EU postpones imposing additional brandy tariffs on significant cognac manufacturers in Beijing
In a significant development for the global spirits industry, major French cognac producers have reached an agreement with the Chinese government that exempts them from hefty anti-dumping tariffs. This arrangement, which requires companies like Rémy Cointreau, Pernod Ricard (Martell), and LVMH's Hennessy to maintain export prices above certain minimum levels, was announced by the Chinese Ministry of Commerce.
The minimum price commitments have proved to be a lifeline for these cognac manufacturers, allowing them to avoid anti-dumping tariffs of up to 34.9%, which China will impose on other European brandy imports starting from July 5, 2025. This exemption provides a less punitive alternative to full anti-dumping duties, easing cost pressures and partially reviving market conditions for EU cognac brands in China that had been severely affected by preliminary duties imposed the previous year.
However, the commitment regime does limit pricing flexibility and can restrict competitive strategies, as industry representatives like Florent Morillon, president of the BNIC (the producers' association), have emphasised. Despite the relief, efforts will continue to restore unhindered access to the Chinese market for all exporters, Morillon added.
The arrangement has been welcomed by the companies as a significantly better outcome compared to a full tariff imposition, but final assessments are pending as producers await more details on implementation. The deal comes amid wider trade tensions and retaliations between the EU and China, including tariff disputes on electric vehicles, which have affected diplomatic and trade relations.
The BNIC has renewed its call for a political agreement between the French government, the European Commission, and Chinese authorities to eliminate anti-dumping duties. Remy Cointreau, one of the affected companies, stated that the deal on minimum price commitments is a "substantially less punitive alternative," allowing for "the strengthening of some investments in China."
It is worth noting that the Chinese Ministry of Commerce has not disclosed the minimum prices for these commitments. Additionally, monthly cognac exports to China, the world's most valuable market for the spirit, have decreased by as much as 70% due to the trade dispute. The refund issue was a significant point of contention in the months-long negotiations, particularly for smaller producers.
The ruling spares these major cognac producers from duties of up to 35%, provided they sell at a minimum price. The ministry will refund deposits made by brandymakers since October last year, when provisional duties were imposed. The deal for minimum price commitments is considered "less unfavorable" but still worse than the historical pre-investigation norm by the Bureau National Interprofessionnel du Cognac (BNIC).
French cognac makers collectively export approximately $3 billion annually. This strategic compromise protects major EU cognac producers from the full burden of China's anti-dumping duties, thereby sustaining some level of cognac export flow to China, but it still constrains their market operation and pricing freedom. The industry will continue to monitor the situation closely as more details emerge about the implementation of this agreement.
The deal avoids anti-dumping tariffs of up to 35% for major cognac producers, providing a less punitive financial alternative for these companies. However, the minimum price commitments, as stipulated by the Chinese government, could restrict their energy and pricing flexibility in the global finance industry.
