China has hit Australian wine with tariffs that will double or triple its price, making the market “unviable” for exporters according to the trade minister, Simon Birmingham.
“This is a devastating blow to those businesses who trade with China in the wine industry,” Birmingham said. “It will render unviable for many businesses their wine trade with China. And clearly, we think it’s unjustified, and without evidence to back it up.”
The Chinese Ministry of Commerce said its investigation, first announced in late August, had determined Australian wine was being dumped in China, and this had caused “substantial damage” to the domestic industry.
China is Australia’s biggest wine export market, receiving about 37% of Australian wine exports, worth more than $800m.
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Shares in Treasury Wine Estates, which makes the luxury brand Penfolds Grange and a host of cheaper wines, tumbled by 11.25% on Friday morning before the company stopped trade in its shares at lunchtime.
Birmingham said it was “a very distressing time for many hundreds of Australian wine producers, who have built in good faith a sound market in China”.
“Australia defends to the hilt our winemakers, their integrity, and the commercial market-based proposition and environment in which they operate. The idea that Australia somehow subsidises our wine industry for it to be able to dump or sell its product below cost on international markets is a falsehood.”
The move follows tariffs on barley announced in May and a long-running standoff that has seen other commodities restricted or delayed at Chinese ports.
At least 60 ships laden with coal from Australian producers that have been waiting for a month or more to unload remain stuck off the coast of China, which has refused to let them come into port.
Two Australian bulk carriers which had been anchored off the coast since late June, were allowed to dock on Thursday, according to shipping analysis provided to Guardian Australia.
Birmingham said the cumulative impact of China’s moves against a number of Australian industries gave rise to “the perception these actions are being undertaken as a result or in response to some other factors”.
It was “completely incompatible” with China’s commitments under the China-Australia Free Trade Agreement and through the World Trade Organisation.
China’s actions did not just heighten the risk for Australian businesses, but created “a much riskier proposition for businesses and countries right around the world”, Birmingham said.
The agriculture minister, David Littleproud, said the Australian government would defend the wine industry against the “outrageous” tariffs.
“We’re trying to get an appreciation of the reasoning behind the determination in introducing these tariffs,” he said.
“That’s why we’re moving quickly to work with the industry and my officials and Dfat officials in Beijing to get an understanding so we can put our case around this decision imposed on the wine industry that we feel is quite outrageous, and to be honest, disproportionate to any reason that anyone has put to us subsequently.”
The “temporary” tariffs of between 107% and 212% take effect from Saturday, with no fixed end date, China’s ministry of commerce said.
“After filing the case, the Ministry of Commerce conducted an investigation in strict accordance with the relevant laws and regulations of China and the WTO rules, and made the above preliminary ruling,” the ministry said.
Littleproud said Australia had 10 days to appeal the decision and he would call a wine industry crisis meeting on Friday afternoon “ around the next steps they wish us to take on their behalf”.
A Chinese embassy official last week said Chinese ministers would not answer the phone to their Australian counterparts until Australia stopped treating China as a strategic threat. The Chinese government has also circulated a list of 14 grievances against Australia that includes rejecting Chinese investment on national security grounds and “incessant wanton interference” in China’s policy towards Hong Kong, Taiwan and its treatment of the Uighur people.
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Among Australian wine producers, Treasury is likely to be hardest hit by the tariffs.
About 40% of its earnings come from sales to Asia, which is dominated by the Chinese market, where its Penfolds Grange brand is highly sought after.
But the company has also in the past been dogged by allegations that it has forced its cheaper wines on to Chinese wholesalers by insisting they purchase them in order to get their Grange allotment. Treasury has consistently denied any wrongdoing.
On Friday, the company said it was “reviewing the details of the provisional measures as a matter of urgency in order to update the market”.
Meanwhile, the ships carrying millions of tons of Australian coal remain stuck off the Chinese coast, running up tens of thousands of dollars of costs every day as they wait for approval to unload their cargo.
Market sources say the coal includes cargos from big Australian miners BHP, Glencore and Anglo-American.
In August, the mining news service Argus estimated the cost of demurrage – keeping the ships idle – at between US$17,000 and US$22,000 a day, depending on the size of the vessel.
Under the standard shipping contracts used by the industry, this cost is borne by the customer.
Additional reporting by Lillian Yang