Penfolds maker Treasury Wine Estates hit by new China trade blow

The prickly trade ties between China and Australia look to have further ensnared Australia’s biggest winemaker.

An employee works alongside Australian-made wines on sale at a store in Beijing in August. Picture: AFP

The prickly trade relationship between Beijing and Canberra looks to have further ensnared Australia’s biggest winemaker, Treasury Wine Estates, which has revealed that a powerful drinks industry group within China has called for retrospective tariffs to be slapped on all Australian wine.

If accepted by the Chinese government, as part of an overall tariff punishment looming over the Australian wine industry, it could mean that winemakers such as Treasury Wine are hit with bills for wine that had already been shipped to China in the past few months.

It marks yet another increase in tensions in the trade relationship that is worth more than $1.2bn in Australian wine exported to China every year and adds to a growing list of hits to Australian agricultural exporters by the Chinese regime, including barley, meat and seafood.

Treasury Wine, which makes popular brands such as Penfolds and Wolf Blass, said the China Alcoholic Drinks Association had submitted a written request to the Chinese Ministry of Commerce that imports of Australian wine in containers of two litres or less into China be subject to retrospective tariffs.

The Chinese Ministry of Commerce recently announced an anti-dumping investigation into Australian winemakers for allegedly dumping wine in China, with many seeing the accusation and current investigation a payback for recent political decisions taken by the Australian government. It was the China Alcoholic Drinks Association, an industry body that represents about 122 firms, that kickstarted the anti-dumping investigation in August when it complained that low-priced Australian wines sold in China had “severely disrupted and inflicted a serious negative impact on the local market”.

Some wine industry insiders believe the calls for retrospective tariffs on Australian wine might only be related to wine sold to China in the past few weeks or months to catch out wine that was hurriedly shipped to China before any tariff was introduced or the ­results of the anti-dumping investigation was announced. 

The demand for retrospective tariffs comes as Treasury Wine prepares to face its shareholders at its annual meeting on Thursday, when the issue of China will probably be discussed at length.

The growing trade fight around wine comes at a difficult time for the relationship between China and Australia. Chinese pressure on Australian exporters has included tariffs on barley, restrictions on meat exports and, more recently, holding up the shipment of Australian rock lobsters to China as well as Australian timber exports.

Now the Chinese government is aiming its trade guns at wine, with more than $1.2bn worth of Australian wine sold into China and Treasury Wine the biggest player in that market.

Treasury Wine said in a statement on Wednesday that the recent request for retrospective tariffs was associated with the ongoing anti-dumping investigation initiated by the Chinese Ministry of Commerce.

“It is not known whether [the ministry] will accept CADA’s request, whether tariffs will be determined to apply to the products as a result of the anti-dumping investigation or, if they do, whether they will be applied retrospectively,” it said.

Treasury Wine said if the Ministry of Commerce decided to accept CADA’s request, it would make a public announcement to that effect.

“Whilst engagement with customers is ongoing, Treasury Wine is not in a position to provide an assessment of the financial impact of this development in fiscal 2021,” it said.

The winemaker said it was also aware of recent media reports and speculation relating to a potential embargo on imports of Australian exports, including wine, into China. “Treasury Wine has not had any advice or notification from the Chinese authorities in relation to this and is not in a position to comment on those reports at this point in time,” it said.

Citi analyst Craig Woolford said he placed a 40 per cent probability of a 40 per cent duty on all wine, and a 40 per cent probability of 40 per cent duties only applying on bottles costing less than $10.

“Treasury Wines remains a high-risk investment proposition with the balance of risks skewed towards the upside in terms of tariff imposition in China,’’ he said.

Shares in Treasury Wine ended down 28c at $8.67. The company announced the tariff developments on the market close.