China said on Friday that it would impose steep duties on European brandy, mostly French Cognac, but softened the blow by sparing the largest producers after they agreed to change the prices they charged. The deal came at a delicate moment in trade relations between Europe and China as each accuses the other of dumping, of unfairly subsidizing industries and of imposing other barriers to trade.
The Chinese Ministry of Commerce announced duties of up to 34.9 percent on imported European brandy, the conclusion of a dumping investigation started last year that sent shudders through the industry, particularly among French Cognac brands with extensive sales in China.
Beijing imposed preliminary penalties against European brandy makers in October after the European Union voted to impose anti-subsidy tariffs on Chinese electric cars. France had led the push for the electric car tariffs, and almost all the brandy imports targeted by China come from France.
But after a flurry of diplomatic efforts, the biggest European Cognac producers — including the makers of Hennessy, Martell and Rémy Martin — were spared the duties by making a “minimum price commitment,” the Chinese Commerce Ministry said.
China’s foreign minister, Wang Yi, was scheduled to meet President Emmanuel Macron of France in Paris on Friday. European leaders are scheduled to be in Beijing for a summit starting July 24.
It was not immediately clear what prices the European companies had agreed to charge importers of their products in China, but producers suggested that the prices were lower than what they were forced to charge in recent months. Beijing had required brandy importers to post deposits of up to 39 percent on the wholesale value of shipments while it investigated whether European brandy companies hurt producers in China by dumping brandy at unfairly low prices in the country.
Pernod Ricard, the parent of Martell, said the price agreement would result in an “increase in the cost of operating in China” but noted that it was “significantly less than would be the case if the tariffs had been made permanent.” Rémy Cointreau, the parent of Rémy Martin, described the price agreement as “a substantially less punitive alternative” to paying the duties.
Under Friday’s deal, the companies agreeing to price commitments will get their deposits back, according to SpiritsEurope, a trade group that represents major European drinks companies.
The French National Interprofessional Cognac Bureau, another trade group, has said that the industry was losing the equivalent of nearly $60 million per month in sales to China since the autumn. In a statement, the group said companies that signed the price commitments did so “to avoid seeing their presence in China completely jeopardized.” Brandy had started to disappear from Chinese stores and dinner tables after the preliminary duties were imposed.
One executive of a French cognac maker, who spoke on condition of anonymity to discuss internal procedures, said that the Chinese authorities during their investigation had minutely inspected all parts of the Cognac-making process at the company’s factory in France. The Chinese inspectors required managers to fill out more than 2,000 pages of questionnaires in Chinese, requiring a hefty translation bill, the executive added.
China has rivaled the United States in recent years as one of the largest markets for French brandy, with shipments to China worth more than a billion dollars a year until recently. China is rapidly developing its own brandy industry, located mainly in the coastal Shandong Province, between Beijing and Shanghai. That brandy has so far been aimed mainly at the domestic market, but it has been improving in quality.
Li You contributed research.
Liz Alderman is the chief European business correspondent, writing about economic, social and policy developments around Europe.
Keith Bradsher is the Beijing bureau chief for The Times. He previously served as bureau chief in Shanghai, Hong Kong and Detroit and as a Washington correspondent. He has lived and reported in mainland China through the pandemic.
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