FOLLOW US
China has announced that the 13% export VAT rebate will be cancelled for nicotine-containing, non-combustion inhalation products, effective 1 April 2026. The policy will take effect on April 1, 2026. For the global vaping supply chain, this is a material policy change that will recalibrate export cost structures and pricing dynamics, directly influencing the export pricing framework and operating strategy of Chinese e-cigarette manufacturers, with lasting implications for the global vaping industry landscape.
For affected exporters, this raises the export cost base and requires a reassessment of export pricing and commercial terms. From a global supply-chain perspective, the room for low-price competition will narrow materially. Buyers are more likely to favour suppliers with stable delivery, consistent quality, and strong execution, and orders may increasingly concentrate among leading players.
Issuing authorities: Ministry of Finance (MOF) and State Taxation Administration (STA)
Policy measure: From 1 April 2026, the 13% export VAT rebate will be cancelled for products listed in the official product scope
Scope: Includes 2404120000, described as “products for inhalation without combustion, containing nicotine, not containing tobacco or reconstituted tobacco.”
Implementation rule: Applicability is determined by the export date stated on the customs declaration
Key Implications
When rebates apply, part of the VAT burden can be offset via the export rebate mechanism, leaving more flexibility in pricing. With rebates removed, that offset exits and the export cost base rises accordingly, requiring a reset of pricing frameworks and commercial terms.
The magnitude of impact will vary by company and SKU, depending on transaction structure, tax handling, pricing terms, and payment conditions. Typical response paths fall into three buckets:
• Adjusting price and/or commercial terms to pass through costs
• Absorbing part of the impact through efficiency gains and cost control
• Reducing uncertainty by standardising quotation logic and clearly defining tax allocation and price-adjustment rules in contracts
For thin-margin players relying heavily on aggressive pricing, pricing elasticity becomes smaller and sensitivity to cash flow and execution risk increases.
As cost pressure becomes more visible and pricing frameworks are reset, buyers tend to focus more on certainty, namely, suppliers that can maintain stable delivery and consistent batches under tighter margin conditions.
Price remains important, but the weighting of the following capabilities typically rises:
• Batch consistency and quality control
• Delivery reliability and responsiveness
• Execution capability to supply steadily under tighter commercial terms
As low-price headroom narrows, orders may increasingly flow toward suppliers with scale efficiency and stable fulfilment capability, accelerating supplier differentiation.
Around the implementation date, exporters and buyers typically need to:
• Confirm product scope, HS classification, and declaration pathway alignment
• Align on new cost assumptions and clarify quotation and settlement boundaries
• Adjust orders and shipment arrangements under the updated assumptions to reduce uncertainty
For high-volume, standardised SKUs, these transition tasks tend to be more concentrated and require earlier alignment.
• For core SKUs, confirm updated quotations and align key contract terms early to reduce disputes and delivery uncertainty around the effective date.
• Where commercially feasible, bring forward purchase orders for second-half core SKUs to be placed before 1 April 2026.
• Prioritise mainstream portfolios with stable demand, larger volumes, and predictable sell-through to reduce end-market price volatility.
• Define clear triggers, adjustment methods, and allocation rules for tax-related changes in commercial terms.
• Optimise payment terms, cash collection, and inventory strategy to reduce working-capital stress during transition periods.
• Offset cost pressure through manufacturing efficiency improvements, process digitalisation, and supply-chain coordination, while reinforcing delivery stability.
The cancellation of export VAT rebates will raise the export cost base for affected products and trigger a recalibration of export pricing and commercial terms. As low-price headroom narrows, buyers are likely to place greater emphasis on scale efficiency, quality consistency, and delivery stability, making supplier differentiation and order concentration more visible. In the near term, this may add upward price pressure in end markets and compress margins, leading to downward revisions in profit expectations, a shift that has already been clearly reflected in equity market performance.
Over a longer cycle, as cost constraints tighten and procurement standards become more selective, low-quality and low-stability supply becomes harder to sustain. Buyers are more likely to build long-term partnerships with suppliers that demonstrate strong quality systems, process control, and reliable fulfilment. This can help suppress disorderly low-price competition, support an overall uplift in supply-chain delivery capability and product quality, and promote a more sustainable and healthier competitive model for the industry.
Hangsen Empowers Your Vape Business
As export cost structures reset following China’s export VAT rebate cancellation for certain nicotine inhalation products effective 1 April 2026, buyers are placing greater emphasis on partners that can deliver stable fulfilment, consistent quality, and commercially disciplined execution. Hangsen supports this shift with professional vape flavour R&D and contract filling services for finished e-liquid, backed by nearly 300,000 formulation records and over 60,000 mass-production recipes, together with long-term collaboration with international tobacco companies and leading vaping brands.
We also support multi-market, multi-version product portfolio management, enabling flavour profiles tailored to differentiated regional preferences worldwide while meeting local compliance requirements, helping brands maintain predictable supply and product consistency across markets.
For enquiries, please contact us at [email protected].
Previous