China and Australia are locked in trade rows (pic: stock image)

China and Australia are locked in trade rows (pic: istock image)

In this explainer, we break down in detail how the new tariff on Australian wines is going to be calculated and how long it's going to last.

Last Friday, China’s Ministry of Commerce announced that it will impose up to 212.1% provisional tariffs on Australian wines starting from November 28. In this explainer, we break down in details how the new tariffs are going to be calculated and how long it’s going to last.

Australian wines in China

What does it mean?

The devastating measure means that from November 28, nearly all Australian wines below 2 liters will have to pay 212.1% punitive tariffs.

There are some 30 companies that “voluntarily” participated in Chinese government’s twin investigations including all the Australian top wine companies such as Treasury Wine Estates, maker of Penfolds and Wolf Blass, Casella, owner of Yellow Tail, Pernod Ricard, maker of Jacob’s Creek, Accolade Wines, parent company of Hardys, as well as Chinese-owned Australian Swan Vintage and Changyu’s Kilikanoon winery.

These companies received “lesser” punishment but among them TWE, the biggest Australian wine exporter to China, was hit the hardest with 169.3% tariff and Chinese-owned Australian Swan Vintage the least with 107.1%.

Australian Swan Vintage, the third largest Australian wine exporter to China, is owned by Chinese Australian Li Wei, and has a red wine dedicated for former Australian ambassador to China, Geoff Raby, who is also a fierce critic of Morrison government’s current China policy.

What about bulk?

Bulk wine at this stage is excluded. Both the twin investigations and the latest anti-dumping measures did not target wines in containers holding 2 liters or above. This might be due to the fact that some Chinese wineries would still need to import bulk either for cheap commercial bottlings or mix with their own wine for domestic market.

Here’s also a detailed list of how much tariff each company is subject to.

How it’s calculated?

This is the formula for each wine company to figure out how much to pay: duty-paid price × tariff rate) × (1+13%). It’s worthy to note that the anti-dumping tariff announced last week is on top of the import tariff, VAT and excise tax, but thanks to the two country’s Free Trade Agreement that reduced import tariff to zero, companies will still be looking at VAT and excise tax after the new anti-dumping tariff.

How long will it be in place?

According to China’s anti-dumping law, provisional tariffs on Australian wines is effective for four months, meaning from November 28 till end of March 2021. It could be extended for another five months till August depending on investigation. The time window is interesting cause it covers the biggest wine sales season in China, which is the Chinese Spring Festival.

However, with the massive rush to stockpile Australian wines before the imminent tariff hike might give merchants enough wines to cover the four-month period.

What happens after the four-month period is anyone’s guess.

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