China has imposed “provisional anti-dumping measures” on the imports of brandy from the EU.
Starting on Friday (11 October), companies importing products including brandy will have to pay a security deposit on arrival to Chinese customs authorities.
The deposit amount will be equivalent to tariffs that were recommended in August by China's Ministry of Commerce.
“Today’s decision means that, at an extremely short notice, EU producers will be hit by a significant additional financial burden when exporting EU wine-based and marc-based products to China," Ulrich Adam, the director general for trade group SpiritsEurope, said.
In January, China launched an investigation into claims by the China Liquor Industry Association imports of brandy from the EU were being dumped into the country. It came months after Brussels launched an anti-subsidy investigation into Chinese electric vehicles.
In August, Beijing issued a preliminary finding that accused EU brandy makers of dumping products. At the time, it did not enact any anti-dumping measures but determined the dumping margin ranged from 30.6% to 39%, indicating the level of future tariffs.
On 4 October, the EU approved tariffs of up to 45% on imported China-made electric vehicles.
Following the EU's move to impose those tariffs, the Bureau National Interprofessionnel du Cognac (BNIC) – Cognac’s trade body – said the move reinforced the “imminent threat” of tariffs on brandy. “The French authorities have abandoned us. We do not understand why our sector is being sacrificed in this way,” a spokesperson for the BNIC said at the time. Just Drinks has contacted the BNIC for comment on today's announcement.
In a note to clients this morning, Trevor Stirling, an analyst covering the drinks sector for investment bank Bernstein, said: “The twist is that [the measures] are 'provisional' and implemented through a 'corresponding security deposit', which sounds like it might be rebated if an agreement is eventually reached, rather than a definitive tariff. We believe this is intimately linked to the dispute on EV tariffs and is being used as a negotiation lever. Nevertheless, the threat is real.”
The prospect of tariffs this morning caused the shares of three spirits giants that market Cognac – LVMH, Pernod Ricard and Rémy Cointreau – to slide in early trading.
Shares in Hennessy maker LVMH were down 3.25% at €657.70 at 13:31 CEST. Pernod Ricard, the owner of the Martell brand, saw its shares reach €126.80 by 13:31 CEST, down 3.54%. Shares in Rémy Cointreau had fallen 8.42% on the day to €60.40 by 13:32 CEST.
Just Drinks has approached all three companies for comment.
