India customs tariff dispute holds Pernod, Diageo Scotch shipments

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India Scotch tariff dispute

Highlights

Indian customs are holding over 85 containers of Pernod Ricard, Diageo, and Bacardi bulk Scotch imports, disputing eligibility for reduced 75% duty under the India-UK trade pact.
A November 4 memo from India's Directorate of Revenue Intelligence asserts bulk Scotch should face a 150% tariff, labeling treaty benefit claims as incorrect, risking large recurring revenue implications.
Scotch exports to India hit $335 million in 2024, with potential $1.34 billion growth over five years at risk from ongoing tariff dispute delaying bulk imports and raising investor concerns.

Trade pact dispute stalls bulk Scotch imports

As reported by Reuters, Indian customs is holding dozens of containers of bulk Scotch imported by Pernod Ricard and Diageo while investigators argue the shipments do not qualify for the lower duty available under the India-UK trade pact.

In the first major dispute linked to the agreement, customs investigators say bulk Scotch concentrates used to make whisky brands are not eligible for the pact's reduced 75% tariff. They contend the lower rate applies only to finished products such as bottled, ready-to-drink Scotch.

That position conflicts with assurances given by India's commerce ministry to senior industry executives on November 2 that the pact would be honored and the dispute resolved quickly. However, a November 4 memo from the finance ministry's Directorate of Revenue Intelligence instructs customs commissioners across India to keep applying a different interpretation.

The memo says importers are "incorrectly" claiming treaty benefits on bulk Scotch and that the shipments should attract a 150% tariff under a customs classification in effect since May 1 for "compound alcoholic preparations." It also says any misclassification has "large-scale, recurring substantial revenue implications" and cites a preliminary investigation finding that the imported goods are concentrates subject to further manufacturing, rather than finished whisky, brandy or rum.

Supply risks and investor concerns grow

Pernod and Diageo each have more than 40 containers stuck at Indian ports, according to two industry sources, and Bacardi has five containers on hold, according to a third source. The companies are unwilling to pay the higher duty, and prolonged delays are likely to disrupt supplies.

In recent weeks, tax officials have searched the offices of several companies, including Pernod and Diageo, and questioned executives. A senior finance ministry source says the finance ministry and commerce ministry are discussing an appropriate resolution, although neither ministry formally responds to Reuters queries.

Scotch exports to India totalled $335 million in 2024, and the Scotch Whisky Association forecasts the trade pact could increase that figure by $1.34 billion over five years. About 80% of Scotch whisky imports from Britain by volume arrive in bulk and are later used to produce Indian-Made Foreign Liquor, which blends small amounts of Scotch with other spirits and ingredients.

The International Spirits and Wines Association of India has privately warned New Delhi that the dispute risks undermining an important market-access benefit agreed between India and the UK. The clash also revives a longstanding concern for foreign investors, as import tariff disputes in India have previously involved multinational groups including Samsung and Volkswagen.

In a previous article, we explained how the WTO warned geopolitical tensions could reshape global trade flows and supply chains.

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