Why does Hennessy want to carry out this test?
The Chinese surcharge system on European wine spirits applies to containers of less than 200 liters. Which, by deduction, implies that spirits exported in containers of more than 200 liters would not be subject to a 35% surcharge. It is to circumvent this lethal tax for its exports that Hennessy, leader in cognac, wishes to carry out this test and ship its cognac in bulk to China so that it can be bottled and then sold there.
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Ironically, the Chinese automobile industry is trying the same parade in order to escape European taxes on electric vehicles. The number one in the sector has in fact announced the construction of an assembly plant in Hungary, then a second in Türkiye. To build electric vehicles whose parts come from China.
Yes, bottling cognac abroad is permitted
It is authorized because it is not… prohibited. The specifications for the cognac appellation make no provision for bottling. With each crisis, the debate is relaunched. And each time, the same specificity returns: cognac is a product… Industrial, because it does not appear in the annex of agricultural products to the Treaty of Rome of 1957.
Everything relating to the production of eau-de-vie and its aging is standardized. Not the bottling. We can therefore produce in Cognac, ship in bulk to the ends of the world, bottle then sell while retaining the name “cognac”.
Until then, the cognac giants prohibited this type of practice with their flagship brand. Question of prestige, brand image, quality and traceability.
Note that for port, for example, bottling in Portugal is mandatory. In the 2000s, the cognac giants wanted to take inspiration from this model to ban bottling outside the CognacL appellation zone.
What is bulk?
Since the virtual disappearance of the Russian cognac market, bulk only represents 2% of cognac shipments. Concretely, it is brandy shipped without having been bottled, not yet reduced to 40 degrees. It takes up less space when exported and is then bottled in factories in low-cost countries. This was the case in Russia, Armenia, etc. On the Russian market, in the years 2005/2010, the production cost was halved by operators choosing bulk. At the time, the cognac giants considered the practice very dangerous. And denounced her.
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The risks: employment and fraud
The practice is all the more dangerous as no control mechanism is put in place. And that the fear of seeing brandys – wine brandy produced elsewhere than in the region defined as cognac – and cognac coexist in this type of factory is not just a pipe dream. If we cannot suspect a large group of being tempted by this very dangerous game, other more obscure operators have already been suspected of taking part in this scam.
The risk is therefore twofold: firstly, it weighs on local employment. Bottling – by houses and subcontractors – by glassmakers, already in a bad situation, corks, packaging, in short everything that concerns the packaging of an industry which will weigh a little over 160 million bottles in 2024 The second is that of fraud and counterfeiting. An acceptable risk when bulk concerns 2% of shipments. A much higher risk if this type of expedition is institutionalized.
The BNIC has been thinking about a control system for several years
It is an official document, a meeting report from November 2023 accessible in three clicks. It is titled: “BNIC projects for the implementation of a system to control the logistics chain up to the bottling of the finished product” and comes from the INAO, the national institute of appellations of origin.
This document therefore underlines two things. 1. The BNIC wishes to control the bottling of cognac outside the appellation zone. 2. Which means that the BNIC is seriously considering this type of packaging gaining momentum.
Here is the inter-professional project: “The BNIC therefore wishes to set up a system to control the logistics chain up to the bottling of the finished product, whatever its location, within or outside the area or of the national territory.
This system would require providing in the specifications an authorization or approval of the operators concerned which would require a commitment to respect the specifications, to submit to control procedures and to only sell in bulk to authorized operators.
The reflection is therefore more than underway and began before the trade conflict with China.
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