China penalizes European brandy in tit-for-tat response
Beijing/Paris
Reuters
—
China imposed temporary anti-dumping measures on brandy imports from the European Union on Tuesday, hitting brands from Hennessy to Remy Martin, after the 27-state bloc voted for tariffs on Chinese-made electric vehicles (EVs).
An investigation has preliminarily determined that dumping of brandy from the EU is threatening China's own brandy sector with "substantial damage," the Chinese Commerce Ministry said.
Hinting at more to come potentially, the Chinese ministry said its anti-dumping and anti-subsidy investigation into EU pork products was ongoing and would make "objective and fair" decisions at the end of the probe.
The ministry added that it was considering a hike in tariffs on imports of large-engine vehicles. Higher levies would hit Germany's producers the hardest, with German exports of vehicles with engines of 2.5 liters or larger to China reaching $1.2 billion last year.
As of October 11, importers of brandy originating in the EU will have to put down security deposits mostly ranging from 34.8% to 39.0% of the import value, the ministry said.
France was seen as the target of Beijing's brandy probe due to its support of tariffs on China-made EVs. It also accounted for 99% of China's brandy imports last year, with French brandy shipments reaching $1.7 billion.
Hennessy and Remy Martin were among the brands worst-hit, with importers having to pay security deposits of 39.0% and 38.1%, respectively.
The deposits would make it more costly upfront to import brandy from the EU. It was not immediately clear how and when importers would be able to get back their deposits. The Chinese commerce ministry gave no details.
Shares tumble
Shares in Pernod Ricard were down 2.9% following the news, while Remy Cointreau was down 5% and LVMH, owner of Hennessy, was down 4%
Companies that cooperated in the Chinese investigation were hit with security deposit rates of 34.8%. The rate on Martell was the lowest, at 30.6%.
French cognac trade body the Bureau National Interprofessionnel du Cognac (BNIC), Pernod Ricard and Remy Cointreau did not immediately respond to a request for comment.
The punitive measures came on the heels of a vote by the EU to adopt tariffs on China-made EVs by the end of October. Ahead of the vote, in late August, China had suspended its planned anti-dumping measures on EU brandy, in an apparent goodwill gesture, despite determining that EU brandy had been sold in China at below-market prices.
At the time, the Commerce Ministry said its probe would end before January 5, 2025, but that it could be extended.
China's Commerce Ministry previously said it had found that European distillers had been selling brandy in its 1.4 billion-strong consumer market at a dumping margin in the range of 30.6% to 39% and that its domestic industry had been damaged.
In the EU's decision to impose tariffs on China-made EVs, the bloc set tariff rates ranging from 7.8% for Tesla to 35.3% for SAIC and other producers deemed not to have cooperated with the EU's anti-subsidy investigation. These will come on top of the EU's standard 10% car import duty.
The European Commission has said it is willing to continue negotiating an alternative, even after tariffs are imposed.
