China Imposes 27.7% to 34.9% Anti Dumping Duties on European Brandy Exempting Major Producers

China has imposed anti-dumping duties on European brandy, with rates ranging from 27.7% to 34.9%, effective from July 5. This decision follows a months-long investigation by China's Ministry of Commerce, which concluded that European brandy imports posed a threat to the domestic brandy industry. The duties are intended to counteract what China deems as unfair competition and protectionism, specifically the practice of "dumping," where foreign goods are sold significantly below their normal price.

However, major European brandy producers, including Remy Cointreau, Pernod Ricard, and LVMH's Hennessy, have been exempted from these duties. The exemption applies to cognac makers that have agreed to a price undertaking with China, ensuring that their products are sold at a minimum price. This move is seen as a strategic decision by China to mitigate the impact on major European brandy producers while still addressing concerns about unfair trade practices.

The decision to impose duties and exempt major producers comes amid ongoing trade tensions between China and the European Union. The duties are part of a broader trade dispute that has seen both sides engage in retaliatory measures. The European Union has previously imposed tariffs on Chinese electric cars, and China's latest move is seen as a response to these actions.

The exemption for major brandy producers is expected to provide some relief to the European spirits sector, which has been bracing for potential losses due to the duties. The trade group representing EU producers of spirit drinks, spiritsEUROPE, has expressed regret over the decision to impose duties but welcomed the partial relief for companies that have entered into price undertakings. The group has maintained that there is no evidence of dumping practices on the Chinese market and that the measures will still pose a significant barrier to legitimate trade.

The decision to exempt major brandy producers is also seen as a strategic move by China to maintain its market presence and avoid further escalation of trade tensions. By allowing major producers to continue selling their products at a minimum price, China aims to ensure that the impact on its domestic market is minimized while still addressing concerns about unfair trade practices. The move is expected to have a limited impact on the overall trade relationship between China and the European Union, as both sides continue to engage in negotiations to resolve their differences.

By accepting minimum pricing, these cognac makers can maintain their presence in the Chinese market without the burden of additional duties. This was obviously a crucial decision, as China is a key market, accounting for a substantial portion of their global sales. The terms of the price agreement represent a “significantly more favorable outcome, or at the very least, a substantially less punitive alternative,” compared to the anti-dumping duties announced. While it’s waiting for further details to assess the effects accurately, the impact is expected to be far less restrictive than what was anticipated.

Tensions between the two trading partners are far from easing, with China leaning toward canceling part of a two-day summit with European Union leaders planned for later this month. The tariffs on brandy followed the EU’s decision last year to levy duties as high as 45% on Chinese-made electric vehicles. China had postponed the conclusion of the cognac probe twice, as the two sides tried to resolve the alcohol and EV spats, among others. China’s Commerce Minister had discussed the two issues with the EU Trade Commissioner when he visited France in June. Foreign Minister is scheduled to meet with French President later.

French Industry Minister told that it’s essential to deescalate tariff battles, over cognac and other goods. “Trade wars only make losers, so we shouldn’t be happy with what was announced today by China — even if some agreements can be found.”