China’s tariffs on French cognac reportedly depend on EV deal

Investing.com -- French cognac producers have reached a provisional agreement on minimum import prices for the Chinese market, but China will only finalize the deal if progress is made in a dispute over European Union tariffs on Chinese electric vehicles, according a Reuters report on Friday.

Negotiations between the two sides have continued for months while cognac sales in China, the most valuable market for the spirit, have declined.

The agreement would benefit companies like Pernod Ricard (EPA:PERP), Remy Cointreau (EPA:RCOP), and LVMH (EPA:LVMH), which have also experienced slower sales in the United States, the largest cognac market by volume, due to inflation and economic uncertainty.

If no agreement is reached by July 5, the deadline set by China to complete an anti-dumping investigation into European brandy, China could make permanent its temporary customs duties of up to 39% that are currently in place.

The report indicated that the provisionally agreed minimum prices would be "much better" than continuing to pay the existing duties.

During a June 12 web briefing for cognac makers, lawyers working for the BNIC industry body outlined the minimum import prices that form part of the tentative deal. According to presentation slides, VS (Very Superior), the least expensive cognac category, would have a minimum import price of 46 yuan ($6.39) per liter. High-end "Extra Old" (XO) cognac would cost 424 yuan per liter, while the premium XXO category would start at 613 yuan ($85) per liter.

For major houses like Hennessy, Martell, and Remy Martin, minimum import prices would be higher than for smaller producers but still considerably below current levels.

Many companies have reportedly committed to the prices and are waiting for Chinese authorities to approve them.

The report added that Beijing has linked finalizing the cognac deal to movement on the electric vehicle tariff dispute with the European Union.