China has enacted temporary anti-dumping measures on brandy imports from the European Union, impacting well-known brands such as Hennessy and Remy Martin, following a decision by the 27-member bloc to impose tariffs on Chinese-manufactured electric vehicles.
An initial investigation has found that the dumping of EU brandy threatens significant harm to China’s domestic brandy industry, according to the Chinese commerce ministry.
Indicating the possibility of further actions, the ministry mentioned that its ongoing anti-dumping and anti-subsidy investigation into EU pork products would result in “objective and fair” conclusions at the end of the inquiry.
The ministry also noted that it was contemplating an increase in tariffs on large-engine vehicle imports. Such a rise in tariffs would primarily impact German manufacturers, with Germany’s exports of vehicles with engines of 2.5 liters or more to China totaling $1.2 billion last year.
France is viewed as the primary target of China’s brandy investigation, owing to its backing of tariffs on EU-made electric vehicles. Notably, France constituted 99% of China’s brandy imports last year, with shipments valued at $1.7 billion.
Among the brands facing the most significant impact are Hennessy and Remy Martin, with importers required to pay security deposits of 39% and 38.1%, respectively.
The security deposits will increase upfront costs for importing brandy from the EU. Details on how and when importers might reclaim their deposits have not yet been disclosed by the Chinese commerce ministry.
In response to the announcement, shares of Pernod Ricard fell by 2.9% this morning, while Remy Cointreau experienced a 5% drop, and LVMH, the parent company of Hennessy, saw a decline of 4%.
Companies that collaborated with the Chinese investigation faced security deposit rates of 34.8%, with Martell receiving the lowest rate at 30.6%.
The French cognac trade association, the Bureau National Interprofessionnel du Cognac (BNIC), along with Pernod Ricard and Remy Cointreau, did not respond immediately to requests for comments.
These punitive measures were implemented following the EU’s decision to impose tariffs on Chinese-made electric vehicles by the end of October.
Just before the vote in late August, China had suspended its planned anti-dumping measures on EU brandy as a gesture of goodwill, despite previously identifying that EU brandy was being sold in China at below-market prices.
At that time, the ministry stated that its investigation would conclude before January 5, 2025, though it could be extended.
The Chinese commerce ministry had previously reported that European distillers were selling brandy in its vast consumer market at a dumping margin between 30.6% and 39%, inflicting damage on its local industry.
In the EU’s resolution to impose tariffs on Chinese electric vehicles, the bloc established tariff rates ranging from 7.8% for Tesla to 35.3% for SAIC and other manufacturers who did not comply with the EU’s anti-subsidy probe.
These tariffs will be added to the EU’s standard 10% duty on imported cars.
The European Commission has indicated a willingness to continue discussions on alternatives, even after the tariffs take effect.
