Coonawarra winemakers have been slugged with crippling import taxes by the Chinese government that will land an immediate blow to the billion-dollar Australian industry.
The new tariffs came into effect on Friday after China announced importers of Australian wines – a $1.2b per annum industry – would need to pay temporary deposits to the nation’s customs authority, ranging from 107% to 212%.
This followed the release of preliminary findings from an anti-dumping investigation, which saw China accuse Australian producers of selling wines below the cost of production, allegations swiftly denied by Canberra and industry.
It also follows last month’s informal directive to importers by China to suspend orders of wine and other Australian exports, like South Australian crayfish and timber.
The SE Voice understands this also led South Australian wine due to go to China – an export market worth $816m per annum to SA – not bottled or shipped, with producers then awaiting a certainty in market conditions that has not come.
It is understood importers of Casella Wines, the parent company of Brand’s Laira Coonawarra, is now required to pay a 160.2% deposit to the Chinese government.
While the rate required of Treasury Wine Estates, the parent of Penfolds and an ASX-listed
company, was the highest among all named wine producers in the statement at 169.3%.
Chinese importers of Swan Vintage wines will require a deposit of 107.1%. While Australian wines that are not named on the list will require deposits of 212.1%.
Australia’s Trade Minister Simon Birmingham said Canberra had learned of the tariffs through an online notice.
He said the tariffs, described as “unjustified” and “without evidence”, would deliver a “devastating blow” to the wine industry because it “will render unviable for many businesses, their wine trade with China”.
“It’s a tax on Chinese consumers, essentially, but by taxing the product at such enormous, impactful levels, it will likely see consumers turn away from that and that is what has the devastating impact on Australian producers,” he said.
“That’s why we think it is grossly, grossly unfair, unwarranted, unjustified.”
A week before announcing the tariffs on Australian wine, China is reported to have deliberately leaked a document that outlined its grievances with Australia’s foreign investment, national security and human rights policy.
It said that Australia would need to correct its actions to restore relations.
Agriculture Minister Davie Littleproud said that “China’s recent comments gives the perception that it’s more about their grievances around those matters, rather than in fact around anything any industry has done wrong”.
Minister Littleproud added the current situation “does not worry Australian exporters, it worries exporters from around the world”.
South Australian Wine Industry Association chief executive Brian Smedley told The SE Voice the tariffs would have an immediate impact on the South Australian wine industry.
“It represents disappointment for many businesses who have invested significant time and funding to develop the China market over many years,” he said.
“The proposition that Australia has been dumping wine in the China market would not be supported by the facts.”
However, if the tariffs were to continue beyond this window, Mr Smedley said businesses would need to reassess their export market with China.
They would also need to determine if their business model would support significant margins.
“There are flow on implications for grape prices, grape supply, contract winemaking, contract bottling, potential cash flow issues and financial performance pressures on companies severely exposed to the China market,” he told The SE Voice.
“Other markets will potentially enjoy the wine destined for China.”
South Australian wines export to around 100 countries globally. It is understood that some impacted wine businesses will consider the domestic market.
