India-UK FTA faces first hurdle as 40 containers of Pernod Ricard, Diageo Scotch stuck at ports amid tariff dispute | Today’s news
An India-UK trade pact that came into effect in July is facing its first major dispute as customs investigators seek to impose a 150% duty on bulk shipments of Scotch whiskey imported by Pernod Ricard and Diageo, Reuters reported.
The report, citing people familiar with the matter and a confidential government memo, said the companies are seeking assurances from India that their shipments are eligible for a reduced 75% duty under the deal.
According to investigators, the lower duty rate only applies to finished products, including ready-to-drink bottled Scotch. After receiving comments from spirits companies, India’s commerce ministry told executives on November 2 that it remains committed to the trade pact and will work to resolve the issue quickly. This led the company to expect a reduced tariff on their shipments.
Why are customs officials aiming for 150% duty?
However, a November 4 memorandum from the Finance Ministry’s Directorate of Revenue Intelligence (DRI) reportedly directed customs commissioners across the country to maintain their adversarial stance.
The DRI’s notice said the importers were wrongly claiming preferential duty rates under the India-UK pact for Scottish bulk shipments. He argued that these products fall under the tariff category for “compound alcoholic preparations”, which are subject to a 150% duty from May 1.
The statement added that any misclassification by importers could have “wide-ranging, recurring material revenue implications.” He also instructed officials to ensure proper application of the 150% duty.
He further stated: “Preliminary investigation has revealed that the imported goods are not finished whisky/brand/rum as such, but are concentrates/mixed preparations undergoing further manufacturing.”
However, the report did not clearly explain the reasons for the investigators’ stance.
There are dozens of Scotch whiskey containers in Indian ports
Although the commerce ministry’s comments initially appeased companies such as Pernod Ricard and Diageo, customs authorities at Indian ports detained dozens of containers belonging to the two companies, which are unwilling to pay the higher duty.
Pernod Ricard and Diageo each have more than 40 containers at the ports. A long delay could disrupt deliveries. Separately, Bacardi has five containers waiting.
With shipments still suspended and DRI maintaining its position, the tariff dispute remains unresolved.
The liquor industry is raising concerns about the trade pact
In recent weeks, tax authorities have raided the premises of several companies, including Pernod Ricard and Diageo, and questioned their executives.
The International Spirits and Wines Association of India reportedly raised its concerns privately with the government, warning that the dispute could undermine a key market access concession negotiated and agreed by India and the UK.
Disputes over import duties have historically posed problems for foreign businesses operating in India. The country has previously made significant back tax claims against multinational corporations, with Samsung and Volkswagen among the companies involved in such disputes.
