WASHINGTON (AP) — 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.

According to public records and court documents reviewed by The Associated Press, the manufacturers of Elf Bar and other Chinese e-cigarettes have brought in products worth hundreds of millions of dollars, consistently evading customs and neglecting to pay taxes and import fees.

According to records, manufacturers of disposable vapes often falsely label their shipments as “battery chargers,” “flashlights,” and other unrelated items. This makes it difficult to prevent the distribution of products that are contributing to the rise of teenage vaping in the United States.

Eric Lindblom, a former official of the Food and Drug Administration, expressed that the measures taken to regulate disposable products have been insufficient, allowing the problem to escalate.

Fruit-and-candy-flavored disposables began pouring into the U.S. shortly before Chinese regulators banned vaping flavors last year. Officials there said they were acting to protect children’s health, but vaping executives and health experts note the ban came only after e-cigarettes began threatening sales of traditional cigarettes, which generate $200 billion annually for China’s state-run tobacco monopoly.

Governments around the world, from Australia to England, are considering banning disposable e-cigarettes due to concerns about their popularity among underage users and their negative impact on the environment.

The worldwide criticism may prompt vaping business owners to place greater emphasis on the American market, where lenient regulations and lack of strict enforcement make it simple to conceal e-cigarettes among the numerous daily imports by sea and air.

‘DISCREET’ SHIPPING

Elf Bar is the lead product of Shenzhen iMiracle, a privately held company based in Shenzhen, the sprawling Chinese manufacturing hub that produces more than 95% of the world’s e-cigarettes.

According to ECigIntelligence, Elf Bar, Lost Mary, and other iMiracle brands are predicted to bring in $3.5 billion to $4 billion in revenue worldwide this year.

iMiracle has recently chosen to discontinue using the Elf Bar name in the United States because of a legal conflict over the trademark and attempts by governing authorities to confiscate its imported goods. As a result, their products are now marketed under the name EB Create and come in various flavors such as watermelon ice and frozen creamsicle.

A representative for iMiracle stated that the company ceased shipments of Elf Bar to the U.S. earlier this year and is currently making efforts to adhere to regulatory standards.

According to Jacques Xiang Li, who has been working for iMiracle for three months and is still familiarizing himself with the company’s operations, all Elf Bar-branded products sold in the United States are fake.

When questioned about EB Create electronic cigarettes, he responded: “I am unable to disclose any information about it.”

Information about the company’s sales and operations in the United States is starting to surface in legal filings.

In the past year, iMiracle was required to change their brand name from Elf Bar due to losing a legal battle over the trademark with a smaller company that also marketed their own merchandise under the name Elf vapes.

During a court hearing in 2022 for the case, distributors in the U.S. reported a significant increase in sales.

Jon Glauser, owner of Demand Vape based in Buffalo, New York, testified to a federal judge that his company had generated revenue of over $132 million from the sale of Elf Bar products, making up one-third of their annual profits.

According to the court transcript, Glauser stated that we were selling the product at a rapid pace, even before we could restock it.

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

Heaven Gifts, the parent company of IMiracle, previously outlined their ability to assist customers in avoiding import taxes and fees. On their website, Heaven Gifts promoted discrete shipping options for purchasers, ensuring that the package would not mention e-cigarettes or the company’s name. Instead, the contents would be labeled as “atomizer, coil, tube, etc.”

The website mentioned that they intentionally assign a lower value to the shipment in order to minimize taxes. Additionally, customers have the option to propose their own value for the shipment.

In June, Heaven Gifts declared that it would “suspend operations,” following the FDA’s instruction for customs officials to confiscate shipments from the company.

Despite the recent update, the spokesperson for Heaven Gifts confirmed that the company is still operating and its employees are still using email accounts with the company’s name. However, the spokesperson did not address multiple inquiries regarding the company’s operations.

According to ImportGenius, a company that analyzes global trade, neither Heaven Gifts nor iMiracle are found in the customs data reviewed by the AP.

The recent seizure, which was made public last week, may provide some insight. The packages were brought to Los Angeles International Airport, and airlines do not have to reveal as much information about their shipments as ocean vessels. The electronic cigarettes were falsely labeled as toys, shoes, and other miscellaneous items.

In the United States, ships that carry the majority of Chinese imports are required to disclose details about their suppliers, receivers, and the types of cargo they are transporting. However, importers have the ability to conceal their identities and the specific goods they are importing.

According to data from ImportGenius, approximately 45 out of 100 shipments of e-cigarettes from China this year have listed recipient information as “not available” for the United States. To avoid disclosure, American companies can utilize the services of third-party shippers, known as freight forwarders, who manage foreign goods on behalf of importers.

William George, the research director for ImportGenius, stated that these companies possess high levels of sophistication and are deliberately manipulating the system to their advantage.

Most likely, many disposable e-cigarettes being imported into the U.S. are not officially declared as vaping products.

Esco Bars, a main competitor of Elf Bar in the United States, brought in 30 deliveries from China this year marked as “atomizers,” a general type of equipment used for converting liquid into a spray. The Texas-based company received the shipments through its shipping branch, Affiliated Imports LLC, with each shipment weighing approximately 25,000 pounds. However, the shipments were halted in May when the FDA included Esco Bars on a list of prohibited imports.

According to records, Magellan Technology, a manufacturer of disposable products, frequently labeled their imports as “battery chargers.”

AP’s inquiries were not responded to by either company.

U.S. Customs and Border Protection declined requests for interviews, but referenced the agency’s recent collaboration with the FDA in Los Angeles.

Troy Miller, a high-ranking official with the border agency, stated in a statement that the increase in illegal online shopping requires our organizations to stay alert in stopping packages that could potentially endanger public health.

The FDA’s Commissioner, Robert Califf, stated their dedication to preventing the import of illegal e-cigarettes into the United States.

American tobacco companies in the United States claim that their electronic cigarettes, which are subject to FDA evaluation and do not have fruity flavors, are unable to compete with cheaper disposable options. In the past few weeks, both Reynolds American and Altria have taken legal action against iMiracle, Esco Bars, and other manufacturers of disposable e-cigarettes.

Reynolds has submitted documents to the U.S. International Trade Commission outlining complex methods for illicitly importing disposable goods into the nation.

A former FDA investigator, now employed by Reynolds, states in a legally binding statement that exhibitors at a recent conference were caught removing concealed e-cigarettes from flashlights. This is in line with the deceitful behavior of Chinese manufacturers who falsely claim their product to be flashlights.

The commission stated that it would initiate an inquiry into the issue last week.

There is no future for vaping in China.

Chinese regulators have played a significant role in the increase of disposable e-cigarettes in the United States.

The China Electronics Chamber of Commerce reports that the vaping industry in China is valued at $28 billion, with the United States responsible for approximately 60% of the country’s vape exports.

The Chinese government has promoted the export of vaping products while simultaneously restricting the domestic vaping industry, which is primarily run by numerous private companies.

The state-run tobacco administration now oversees vaping companies, as the government has implemented restrictions on their operations. This includes a ban on online sales in 2019 and a comprehensive restriction on all flavors except tobacco.

The prohibition on flavors caused a significant decrease in domestic sales for major Chinese companies such as RLX Technology, with a drop of over 50%. This also resulted in the closure of numerous vape shops and smaller manufacturers who were unable to acquire the necessary government licenses to continue their operations.

Government officials expressed worries about “harmful substances, faulty e-liquids, and low-quality batteries.” However, analysts with extensive experience in the nation attribute the issue to vaping’s impact on the sales of government-regulated tobacco products.

The biggest tobacco company in the world is the China National Tobacco Corp., which is owned by the government. Working together with the Tobacco Monopoly Administration, they oversee the production, promotion, and pricing of all cigarettes produced in China.

According to EuroMonitor, the sales of e-cigarettes experienced a 254% rise between 2017 and 2020. However, these profits were solely obtained by vaping business owners, not the government.

The tobacco industry argues that for every e-cigarette purchased, one less traditional cigarette is smoked. As a result, they are now heavily regulating e-cigarettes, according to Dr. Ray Yip, a public health expert and former director of the Gates Foundation’s China program.

According to Euromonitor, sales of e-cigarettes in China are predicted to reach $822 million this year, a significant decrease of over 70% from its peak of nearly $3 billion.

According to Lin Jian, the owner of a vape shop in Shenzhen, the government’s ban has had a negative impact on everyone in the industry due to the popularity of flavored vapes. He also mentioned that he is now unable to hire employees to assist at the shop, as its profits only cover his basic expenses.

According to Hu Leng, who manages a contract vape manufacturer in Shenzhen, the domestic market does not show promising prospects. Currently, all of their products are being sold in Europe and they are performing well.

EXPLOITING LOOPHOLES

Shenzhen iMiracle, the maker of Elf Bar, is one of the companies that solely relies on exporting for their business.

In the latter part of 2021, the corporation initiated deliveries to the United States in order to take advantage of a legal loophole: While the FDA had banned appealing flavors for refillable vapes like Juul, they were still allowed for disposable ones.

In 2004, Zhang Shengwei established Heaven Gifts as an online marketplace for e-cigarettes. Throughout the years, he also put money into various businesses involved in producing batteries, nicotine solutions, and other necessary parts. A representative from iMiracle stated that around 2018, Heaven Gifts started producing their own vaping products. Interestingly, both Heaven Gifts and iMiracle are located in the same building in Shenzhen.

Shengwei’s holdings now include more than a half-dozen companies, including a Hong Kong subsidiary, iMiracle HK Limited and VapeOnly Technology, which is listed as Elf Bar’s manufacturer on some products. The company spokesman declined to make Shengwei available for an interview.

Vaping experts are swift to differentiate between companies such as iMiracle and established Chinese manufacturers like Smoore International. These manufacturers have longstanding partnerships with regulators and vaping brands globally.

According to Shane MacGuill, who is Euromonitor’s head of nicotine research, this appears to be a short-term strategy in order to generate revenue promptly by utilizing the resources available in Shenzhen. It is unlikely that there is a long-term plan in place for this.

The Chinese tobacco authority spokesperson did not reply to multiple inquiries for a statement. However, according to China’s tobacco regulations, vapes that are exported must follow the laws, regulations, and standards of the destination country. As the FDA has deemed Elf Bar as illegal, it appears that iMiracle would be breaking Chinese law by sending their products to the U.S.

However, according to experts, these regulations are not enforced.

According to tobacco regulation attorney Patricia Kovacevic, China shows little concern for the fate of their products when they are being sold for export. She explains that there are no standards or regulations in place for products intended for export.

GLOBAL BACKLASH

As brands such as Elf Bar expand globally, governments are enacting measures to restrict their usage, frequently citing concerns about the environmental impact of electronic waste.

Over the summer, Australia declared a ban on single-use items. In the current month, a bill to forbid single-use items was unanimously passed by French legislators.

In the United Kingdom, the backlash against vaping has been particularly severe, despite health authorities previously advocating for it as a safer option for adult smokers.

In October, the nation’s right-leaning administration proposed laws to decrease underage vaping, potentially prohibiting disposable products.

According to supporters of vaping, disposable products have significantly harmed the image of the industry.

John Dunne, from the U.K. Vaping Industry Association, stated that the government used to strongly support vaping six months ago. However, the prime minister is now actively opposed to it. This sudden shift in attitude, according to Dunne, is solely due to the rise in popularity of disposable vaping products.

Dunne attributed some of the mistakes to the lack of experience and small size of the teams of employees. He believes the situation is getting better, as iMiracle has recruited regulatory staff to monitor compliance in Europe and the U.K. Additionally, the company announced plans to discontinue certain flavors that are based on desserts and soft drinks.

However, while iMiracle seems to be reducing its use of disposable items in the United Kingdom, the company is actively promoting new products.

In the previous month, vape shops started advertising a new product from iMiracle’s U.K. branch: TACJA nicotine pouches.

These pouches are akin to nicotine gum and have less mess than traditional chewing tobacco. They are packaged in vibrant plastic containers that showcase their flavor, potency, and the slogan: “fueled by Elf Bar.”

A common Instagram post showcases the latest advertisement message: “Experience elevated satisfaction and unparalleled convenience, while still savoring the beloved taste of Elf Bar.”

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This report was aided by the contributions of Beijing-based Associated Press researcher Yu Bing. Stay updated on the latest news from FDA writer Matthew Perrone by following him on Twitter at @AP_FDAwriter.

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The Howard Hughes Medical Institute’s Science and Educational Media Group provides support to the Associated Press Health and Science Department. The AP is solely accountable for all of its content.