Sources in the Australian Financial Review say China has urged Australia's major wine producers to respond to preliminary questions about the anti-dumping investigation by this Friday. This has some Australian investors worried that the move will allow China to impose tariffs on Australia's $1.2 billion wine export industry within a few months.
Image from: Newsflash.com Australia
The Chinese Ministry of Commerce reportedly sent a letter on September 15 to a provisional sample of 31 Australian wine producers, including Treasury Wine Estates and Accolade Wines, sending them a questionnaire about their business. These producers were given 10 days to respond.
While some investors are concerned that the move could signal that China wants to end the investigation quickly, the Australian federal government and wine industry see it as a procedural move and that the Chinese government is following due process.
But fears that China could impose tariffs on Australian wine as early as next month have deepened in light of chilly relations between Australia and China. Sources in Australia said the industry"s unease over the possibility of tentative tariffs (imposed by the Chinese side first) has increased.
Since China announced the launch of anti-dumping investigations against 10 Australian wine producers last month, Penfolds producer Fognac Wine Group, Casella Wines, which produces Yellow Tail, as well as Meyers, Australian Vintage, Yalumba, South Australian Wine Group, The Wine Company, Truffle Wine, Truffle Wine, Wingara Wine Group, Truffle and Wine. (Yalumba), South Australian Wine Group, The Wine Company, Truffle Wine, Wingara Wine Group and Stoney Rise) were all included in the investigation. Since then, Fognac's share price has also fallen by 30%.
Australian wine producers and their lawyers were filling out Chinese questionnaires over the weekend, with the Chinese Ministry of Commerce requiring them to answer in simplified Chinese characters.
The 31 Australian companies surveyed, which account for 90 percent of the market, were required to describe their company structure, products, market channels, and price comparisons with Chinese producers, but there were no questions about subsidies.
Tony Battaglene, president of Australian Grape Wine, said the interim sample survey meant that the Chinese side would have a better understanding of the Australian wine industry when they returned the full questionnaire (answers) in October.
Image from: Newsflash.com Australia
The article in the Australian Financial Review claims that the Chinese side should use the information to better understand the industry before issuing the final questionnaire, as required. Australian exporters will have 37 days to answer questions.
That"s great news, as I see it, because it shows they're going to do a sample and want to base it on what's reasonable," Battaglen said. It gives us an opportunity to show what the sample should look like.
But sources in the Australian wine industry confessed that there are concerns that China may use this procedure to justify an early tariff increase.
Australian barley exporters, who are also being investigated by the Chinese side, did not receive a sample questionnaire. But experts say this is because the wine industry is more complex, with one exporter able to sell hundreds of products at different prices.
According to the World Trade Organisation (WTO) rules in anti-dumping cases, China is not obliged to calculate dumping margins for individual producers if they can show that the investigation could not be completed within the specified period because of the number of companies involved. If so, the Chinese side may calculate the dumping margin based on information provided by its sample of producers.
For Australian wine producers not selected or not listed, the Chinese side can determine the dumping margin of the former based on the weighted average of the dumping margins of the compulsory investigation enterprises, which is the all others rate.
An Australian legal source claims that the Australian wine producers under investigation were asked to list their Chinese counterparts. This is surprising and should not have been relevant to the information they provided.
The investigation was launched by the Chinese Ministry of Commerce on August 17 at the request of the China Alcoholic Drinks Association (CADA). The China Alcoholic Drinks Association believes that Australian wines are being dumped at a rate of 202.7%.
Shane Oliver, chief economist at AMP Capital, predicts that if tariffs are imposed on Australian wine, prices in China are bound to rise sharply as a result.