Elf Bar and other e-cigarette makers dodged US customs and taxes after China's ban on vaping flavors

Until recently, the Chinese manufacturer behind Elf Bar e-cigarettes was able to slip its products passed U.S. customs officials

E Cigarettes Smuggling China (Copyright 2023 The Associated Press. All rights reserved)

In only two years, a small, colorful vaping device called Elf Bar has become the most popular disposable e-cigarette in the world, generating billions in sales and quickly emerging as the overwhelming favorite of underage U.S. teens who vape.

Last week, U.S. authorities publicly announced the first seizure of some of the company’s products, part of an operation confiscating 1.4 million illegal, flavored e-cigarettes from China. Officials pegged the value of the items at $18 million, including brands other than Elf Bar.

But the makers of Elf Bar and other Chinese e-cigarettes have imported products worth hundreds of millions of dollars while repeatedly dodging customs and avoiding taxes and import fees, according to public records and court documents reviewed by The Associated Press.

Records show the makers of disposable vapes routinely mislabel their shipments as “battery chargers,” “flashlights” and other items, hampering efforts to block products that are driving teen vaping.

Elf Bar is the lead product of Shenzhen iMiracle, a privately held company based in Shenzhen, the sprawling Chinese manufacturing hub.

In the U.S., iMiracle recently abandoned the Elf Bar name due to a trademark dispute and efforts by regulators to seize its imports. Instead, its products are sold as EB Create.

A spokesman for iMiracle said the company stopped shipping Elf Bar to U.S. earlier this year and is trying to comply with regulators.

When asked about EB Create e-cigarettes he said: “I can’t tell you anything about that.”

Details on the company’s U.S. sales and activities are beginning to emerge in court documents.

At a 2022 court hearing in the case over the company's name, U.S. distributors described skyrocketing sales.

Jon Glauser of Demand Vape told a federal judge his company had sold more than $132 million worth of Elf Bar products last year.

“We were selling it faster than we could get it in,” Glauser said, according to the court transcript.

Glauser attributed Elf Bar’s quick rise to its profit margin. Sellers make about a 30% profit, double that of other disposable e-cigarettes.

IMiracle’s parent company, Heaven Gifts, previously described how it could help customers evade import fees and taxes. Heaven Gifts’ website advertised “discreet” shipping methods to buyers, including not mentioning e-cigarettes or its company name “anywhere on the package.”

“We also mark a lower value to avoid tax,” the website stated.

In June, Heaven Gifts announced on it would “go offline,” after the FDA directed customs officials to begin seizing shipments from the company.

Neither Heaven Gifts nor iMiracle appear in customs data reviewed by the AP and compiled by ImportGenius, an analytics company.

The seizure announced last week suggests part of the answer: The shipments arrived at Los Angeles International Airport, and air carriers are not required to disclose the same details about their cargo as ocean vessels.

Ships docking in the U.S. must provide information on suppliers, recipients and types of cargo they are carrying. But importers can obscure their identities and products.

For example, recipient information is listed as “not available” for roughly 45 of over 100 shipments of e-cigarettes from China this year, according ImportGenius data. U.S. companies can avoid disclosure by using third-party shippers, called freight forwarders.

It’s likely most disposable e-cigarettes coming into the U.S. aren’t even declared as vaping products.

Esco Bars, one of Elf Bars’ chief rivals, imported 30 shipments from China this year labeled “atomizers,” a generic type of hardware that turns a liquid into a spray.

U.S. Customs and Border Protection did not make officials available for interviews, but pointed to the agency’s recent operation in Los Angeles with the FDA.

“The rise in illicit e-commerce demands that our agencies remain vigilant in intercepting shipments that could pose serious health risks to the public,” Troy Miller, a senior official with the border agency, said in a release.

FDA Commissioner Robert Califf said that agency was “committed to continuing to stem the flow of illegal e-cigarettes.”

China’s vaping sector is estimated to be worth $28 billion, and the U.S. accounts for nearly 60% of the country’s vape exports, according to the China Electronics Chamber of Commerce.

Chinese authorities have encouraged those exports while at the same time curtailing the country’s domestic vaping business.

The government brought vaping companies under control of its state-run tobacco administration last year, banning all flavors except tobacco.

Authorities cited “safety issues around unsafe additives," and other risks. But experts point to another cause. The China National Tobacco Corp. is the largest tobacco company in the world. In cooperation with its regulatory arm, the Tobacco Monopoly Administration, the entity controls the manufacture of all cigarettes made in China.

“The tobacco administration says, ‘Well, every e-cigarette sold means one less cigarette smoked,’ so they are going to regulate the hell out of them now,” said Dr. Ray Yip, a former director of the Gates Foundation’s China program.

Hu Leng, manager at a vape manufacturer said: “There is no future in the domestic market. All of our products are sold to Europe.”

Elf Bar-maker Shenzhen iMiracle is among the companies that have built their entire business on exports.

In late 2021, the company began shipping to the U.S. to exploit a regulatory loophole: The FDA had prohibited kid-appealing flavors from reusable vapes, such as Juul, but not disposable ones.

A spokesperson for China’s tobacco administration did not respond to requests for comment, but the country’s tobacco regulations state that exported vapes “should comply with the laws, regulations and standards of the destination country.” Since the FDA has declared Elf Bar illegal, iMiracle would seem to be violating Chinese law.

But experts say such rules go unenforced.

“China basically couldn’t care what happens to the products if they’re selling for export,” said Patricia Kovacevic, an attorney specializing in tobacco regulation.

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Associated Press researcher Yu Bing in Beijing contributed to this report. Follow Matthew Perrone on X: @AP_FDAwriter

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The Associated Press Health and Science Department receives support from the Howard Hughes Medical Institute’s Science and Educational Media Group. The AP is solely responsible for all content.