Published by Global Banking and Finance Review
Posted on June 27, 2025
By Tassilo Hummel and Julia Payne
PARIS/BRUSSELS (Reuters) -France's cognac makers have reached a tentative deal on minimum import prices for the Chinese market, but China will finalise it only if progress is made in a separate row over EU tariffs on Chinese-made EVs, five sources familiar with the matter said.
Talks between the two sides have dragged on for months, while sales of cognac in China, the world's most valuable market for the spirit, have shrunk.
If finalised, the deal would bring relief to groups including Pernod Ricard, Remy Cointreau and LVMH, whose sales have also slowed in the United States, the world's biggest cognac market by volume, as a result of inflation and economic uncertainty.
In the absence of an agreement by a July 5 deadline set by China to complete an anti-dumping investigation into European brandy, most of it cognac, China could make permanent its temporary customs duties of up to 39% that are already in place.
The provisionally agreed minimum prices for brandy imports would be "much better" than continuing to pay the existing duties, one of the sources said.
In a June 12 web briefing for cognac makers, lawyers working for the BNIC industry body detailed minimum import prices described as part of the tentative deal obtained after the lengthy technical negotiations, presentation slides seen by Reuters showed.
VS, or Very Superior, the cheapest cognac category, would have a minimum import price of 46 yuan ($6.39) per litre, the slides showed. High-end "Extra Old" cognac, known as XO, would cost 424 yuan per litre, with the XXO category, where retail prices reach thousands of dollars per bottle, costing from 613 yuan ($85) per litre.
For the biggest houses Hennessy, Martell and Remy Martin, two of the sources said minimum import prices would be higher than for smaller producers, but still well below current levels.
One industry insider said his company has committed to the prices detailed in the presentation, and was waiting for the Chinese authorities "to sign them off".
Three other sources at leading Cognac makers said their companies had also signed up to the minimum prices and awaited Beijing's response. They and a fourth industry source said Beijing had linked finalising the cognac deal to movement on the electric vehicle dossier.
In all Reuters spoke to five industry sources. All of them asked not to be named because of the sensitivity of the issue.
The BNIC declined to comment on the prices, saying they were confidential. China's Commerce Ministry did not respond to questions sent by Reuters.
A French government source told Reuters Chinese officials have consistently linked the cognac and electric vehicles dossiers. The source said the French government had refused to make the connection, but was cautiously optimistic a formal deal can be struck ahead of the July 5 deadline.
A person familiar with EU-China trade talks also confirmed China had tied signing off the cognac agreement to the electric vehicle talks.
COLLATERAL DAMAGE?
France's cognac makers have complained they are collateral damage in the broader trade row between Brussels and Beijing after France was vocal in its support for tariffs on China-made EVs.
China imposed temporary duties on cognac following a brandy investigation launched last year after the EU accused Beijing of unfair public subsidies for China's auto industry and imposed duties on imports of Chinese-made EVs.
Shares in Remy Cointreau and Pernod Ricard are down 35% and 33% respectively since China announced temporary import charges last October. Monthly cognac exports to China have fallen by as much as 70% due to the trade dispute, according to BNIC data.
Reuters exclusively reported this month that cognac makers had offered minimum prices to Chinese authorities to try to break the deadlock.
Beijing wants the EU to replace its import tariffs on Chinese EVs with minimum price commitments similar to those proposed for cognac, the sources said.
China has said talks on EVs have entered a final stage, but EU officials say progress has been limited.
The European Commission did not respond when asked if it supported the provisional agreement on Cognac.
EU leaders will travel to Beijing for a summit to mark 50 years of EU-Chinese relations on July 24-25, where officials have said trade will be a priority.
French trade minister Laurent Saint-Martin told producers during a visit to the Cognac region in southwestern France this week that talks on minimum import prices were "on the right track" but had not reached a conclusion.
(Reporting by Tassilo Hummel and Julia Payne; additional reporting by Leigh Thomas and Dominique Vidalon in Paris and Laurie Chen in Beijing; editing by Richard Lough and Barbara Lewis)
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