Several French cognac brands have been granted duty-free status in China, but not everyone is happy

In the shadow of dumping charges and tariff war

The recently concluded Chinese anti-dumping investigation was launched last year as a response to the EU imposing high tariffs on electric cars from China. During the investigation, Beijing found that EU brandy – especially French cognac – was entering the Chinese market with an unfair price advantage, and therefore imposed a duty of 27.7–34.9 percent on the products for five years.

They can still stay on the shelves – at official prices

However, the Chinese Ministry of Commerce announced that 34 of more than 60 European companies have reached agreements to sell their products in China at official, i.e. fixed prices. These companies – including the LVMH group’s Hennessy brand and Rémy Martin, owned by Rémy Cointreau – are exempt from paying customs duties.

However, no details have been released yet on the exact level of the official prices. In any case, French producers believe that this compromise, although restrictive, represents a “less strict alternative” and provides an opportunity for further investment in the Chinese market.

Spectacular decline in exports

The trade conflict has already had its impact: according to the French cognac industry’s professional organization, the Bureau National Interprofessionnel du Cognac, monthly exports to China have fallen by 70 percent during the months of uncertainty. This is a serious loss, as the annual export value of French cognac production reaches $3 billion, with premium brands being bottled for hundreds of dollars.

Political gesture before the summit

The agreement on duty-free trade is not only an important development from an economic but also a diplomatic point of view. Chinese Foreign Minister Wang Yi met with Emmanuel Macron in Paris last Friday, where he said the brandy dispute had been resolved “through friendly consultations.” The decision came a few weeks before the EU-China summit in Beijing, so it could also be interpreted as a gesture to ease increasingly tense relations.