In 2024, the sales of unauthorized e-cigarettes in the United States exceeded $2.4 billion, a figure that reflects the deep game between regulation and the market. Although the FDA has issued warning letters to 14 online retailers and 115 physical retailers throughout the year, and jointly seized more than one million dollars of illegal products with customs, the strong demand for flavored e-cigarettes among young users still drives a surge in black market transactions. Data shows that 84.9% of young e-cigarette users use flavored products, among which fruit flavors are the most popular, and the FDA’s ban on flavored disposable e-cigarettes has forced some demand to turn to unauthorized channels.
Cross-border smuggling is rampant: The US ITC has launched a 337 investigation against 42 Chinese and foreign companies, accusing them of patent infringement on disposable e-cigarettes, showing that illegal products mostly enter the United States through complex supply chains; Obvious price advantage: Unauthorized products circumvent PMTA certification costs, and the price is 30%-50% lower than compliant products, attracting price-sensitive consumers; Lack of localized production: The brands involved, such as Esco Bars and Funky Republic, mainly rely on Chinese OEMs and lack a local compliant production system.
As the provider of 90% of the world’s e-cigarette production capacity, China’s supply chain has exposed three contradictions in the US regulatory storm: Certification costs have increased sharply: The application fee for a single PMTA exceeds one million US dollars, which is difficult for small and medium-sized enterprises to afford; Patent infringement risk: US companies RAI Strategic Holdings and others have initiated patent lawsuits, pointing directly at Chinese OEM technology imitation; Weak channel control: Under the low-price OEM model, Chinese companies have lost their voice in the distribution network, resulting in products flowing to illegal channels. Data from 2024 showed that the average price of China’s e-cigarette exports to the United States fell by 27% year-on-year, and the profit margin of some OEMs was less than 5%.
Faced with the dual squeeze of regulation and market, the new supply chain model represented by VEEHOO (Global E-cigarette Compliance Collaboration Network) is reconstructing the logic of competition: PMTA joint declaration: By integrating the resources of more than 30 laboratories, VEEHOO has reduced the certification cost by 40%, helping brands such as ELF BAR to complete the youth appeal test; Blockchain traceability system: Cooperate with Huahan Logistics to establish a full-chain traceability from Shenzhen factories to US retail terminals, helping companies avoid 337 investigation losses of more than US$80 million in 2024.
North American nearshore production: Set up an atomizer cartridge assembly base in Mexico to realize the “Chinese core components + local assembly” model, avoid 25% tariffs and shorten delivery cycles; Southeast Asian capacity backup: Vietnam and Thailand production bases undertake transfer orders to ensure supply chain flexibility during surprise inspections by the US FDA.
Youth protection technology: Develop patented technologies such as biometric unlocking and intelligent regulation of nicotine dosage, so that the product passing FDA review rate has increased to 78%; Localized IP operation: Build a social marketing matrix with local KOLs, and VEEHOO alliance brands account for 32% of the exposure of TikTok e-cigarette topics.
Compliance market concentration: The market share of the top five brands is expected to exceed 65%, and Juul and Vuse dominate the mainstream channels through PMTA’s menthol products; Black market technology upgrade: Illegal products have begun to use new technologies such as synthetic nicotine and nano-atomization to evade supervision. 23% of the cases seized in 2024 involve new chemical ingredients; Supply chain value reshaping: VEEHOO and other platforms are transforming China’s manufacturing from a “cost center” to a “value hub” through compliance empowerment (reducing regulatory costs by 30%) + data empowerment (shortening market response cycles by 50%).
The existence of a $2.4 billion gray market is both a reflection of regulatory lag and a forced mechanism for industrial upgrading. The VEEHOO model has opened up a new route for China’s e-cigarette supply chain to “cross the regulatory storm” by building a three-dimensional network of technical compliance, regional collaboration, and brand co-creation. This breakthrough battle is not only about the competition for market share, but also the ultimate contest for the rule-making power of the global e-cigarette industry.
Tags: flavored e-cigarettes, PMTA certification, synthetic nicotine, veehoo vape