uses the following:
3824.99.92.80: 'Mixtures of a kind containing nicotine used in personal electric or electronic vaporizing devices.'
Last May, Australia proposed that the WCO create a new category (24.04) in Chapter 24 for 'nicotine products for human consumption, not containing tobacco but containing nicotine.' The Aussie government admitted that e-cigarettes are not tobacco products but said that 'they are closely related to tobacco in that they are used as substitutes for tobacco products'(!).
The WCO Secretariat seems to be sympathetic to this proposal. It appears to wrongly believe that e-cigarettes were developed by the tobacco industry and wants to put all 'new products developed by the tobacco industry as an alternative to traditional cigarettes' in the tobacco category, including those that don't contain tobacco and even those that don't contain nicotine.
Last week's document includes a letter from the WHO, thanking the WCO for the invitation to comment and supporting the reclassification. It also includes a recommendation from the Mali government to put heat-not-burn products in the tobacco category and keep vape products in the chemical chapter under two categories (one for those that contain nicotine and one for those that do not).
Moving heat-not-burn into Chapter 24 would not be great from a harm reduction perspective but at least it follows some kind of logic. Moving vape products into Chapter 24 follows no logic at all. And yet it seems that the WCO is minded to shift all vape products into the tobacco category and - bizarrely - move heat-not-burn products out of the tobacco category. Moreover, it proposes moving nicotine replacement products into the tobacco category.
This is a seemingly boring, technical matter but it could have profound implications for vapers in the years ahead. I'm sure the pharmaceutical industry will be lobbying the national customs administrations like crazy between now and 11th June when the WCO's Review Sub-Committee will meet to take this further. Vapers and the e-cigarette industry should do likewise.
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