India Holds Pernod Ricard and Diageo Scotch Shipments in Dispute Over Import Tariffs

Indian National flag waves during Jashn-e-Chillai Kalan Program at Shopian, Jammu and Kashmir, India on Dec. 15, 2021. (Photo: Nasir Kachroo/NurPhoto via AP)

Indian customs authorities are holding dozens of containers of bulk Scotch whisky imported by Pernod Ricard and Diageo as government investigators push for a 150% import tariff, creating uncertainty over a trade agreement intended to lower duties on British spirits.

The dispute centers on whether bulk Scotch whisky imported from the United Kingdom qualifies for a reduced 75% tariff under the India-UK trade pact, which took effect in July. Indian customs investigators argue that bulk shipments are not finished whisky and should instead be classified as compound alcoholic preparations, which carry a 150% duty.

A Nov. 4 memo from India’s Directorate of Revenue Intelligence, reported on by Reuters, instructed customs commissioners to continue applying the higher tariff. Investigators said the imported products are concentrates or compound preparations that undergo further manufacturing, rather than finished whisky ready for sale.

The memo said importers were incorrectly claiming the trade agreement’s reduced tariff and warned that misclassification could have substantial revenue implications.

The position conflicts with assurances that India’s commerce ministry gave senior industry executives on Nov. 2 that the government would honor the trade pact and work toward resolving the dispute. A senior finance ministry source told Reuters that the finance and commerce ministries were discussing a resolution.

Pernod Ricard, which owns Scotch whisky producer Chivas Brothers, and Diageo did not respond to Reuters’ requests for comment. India’s finance and commerce ministries and the revenue directorate also did not respond to the publication’s inquiries.

Pernod Ricard and Diageo each have more than 40 containers held at Indian ports, according to two industry sources cited by Reuters. Bacardi has five containers on hold, a third source said.

The companies are unwilling to pay the higher tariff, and prolonged delays could disrupt supplies. Indian tax officials have also searched the offices of several companies, including Pernod Ricard and Diageo, and questioned executives in recent weeks.

The dispute is significant because most Scotch whisky imported into India arrives in bulk. About 80% of British Scotch shipments by volume are imported this way and used to produce Indian-Made Foreign Liquor, a category that blends smaller quantities of Scotch with other spirits and ingredients.

Scotch exports to India totaled $335 million in 2024. The Scotch Whisky Association has projected that the trade agreement could increase the value of that trade by $1.34 billion over five years.

The International Spirits and Wines Association of India has warned the government that the dispute could undermine a key market-access benefit negotiated under the agreement.

The tariff disagreement is the first major dispute tied to the India-UK trade pact, which was designed to reduce duties on British imports. The conflicting positions from India’s commerce and finance authorities have left spirits companies uncertain about how the agreement will be applied to bulk whisky shipments.