China holds off on EU brandy tariffs amid dumping allegations as Commission pushes back

03 Sep 2024 --- The Chinese Commerce Ministry has announced that China will not impose provisional duties on European brandy imports despite leveling allegations against the EU for selling alcohol at below-market prices. The probe was announced in January amid mounting trade tensions between Brussels and Beijing. 

“There is dumping of the relevant imported brandy originating from the EU [and] the domestic relevant brandy industry is threatened with substantial damage,” reads the official statement.

The ministry states that European distillers have been selling brandy in their markets at a dumping margin of 30.6% to 39%. Reports suggest that French luxury cognac brands constitute up to 99% of China’s imports of such drinks.

“Provisional anti-dumping measures will not be taken in this case for the time being,” the Chinese ministry adds, a move that could be interpreted as an attempt to alleviate the country’s volatile trade relations with the EU.

EU’s response

The European Commission (EC) says it has taken note of the investigation and maintains its merits are “questionable.”

“The EC is following and will continue to follow this investigation very closely in full cooperation with our exports, EU producers and member state authorities. We are fully committed to supporting the EU industry as appropriate throughout the investigation and remain fully confident that our cognac or brandy exports to China are completely in line with all applicable WTO rules,” says Olof Gill, EC spokesperson for Trade and Agriculture.

Gill adds that the EC will “not hesitate” to act in the defense of EU stakeholders. Moreover, he asserts that the Chinese investigation will not influence the EU’s stance on electric vehicles.

“According to the commission’s detailed assessment, the merits of this investigation are questionable. The WTO sets out comprehensive rules that WTO members must follow in initiating, conducting and imposing trade defense measures. Therefore, the commission will follow the investigation carefully to ensure that relevant WTO rules are followed.”

“We will examine in detail the basis of these measures, and we will not hesitate to take all necessary action to defend our EU exporters.”

Industry reacts

Trade associations have voiced “disappointment” toward the Chinese investigation into brandy imports. spiritsEUROPE, a representative body for the spirits industry at the European level comprising 30 associations and 11 international companies, said it is “stunned” by the “unjustified” provisional tariffs.

spiritsEUROPE notes that the tariffs, which China is holding off on, could make alcohol 34.8% more expensive in China.The organization notes that the tariffs, which China is holding off on, could make alcohol 34.8% more expensive in China despite the evidence provided by EU producers that they did not engage in dumping.

If confirmed at the end of the investigation, such a decision will “negatively impact” EU wine-based and marc-based spirits exports to China, which remains a significant export destination for these beverages and is the world’s largest spirits market, according to spiritsEUROPE.

“The tariffs, if applied, would constitute an unjustified market access barrier and have a detrimental impact on EU exports of wine-based and marc-based spirits to China, which represent the lion’s share (around 90%) of direct EU spirits exports to China in value,” says Ulrich Adam, spiritsEUROPE’s director general.

“This decision is all the more incomprehensible because our sector has fully cooperated with the Chinese authorities throughout the entire investigation process initiated in January 2024 and has demonstrated complete transparency in its practices. The only silver lining at this stage is that the provisional duties will not apply for now.”

He says the evidence furnished by the brandy sector shows the conditions for launching an investigation were not met, leaving spirit companies out in the open amid a “broader conflict.”

“In contrast, the evidence of dumping, injury and causal link provided in the application was insufficient to justify the initiation of an investigation. Our sector seems to be a collateral victim of a broader trade conflict, which will limit the access of Chinese consumers to products they greatly value and appreciate if not resolved as a matter of priority.”

EU-China trade tribulations

About a fortnight ago, the Chinese government launched a probe into certain imported European dairy products a day after the EC raised tariffs on Chinese EVs to protect domestic motor industries.

Meanwhile, experts dubbed Russia’s recent announcement that it plans to increase pork exports to China, an EU-dominated sector, a “well-expected move” by the Kremlin, which they say has been trying to take advantage of the trade tensions between the EU and China.

By Anvisha Manral