Cognac Manufacturers Exempted from China's Minimum Price Regulations Compliance
In a series of events that have shaken the cognac industry, both China and the United States have imposed tariffs on the popular spirit, causing significant financial losses.
The National Interprofessional Bureau of Cognac reported that the average tariff decided by China, estimated at 32.2%, is slightly lower than the provisional one that has been imposed since October. However, this has still resulted in monthly losses of nearly 50 million euros for the industry.
The Chinese Ministry of Commerce launched an anti-dumping investigation into European wine-based spirit exports, including cognac, in response to Brussels' decision to tax Chinese electric vehicle imports into the European Union. The investigation, which started in January 2024, was extended until July 5, 2025, when final measures were announced.
China concluded the investigation by determining that EU brandy exports, including prominent French cognac brands, were dumped—sold at unfairly low prices—threatening the domestic Chinese brandy industry. Consequently, China imposed anti-dumping duties averaging around 30.6% to 39%, with specific rates such as 34.9% for Hennessy, 34.3% for Remy Martin, and 27.7% for Martell. These duties will last for five years starting July 5, 2025.
The tariffs apply specifically to brandy in containers smaller than 200 liters. While the measure targets major exporters, some large cognac producers like Pernod Ricard and Remy Cointreau have been exempted from duties.
The EU spirits industry has strongly criticized the measure, stating it poses a significant barrier to legitimate trade and denying any dumping evidence in the Chinese market. The trade group SpiritsEUROPE expressed concerns that the decision could further escalate trade tensions that risk undermining mutual cooperation between China and the EU.
The cognac industry, a significant player in the industry, has been particularly affected. Hennessy, a subsidiary of LVMH, and Martell, owned by Pernod Ricard, aimed for 350 million bottles by 2035, but sales in 2023 reached only 165 million due to Chinese and American taxes.
The anti-dumping investigation findings on European brandies, including cognac, are scheduled to be published this Saturday. The industry will closely monitor the developments to understand the full implications of these tariffs and explore potential solutions to mitigate their impact.
As the trade negotiations between Brussels and Washington scheduled for July 9 approach, there is uncertainty about the potential increase in American tariffs on cognac and other wine spirits, which are currently set at 10%.
The cognac industry, a vital part of France's economy, is hoping for a resolution that will help restore its growth trajectory. Emmanuel Macron, the President of France, considers China's decision a positive step towards ending a dispute that threatened their exports. However, the industry remains cautious, aware that the challenges are far from over.
The National Interprofessional Bureau of Cognac might face increased financial difficulties when the anti-dumping tariffs on European brandies, including cognac, are officially imposed, considering their previous losses due to weather conditions and international trade tensions. In light of China's decision to impose taxes on cognac, it is questionable whether the cognac industry will be able to meet its ambitious goal of selling 350 million bottles by 2035.
