China exempts major cognac makers from anti-dumping duties against EU brandy

China imposed anti-dumping duties of up to 34.9% for five years from July 5 on spirits originating from the EU, while exempting major French cognac producers as long as they sell at a minimum price. 

The Chinese Commerce Ministry (MOFCOM) announced the levies in conclusion to a probe launched in January 2024. This was widely seen as a response to the EU’s investigation of Chinese electric vehicle subsidies.

Beijing maintains that European brandy imports hurt its domestic industry.

However, despite the ruling that the EU had engaged in dumping, the practice of exporting goods to a foreign market at a significantly lower price than their regular price, major French cognac players have been exempted from the duties. These include LVMH-owned Hennessy, Rémy Martin, and Pernod Ricard.

According to state-owned media agency Xinhua, China has accepted price undertakings from 34 EU brandy producers, who will not be subject to anti-dumping duties.

French brandy producers were initially worried, as China remains a crucial market for cognac. In 2024, exports crossed €1.6 billion (US$1.8 billion). The main export category to China was spirits and liqueurs, followed by wine.

Beijing’s decision to exempt some top cognac brands has offered respite, but concerns over long-term trade sustainability remain.

Price undertakings offer temporary respite

Belgian trade group Spirits Europe says Beijing’s decision comes despite “substantial evidence” furnished by the EU spirits sector during the last 18 months, “clearly demonstrating the absence of any dumping practices on the Chinese market.”

The group says that while the average duty is slightly below the provisional rate applied since October 2024, the measures will still create problems for legitimate trade.

Spirits Europe also says that while some companies have reached undertakings with MOFCOM, these arrangements, facilitated by diplomatic negotiations from the EU and France, will apply to three companies involved in the investigation and other cooperating businesses.

“Beyond its direct impact on our sector, this decision risks fuelling trade tensions at a time when mutual cooperation is more important than ever. We nonetheless welcome the conclusion of price undertakings with certain companies, as they offer partial relief, and we urge that this option be extended to all companies that have signed up,” says Spirits Europe director general Hervé Dumesny.

Rémy Cointreau, owner of the Rémy Martin brand, has confirmed the price undertaking agreement, which will apply to imports of grape-based spirits in containers of less than 200 liters from the EU.

But it asserts that it “in no way constitutes an acknowledgment of dumping practices.”

“While the commercial terms of this agreement are less favorable than those that were in effect prior to the initiation of the investigation, they nonetheless represent a significantly more favorable outcome, or at the very least, a substantially less punitive alternative, compared to the imposition of definitive anti-dumping duties,” says the spirits conglomerate.

Dealing with price hikes

Pernod Ricard, which has a portfolio of over 200 premium alcohol brands, says it regrets the increase in the cost of operating in China but remains focused on long-term growth in the region.

Spirits Europe also stresses that minimum price commitments do not imply any wrongdoing or dumping. Moreover, these arrangements do not cover many EU producers, who will face “steep and unjustified duties.”

BNIC, the Bureau National Interprofessionnel du Cognac, has renewed its appeal to the French authorities and the European Commission to find a political agreement with Beijing to return to free trade.

The French industry association notes that the MOFCOM announcement confirms the restoration of guarantees paid since October 2024. However, it does not include information on reopening the duty-free market, from which cognac has been excluded since December last year and traditionally represents nearly 20% of its sales in China.

“This decision marks the end of the anti-dumping investigation, but not the end of our action to ensure that all our exporters regain unrestricted access to the Chinese market as soon as possible,” concludes Florent Morillon, BNIC president.