Background and Key Players
The Chinese Ministry of Commerce issued its final ruling on Friday regarding brandy originating from the European Union, applying tariffs of up to 34.9% for a period of five years starting July 5, according to a statement from the ministry.
Companies such as Martell & Co, owned by Pernod Ricard, and Remy Martin, owned by Remy Cointreau, will be exempt from higher tariffs if they adhere to their commitment of maintaining minimum prices. These companies are significant players in the brandy market.
Causes of the Tariffs
This decision stems from an investigation into European brandy, primarily French cognac, initiated last year.
French cognac producers have expressed concern over being collateral damage in a broader trade dispute between Brussels and Beijing over tariffs imposed on the importation of electric vehicles manufactured in China.
China implemented tariffs on cognac following a preliminary investigation into brandy imports last year, after the European Union accused China of providing unfair subsidies to its automotive industry and imposed tariffs on imports of electric vehicles manufactured in China.
Impact on Brandy Exports
Monthly cognac exports to China, the world’s most valuable market for this spirituous beverage, have plummeted by 70% due to the trade dispute, according to data from the National Interprofessional Office of Cognac (BNIC).
Recent Developments
Last week, Reuters reported that French cognac producers had reached a provisional agreement on minimum import prices for the Chinese market, but China would only finalize the deal if progress was made on EU tariffs on electric vehicles manufactured in China.
Impact on Brandy Producers
The news is likely to be welcomed by brandy distillers, who have also witnessed slowing sales in the United States, the world’s largest market for cognac by volume, due to inflation and economic uncertainty.
Key Questions and Answers
- What is the reason for China’s tariffs on EU brandy? The tariffs are a result of an ongoing trade dispute between the EU and China, primarily concerning subsidies given to China’s automotive industry. Cognac, a type of brandy, was caught in the crossfire.
- Which companies are exempt from higher tariffs? Companies like Martell & Co and Remy Martin, which have committed to maintaining minimum prices, are exempt from higher tariffs.
- How have brandy exports to China been affected? Monthly cognac exports to China have decreased by 70% due to this trade dispute.
- What is the current status of the negotiations? French cognac producers have agreed on minimum import prices for the Chinese market, but China will only finalize the deal if there’s progress on EU tariffs on electric vehicles from China.
- How are brandy producers outside of China being impacted? Brandy distillers, including those in the US market, are facing slowing sales due to inflation and economic uncertainty.
