Berliner Boersenzeitung - French cognac workers protest China bottling plan amid tariff threat

Staff in the town of Cognac in southwestern France, from which the iconic brandy takes its name, earlier this month went on strike to protest a plan to export the drink in vats, rather than bottles.

Bottles will be subject to additional taxes estimated at 35 percent from China, Cognac's second-largest export market after the United States.

Hennessy management announced Monday that they would put the plan on ice and the strike had come to an end.

But concern remains strong that Hennessy, part of the LVMH luxury group, and other leading brands will bow to pressure and export their brandies in bulk for bottling in China.

"This idea of relocating bottling is opening a Pandora's box that could be disastrous," said Tommy Dupuis, who has worked in the Hennessy factory for 13 years.

The protesters are demanding in particular an extension of France's controlled designation of origin (AOC) labelling system -- which aims to protect locally produced products -- to include rules protecting local bottling, along the lines of the fizzy drink champagne.

"Today, the AOC does not protect local bottling, this needs to change," said Matthieu Devers of the CGT union, urging support from the BNIC association of cognac producers.

"If the BNIC makes this decision, we will be able to protect our AOC from A to Z," said Dupuis.

"Cognac is here and it must stay here," said Gladys Decou, an employee on the bottling line.

Others fear disastrous economic consequences for the region. "If the production lines are moved, I will lose my job, the others too, and Cognac will become a ghost town. We must not let this happen," said Alex Barbin, a driver at Hennessy for 15 years.

Since October 11, China has required importers of European brandies -- of which cognac represents 95 percent of the total -- to submit a deposit or a bank guarantee letter with Chinese customs authorities.

The measure is part of what Beijing describes as an anti-dumping investigation. But the move is widely seen as retaliation for the EU imposition of tariffs on electric cars imported from China.

Under the plan, materials including glassware, labels, corks and boxes would be shipped to China, where brandy would then be bottled.

Hennessy had said it was "suspending" -- but not cancelling -- the plan to follow the "evolution of the political and diplomatic situation", with Prime Minister Michel Barnier announcing plans to visit China.

The cognac industry, which is heavily dependent on exports, also fears it will be targeted in the United States, its biggest market, following the election of Donald Trump, who plans to step up customs duties across the board.

(S.G.Stein--BBZ)