Treasury Wine Estates plans responses for potential ‘mild to severe’ China wine tax

SA winemakers are mulling over what they will do if Chinese tariffs are imposed from today. It comes as China all but confirmed its trade war with Australia.

Australia’s wine makers are war gaming what will happen if China hits them with “mild to severe” import taxes.

Treasury Wine Estates, the maker of Penfolds and Wolf Blass, is considering several options if tariffs are imposed from the anti-dumping inquiry, but says it is committed to the Chinese market long-term.

Chairman Paul Rayner also told the company’s Annual General Meeting on Thursday that “not all” of Australia’s rhetoric on China has been “helpful” or “constructive”.

“A balanced and respectful approach to this relationship and the surrounding debate is needed and I am sure it can be found with strong leadership from both government and business leaders,” he said.

Treasury Wine Estates, the maker of Penfolds, says it is committed to the Chinese market but is considering several options if tariffs are imposed. Picture: Supplied

TWE’s leadership emphasised it would continue to co-operate with China’s anti-dumping inquiry, which is expected to be finalised in late 2021 or early 2022.

Interim tariffs could be imposed however as early as this month.

“We’re preparing for a range of potential outcomes from mild to severe tariffs,” Mr Rayner said.

“And we’re undertaking detailed scenario planning to ensure we’re prepared once the investigation outcomes are known.”

There are fears China could cut off Australian imports for several goods including wine, lobster, barley, timber, coal, sugar and copper from Friday, as part of an informal ban.

The China Alcoholic Drinks Association has also asked the Chinese Ministry of Commerce to impose “retrospective tariffs” on Australian wine imports.

South Australia would be the most affected state in Australia, as the nation’s biggest wine exporter.

Mr Rayner said depending on the outcome of the anti-dumping inquiry, TWE could pass-through tariffs, which means absorbing part of the cost to continue to export at similar prices.

Pass-through may “vary by brand or price tier,” he said.

TWE could also reallocate to other markets “including South East Asia, Australia, Europe or the US”.

Treasury Wine Estates chairman Paul Rayner. Picture: David Geraghty

“We’ll also continue to focus on our established multi-country of origin sourcing strategy, including continued investment in our French sourcing with the first Penfolds sourced from France expected to be available for release in fiscal (year) 2023,” Mr Rayner said.

“Longer term, we may also consider changes to our supply chain and onshore operating model, working closely in conjunction with our partners.”

He said: “These investigations do not change our long-term commitment to China as a priority market.”

“We continue to see a long-term role for TWE in helping to create a wine culture in China where the industry thrives and everyone shares the benefits together.”

Prime Minister Scott Morrison on Thursday said China had denied there would be an informal ban on some Australian goods from Friday.

“I can only take that at face value out of the respect of the comprehensive strategic partnership we have with China and to work through the channels that we have under that relationship to address the issues that have arisen,” he said.

But on Thursday, China all but confirmed its trade war with Australia days after dismissing allegations of a targeted ban as “rumour”.

The Global Times, a Chinese state-run publication, reported the visit of Australia’s ambassador to China, Graham Fletcher “came after China halted seven categories of Australian goods from the market.”

The Global Times made the claim in an article titled ‘Australia nervous at losing Chinese market’.

Federal Trade Minister Simon Birmingham has since issued a statement seeking further information, saying the “uncertain and inconsistent messages from China” are “heightening risks and undermine the statements made by President Xi [Jinping] at this year’s China International Import Expo.”

Senator Birmingham continued: “If China is to be true to the statements of its Government then it should provide confidence that normal customs and related processes will apply to imports of goods such as seafood and wine.”