Audience:

U.S. buyers, distributors, retailers, MSOs, and industry partners

 

Purpose of this notice:

Industry-wide clarification of policy and cost structure changes

(This notice does not represent the position of any single company)

 

1. Policy Background (Objective and Verifiable)

 

According to official announcements from China’s Ministry of Finance and State Taxation Administration, effective April 1, 2026:

China will cancel the export VAT rebate for vape-related products

The policy is applied based on the export customs declaration date

 

Products affected in actual export practice include, but are not limited to:

Finished vape devices

Empty Disposable Vape hardware

Vape cartridges / atomizers

Vape batteries

This is a nationwide policy adjustment and is not targeted at any individual company or supplier.

 

2. Historical Export Pricing Mechanism (Industry Practice)

 

Prior to this policy change, the industry operated under a long-established export pricing model:

 

Export VAT rate: 13%

VAT was paid upfront but fully refunded after export

As a result, most manufacturers did not include the 13% VAT in product cost calculations or export pricing

In practice, export prices were quoted on a VAT-excluded basis, as the VAT was expected to be fully recoverable.

 

3. Structural Change After April 1, 2026

 

From April 1, 2026 onward:

The 13% VAT will no longer be refunded

This amount becomes a real, permanent, non-recoverable cost

A cost item that previously did not exist in pricing models now directly affects manufacturing economics

This represents a structural cost reset, not a temporary fluctuation.

 

4. Additional Cost Factors: Battery Rebate Adjustment and Raw Material Increases

 

(Important Industry-Wide Clarification)

In addition to the VAT policy change, the vape industry is experiencing significant upstream cost pressure from batteries and raw materials.

 

4.1 Battery Products: Export Rebate Adjustment

 

Battery components are a core cost element of vape hardware.

Export VAT rebate rates for certain battery-related products have been adjusted and reduced

This change increases the effective cost of battery components

The impact applies broadly to lithium-ion battery cells and battery-related exports used in vape devices

 

As a result, battery cost pressure is structural, not temporary.

 

4.2 Raw Material and Precious Metal Price Increases

 

(Since December 2025)

Since December 2025, global raw material markets have experienced sharp and sustained price increases, which continue to trend upward at present.

 

Affected materials include:

Lithium Battery Materials

Driven by global EV and energy storage demand

Increased competition for cell manufacturing capacity

Elevated pricing volatility rather than long-term decline

Base Metals

Copper (wiring, contacts, conductive components)

Aluminum (casings and structural parts)

Nickel and steel-related materials

Precious and Semi-Precious Metals

 

Used in:

 

Electrical contacts

Plating and coating layers

High-reliability conductive components

Although used in small quantities, cost sensitivity is high

Prices have increased sharply since December 2025 and remain elevated

Market data and supplier quotations indicate that raw material and precious metal prices have risen significantly since December 2025 and continue to increase, with no clear short-term reversal.

 

4.3 Combined Cost Effect

 

The industry is therefore facing a compound cost impact:

Export VAT rebate cancellation (effective April 1, 2026)

Battery product rebate adjustments

Sustained raw material price increases since December 2025

Ongoing precious metal price escalation

These factors are additive, not substitutable.

 

5. Industry Margin Reality

 

Based on long-term industry experience:

Top-tier manufacturers: ~20–30% gross margin

Large mainstream factories: ~10–20% gross margin

Small and mid-sized factories: ~10–15%, often below 10%

 

Under this structure:

 

A permanent 13% VAT cost, combined with rising material costs,

Exceeds or closely matches the total profit margin of many suppliers

Absorbing these costs indefinitely is commercially unsustainable.

 

6. Industry-Wide Nature of Pricing Adjustments

It is important to clarify:

Pricing adjustments are driven by structural cost changes, not individual supplier decisions

Different suppliers may adjust pricing at different times or levels depending on scale and efficiency

However, an industry-wide pricing reset is unavoidable

 

This reflects cost reality, not opportunistic behavior.

 

7. Key Timeline for Buyers

Date Explanation

On or before March 31, 2026 Shipments cleared under the previous VAT rebate structure

From April 1, 2026 onward Export VAT rebate cancelled; new cost structure applies

Q2–Q3 2026 Pricing and supply terms increasingly reflect combined cost changes

 

8. Clarification on “No Price Increase for Now”

 

When some distributors indicate that prices will not increase immediately, this typically means:

They are selling inventory produced and exported under the previous cost structure

Pricing stability applies only while existing inventory or contracts remain

This does not indicate that the structural cost impact has been avoided.

 

9. Unified Industry Statement

 

Current pricing adjustments in the vape industry reflect a combination of export tax policy changes, battery rebate adjustments, and sustained increases in raw material and precious metal prices since December 2025.

These factors apply across the industry and are not driven by individual supplier actions.

 

10. Recommendation to U.S. Buyers

 

U.S. buyers are encouraged to:

Plan procurement timelines carefully around April 1, 2026

Engage early with existing suppliers

Consider pre-April shipment arrangements where appropriate

Align pricing expectations with the new cost environment

 

Final Note

This notice is intended to support transparent communication, reduce misunderstanding, and enable informed procurement planning under the new policy and cost framework.