Voluntary Report - public distribution

**Date:** 6/1/2006

**GAIN Report Number:** CH6809

CH6809

**China, Peoples Republic of**

**Wine**

**Shanghai Wine Brief**

**2006**

**Approved by:**

![](media/image1.wmf)Ross Kreamer

U.S. Consulate

**Prepared by:**

Shanna Gratton/Justin Hagel

**Report Highlights:**

Shanghai is the largest market in China for imported U.S. wines. In
2005, the U.S. was the third largest exporter (by value) of wines, after
France and Australia (WTA). As the up-and-coming financial center for
Asia, Shanghai is now home to a clutch of exclusive 5-star restaurants,
wine bars, boutiques and supermarkets that sell imported wine to an
increasing number of wine savvy locals. A large potential market for
wine exists considering the low level of current per capita consumption
of domestic wines (and even lower for imported). China's rapid economic
growth has lead to the emergence of a middle class with global consumer
tastes. ATO Shanghai and the other ATOs in China are here to help with
in-market advice to winemakers and exporters interested in the China
market.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Shanghai \[CH2\]

\[CH\]

Table of Contents

[Executive Summary 3](#executive-summary)

[The China Wine Market 3](#the-china-wine-market)

[General 3](#general)

[The Region 4](#the-region)

[Imported Wines: High Hopes for the High-end Market
4](#imported-wines-high-hopes-for-the-high-end-market)

[Bulk Imports 5](#bulk-imports)

[Bottled Imports 5](#bottled-imports)

[Marketing in a New Culture 6](#marketing-in-a-new-culture)

[Marketing Assistance 7](#marketing-assistance)

[Distributors, Import Laws and Regulations
8](#distributors-import-laws-and-regulations)

[SWOT Analysis 9](#swot-analysis)

[Useful Contact Information 10](#useful-contact-information)

[Agricultural Trade Office 10](#agricultural-trade-office)

[Appendix A: Discrepancies Between U.S. and China Data
10](#appendix-a-discrepancies-between-u.s.-and-china-data)

[Appendix B: List of Required Product Information on Chinese Labels
11](#appendix-b-list-of-required-product-information-on-chinese-labels)

[Appendix C: Formula to Determine Import Tax on U.S. Wine
11](#appendix-c-formula-to-determine-import-tax-on-u.s.-wine)

[Appendix D: U.S. Wine Exports to China, 2000-2005
11](#appendix-d-u.s.-wine-exports-to-china-2000-2005)

# Executive Summary

**"In Vino Veritas!"**

Shanghai is the largest market in China for imported wines. In 2005,
global winemakers shipped \$75 million worth of wine to Shanghai
(Shanghai Customs).[^1] As the up-and-coming financial center of Asia
and the keystone to massive foreign investment in the Yangtze River
delta, Shanghai is now home to a clutch of exclusive 5-star restaurants,
wine bars, boutiques and supermarkets that sell imported wine to
foreigners and increasingly to locals as they become more educated about
wine. French and Italian wines have been in the market for years and
enjoy high brand recognition amongst Shanghainese, but in blind taste
tests consumers prefer U.S. wines' fruitier, fuller flavor. The large
potential market for wine in China remains untapped. The current low
level of per capita consumption of domestic wines (and even lower for
imported), in combination with the country's rapid economic growth and
emergence of a middle class with global consumer tastes, means that the
market is set to grow. Some estimate that the average Chinese person
consumes only 0.3 liters, or just two glasses of wine, per year.
However, the average is slightly higher for urban residents at about one
bottle per person. Compared to countries like the USA (12 liters), Japan
(3 liters) and France (59 liters), China has a huge potential for
growth. For winemakers and wine exporters, the key to success in this
market is perseverance in marketing their wines over the long-term.

# 

# The China Wine Market

## General 

The total value of retail wine sales in China is disputed. Estimates
range from \$1.25 billion to over \$7 billion in 2005 (China Wine &
Liquor Expo, Euromonitor). However, the overall trend in the market is
one of growth with indications of increased consumption of wine over the
past few years. Most of this comes from domestically produced and
blended wine. Anecdotal evidence suggests that 70 percent of wine sales
in China occur in restaurants and bars; however, no official figures are
available on HRI sales. Total China imports of wine (sparkling, white
and red) for 2005 were valued at \$75.1 million, up 42 percent from
2004. From 2004 to 2005, U.S. imports increased 8 percent in value to
almost \$6 million, and 4 percent in volume, to reach over 2,400 KL.
(FAS trade data, World Trade Atlas)

China is a wine-producing country with over 500 wineries in operation,
10 or so of which are major producers. Major vineyards are located in
China's northeast (Hebei and Shandong provinces) and in its far-flung
western province of Xinjiang, which are all about the same latitude as
the south of France. With the opening of China's economy, Modern
commercial viticulture has developed over the past 30 years. Four
state-owned companies (Dynasty, Changyu, Great Wall and Tonghua) control
about two-thirds of the market. Joint ventures with foreign wine
companies, notably with Illva Saronno SpA and Remy Cointreau, have
helped China's wineries procure vines, improve production technology,
and use foreign expertise. In the past year, there has been interest
from U.S. wineries in forming joint ventures in China. Domestic
producers are investing heavily in marketing and brand building, pushing
imported wines up the value pyramid.

Domestic brands dominate the mass market in Shanghai. Domestic wines
retail at \$4 a bottle on average, and as low as \$1.50, making them
attractive choices for consumers that cannot afford imported wines.
Although imported wines are interested in trying to enter the market,
they cannot compete on price alone. For example, a bottle of Carlo Rossi
currently sells for around \$7.50 retail. Similarly in restaurants, the
least expensive bottle of domestic wine will be priced \$5 to \$10 lower
than the least expensive import.

##### 

## The Region

China's Yangtze River Delta, which includes Shanghai and its prosperous
satellite cities in Jiangsu Province to the north and Zhejiang Province
to the south, is a key consumer market. Shanghai's 20 million residents
have the highest per capita disposable income in China. The U.S.
Consulate estimates per capita income at \$6,500. Urban residents in
nearby provinces are not far behind; per capita disposable income for
the entire province averaging \$1,300 in Jiangsu Province and \$1,800 in
Zhejiang Province (China Statistical Yearbook 2005). Shanghainese are
more inclined to try new foods and flavors than other parts of China and
lead the nation in food and restaurant trends.

## Imported Wines: High Hopes for the High-end Market

The present popularity of U.S. wines in other booming East Asian markets
bodes well for the opportunities presented in the China market as its
economy continues to expand. In addition to good prospects for U.S. wine
in general, there is great potential in the high-end luxury goods
market.

![](media/image2.wmf){width="3.6090551181102364in"
height="2.3881889763779527in"}

The value of U.S. wine exports to China increased three-fold from \$1.5
million in 1999 to almost \$6 million in 2005. Exports have shifted in
favor of bottled over bulk, with bottled imports up from 690 KL in 1999
to 2,024 KL in 2005, while bulk shipments have actually declined. Due to
their late entry, U.S. winemakers have yet to gain a significant market
share relative to their French and Italian counterparts, or relative to
other latecomers such as Australia and Chile. French wine imports had
the highest value of all countries in 2005 at \$21.5 million (\$3.35/per
liter), followed by Spain at \$13.3 million (\$0.58/per liter), and
Chile at \$12.5 million (\$1.07/per liter). The evidence points toward
Chilean and Spanish wine being mixed with domestic wine before retail
sales.

## Bulk Imports

![](media/image3.wmf){width="4.583464566929134in"
height="2.617322834645669in"}China imported 42,800 KL of bulk wine in
2005 (WTA). Chile surpassed Spain as the dominant bulk exporter in 2001,
but in 2005, Chilean exports have declined slightly. Blending domestic
wine with imported bulk wine and labeling it as "domestic" is standard
practice. Despite more than 160,000 acres of vineyards in China and a
growth rate in production around 10 percent per year, demand outstrips
supply. By some estimates, wines labeled as domestic often contain 30
percent to 40 percent imported product. Labeling such product domestic
is legal under Chinese law. Some U.S. wineries may find joint ventures
with Chinese companies useful as a means of finding markets for surplus
bulk wine. Blending helps improve the quality of the local product.

Shipping in bulk and bottling in China can also simply be a cheaper
alternative to shipping bottled, and wines can keep their foreign brand
name and market image. Additionally, it opens up the ability for
restaurants and other venues to privately label quality wine at a lower
price.

## Bottled Imports

China imported over 10,800 KL of bottled sparkling and still wine in
2005 (WTA). Imported bottled wines comprise less than 1% of the total
retail market on a volume basis, due in part to the enormous volume
supply of domestic wine available (Euromonitor).[^2] Imported bottled
wines set the standard for the high-end market, competing not only with
expensive domestic wines, but also with equally pricey imported spirits
such as VSOP and Hennessy. Competition among exporting countries for the
limited high-end niche is fierce, with France and Australia in the lead.
The largest market in Shanghai for imported bottled wine is the hotel
and restaurant industry, including nightclubs. Shanghai's 4- and 5-star
hotels, western restaurants (from 2-star to world-class) and up-scale
local chain restaurants targeting Shanghai's middle and upper classes
all carry imported wines. Some local chain restaurants also feature
private label imported wines.

These venues' growing popularity presents an increasing opportunity to
showcase high quality product in an appropriate environment. The
greatest potential consumer group is young-to-middle-age Chinese with
higher incomes who drink wine in high-end hotels, restaurants, clubs and
bars. Shanghai's Xintiandi (pronounced "shin tyen DEE"), a complex of
carefully assembled up-market bars and restaurants frequented by
white-collar locals and foreigners, is one such venue. Establishments in
Xintiandi, and similar up-scale locations, are carrying increasingly
diverse selections (in terms of origin, type and price) of wines. Even
after the businesses add their own margins, typically doubling the
beginning wholesale price, the wines sell quite well. U.S. wines can be
readily found at most price-points, alongside the \$12 wines from Chile
and Argentina as well as the \$1,000+/per bottle French wine.

Retailers have a growing interest in imported wines and in the past
couple of years a new market has opened in Shanghai for specialty wine
stores. Xintiandi and other upscale retail shopping areas throughout
Shanghai now feature such stores. Right now they cater mostly to
expatriates, but have seen an increase in Chinese customer traffic.
Stores such as Cheese and Fizz feature wines from Napa Valley that have
proven to be among their top selling wines. The focus on the high-end
market is not limited to specialty shops but also includes online
retailers. These e-retailers are seeing a trend towards online shopping
and home delivery. In some cases, the selection offered on-line may be
larger than what is available in a store. New offerings like
Winespring.com are looking to establish a high-end, online showcase for
U.S. wines.

![](media/image4.jpeg){width="1.955511811023622in"
height="2.505511811023622in"}

# Marketing in a New Culture

One would be hard-pressed to find a commodity with a more positive image
in China than wine, which is associated with sophisticated western
culture, the social elite and good health. While this positive image of
wine has been popularized, however, wine education---how to appreciate
fine wine---has not matched this trend. A factor making wine education
more difficult is the government's very loose regulation on appellation
and grape varieties, which results in Chinese wine labels being less
meaningful to consumers. Although the wine industry has debated using
the French or German system of classification, no decision has been made
(China Wine Online).

Despite a history of winemaking that extends back to at least 212 B.C.,
and commercial wineries operating since the end of the 19^th^ century,
winemaking has been limited in scope and developed along a different
trajectory than the European wine tradition. It is only since China's
opening in the 1980's that modern wine drinking has caught on in local
drinking culture. It has been quickly embraced as a healthy, new,
lower-cost alternative to other high-end drinks such as imported brandy
and Scotch or Chinese spirits.

At present, wine purchases by local Chinese fall largely into two
categories: banquet dinner purchases and retail gifts. Banquet
consumption generally involves competitive drinking among men (and
occasionally women) in formal settings in which the ordering of
expensive dishes and drinks demonstrates respect for guests or
colleagues. Red grape wine frequently substitutes for higher-octane
clear spirits (*baijiu*) at official banquets in Shanghai, especially
for toasts. This practice has been encouraged by the Chinese government
in attempts to improve health and reduce levels of drunkenness.

Chinese wine drinking habits have been known to differ from those in the
West. Some of these habits have disturbed Western wine aficionados. Wine
is used for toasting several times in the course of a meal, or mixed
with lemon, ice or Sprite. The long-time foreign presence in Shanghai
has resulted in a familiarity with western wine drinking practices, and
local wine lovers are adopting them. For the most part, however,
ordinary Shanghainese and their compatriots in nearby cities continue to
mix or dilute wine to achieve a sweeter taste. As one distributor
commented, "No one likes the taste of wine the first time."

Wine is typically purchased as an elegant and tasteful gift to share or
for others to enjoy. Wine conveys the same affection and respect as a
gift item as it does at a banquet, to be given on special occasions such
as Chinese New Year or a housewarming party. Gift packaging in the form
of a sturdy, highly decorated cardboard display box is standard. Larger
gift boxes may include 2 bottles of wine and a corkscrew or wineglass,
all resting on a "satiny pillow" (a plastic mold covered with attractive
fabric).

**\
**Even as Chinese consumers gradually assume western wine consumption
habits, there are some differences in the Shanghai market that will
remain for the foreseeable future:

-   ![](media/image5.jpeg){width="3.394488188976378in"
    height="2.5401574803149605in"}About 80 percent of the wine consumed
    in Shanghai and across China is red wine. This is partly due to
    positive media on red wine's health benefits and the growing market
    for eating out. Interestingly, in blind taste tests, Chinese prefer
    white; however, because of wine's function as a symbolic gift and
    not for personal consumption, red wine sales continue to be strong.
    Wine pairing with food is as yet uncommon. Most Chinese prefer the
    appearance of red wines to white (red is also the color of good
    luck), so they tend to choose reds for all dishes. White wine sales
    tend to be to foreigners who are attuned to food pairing and to
    local women, who prefer white wine to beer. Women often drink it
    straight or mix it with soda, making a type of spritzer. White wine
    sales increase significantly during the summer because it can be
    enjoyed chilled.

-   Shanghainese prefer the fruitier, fuller tastes of U.S. wine. 65
    percent preferred the taste of California wine in a blind taste test
    against French, Chinese, and Australian wine. However, the
    participants associated this taste with French wine, indicating a
    lack of awareness for U.S. wines. Because purchase behavior is so
    strongly linked with wine's image, to succeed in the local market
    U.S. exporters need to promote their product image as quality,
    prestigious wine.

-   Lastly, access to mainstream, middle-class Shanghainese is a
    long-term goal. At present, only a few imported wines are able to
    get product in to market at a low enough price level so as to
    compete with domestic wines, meaning the majority of imported wine
    is limited largely to foreigners and upper-income urban Chinese.
    Distributors in Shanghai cite strongest sales in up-scale and/or
    western bars and restaurants, supermarkets frequented by
    expatriates, home delivery to foreigners, and corporate or free-flow
    events. Online sales are also on the rise. As incomes rise and more
    Shanghainese become familiar with imported wine and learn to enjoy
    the taste, imported wine consumption will continue to increase in
    bars and restaurants (western and Chinese) as well as in retail.

# Marketing Assistance

## 

Introducing a foreign wine and creating a brand that suits Chinese
consumers takes commitment and a targeted marketing strategy. The
Agricultural Trade Office/Shanghai, one of four FAS offices located in
China, provides country market information, market development support
and a wide variety of activities designed to strengthen distribution
channels for U.S. agricultural products. ATOs are a good place for a
winemaker or exporter who is interested in the China market to seek
in-market advice.

![](media/image6.png){width="3.95in" height="2.147244094488189in"}

ATO works with cooperators, including the California Wine Institute
(CWI), the Napa Valley Vintners Association, and the Oregon Wine Board
to promote U.S. wine in the Shanghai area. Events such as wine tastings
for trade professionals, wine dinners, and trade shows are typical ways
to introduce wines to hotel and restaurant buyers and distributors.
France and Australia, for example, have consistently installed large
pavilions at trade shows dedicated to their wines. Today they have the
highest market shares for bottled wine. Consumer wine tastings have
become prevalent. However, unless the product is very unique or a famous
brand, interest is minimal. Establishing a brand is a long-term process
and must be properly focused for meaningful results. ATO is happy to
work with wineries and exporters new to the market that wish to have
custom programs to test market their wines with distributors.

ATO's large umbrella events for U.S. products, such as restaurant and
retail store activities and the multi-product Chinese New Year promotion
in mid-winter, are good places to begin to increase market awareness
directly among end users. To get more bang for their buck, wineries from
a particular regional appellation are encouraged to work together to
establish a market image for that region. Those who would like
first-hand experience with the China market are encouraged to visit or
join a trade mission.

## 

# Distributors, Import Laws and Regulations

The first step in exporting bottled or bulk wines to Shanghai is to find
a good distributor. Although the major wine distributors/importers offer
impressive lists of imported labels, most currently do not proactively
market new wines. That said, an interested importer/distributor can be
useful by: explaining tariffs and labeling requirements, helping a
seller quickly register wine so it can be imported, and helping import
small quantities hassle-free for trade shows and tastings. With the help
of your distributor, arranging annual visits to current and potential
buyers in China is a very effective way of staying visible in the market
and building relationships, an essential element for success in China. A
detailed list of wine importers and distributors in the area can be
provided by the ATO upon request.

Imported wine is subject to a total import tax of 48.2 percent for
sparkling and still wines in containers less than 2 liters (bottled
table wines), and 56 percent for wine in containers over 2 liters (bulk
wine)[^3]. This consists of three separate taxes: the import tax rate,
consumption tax rate, and VAT rate. The current tax levels are expected
to remain constant for the near future, although if imported wine begins
to overpower the domestic wine market, the government may consider
raising the consumption tax to level the playing field. Imported U.S.
wines are retailing on average at 130-300 RMB (\$15.50-\$36) a bottle.
Despite the tax disadvantage, China's ability to offer quality
facilities at lower costs means shipping bulk and bottling in China can
significantly lower retail prices to 38-70 RMB (\$4.85-8.50) per 750 ml
bottle. A number of U.S. companies have recently increased bulk
shipments to China.

China's labeling requirements for imported wine require that certain
product information on the bottles be in Chinese (see Appendix B, List
of Required Product Information on Chinese Labels). Regulation GB
7718-2004 provides the Chinese requirements for labeling. (An unofficial
translation is available in the FAS GAIN Report CH4026.) Enforcement is
constantly being updated, so before shipping it is helpful to study the
regulation carefully and thoroughly.

Previously, distributors for many foreign wineries placed small,
adhesive labels over their back labels, leaving the more artistic front
labels untouched. These stickers are no longer acceptable, although
regional CIQ offices appear to exercise some flexibility in enforcement.
Their discretion will reportedly grind to a halt on Oct. 1^st^, 2006.
China's labeling regulations are quite strict about appellation claims. 
The importer must provide production and sales licenses from the wine
maker to prove appellation claims made on the label.  It is still a
lengthy process to get a label approved and it is beneficial to
thoroughly review the regulations.

# 

# SWOT Analysis

+-----------------+-----------------+-----------------+-----------------+
| **[Strengths    | Imported wine   | Import          | **[Weaknesses   |
| ]{.underline}** | has a positive  | procedures for  | ]{.underline}** |
|                 | image as a      | new brands and  |                 |
| Shanghai's per  | high-quality,   | vintages are    | Long-term       |
| capita GDP and  | healthy and     | often lengthy   | commitment and  |
| population      | excellent gift. | and arbitrary.  | personal        |
| continue to     |                 | New items need  | contact is      |
| grow and        | Distrib         | up to 4 months  | necessary. To   |
| residents are   | utors/importers | to clear, so    | achieve its     |
| developing a    | in Shanghai     | advance         | current high    |
| more            | have much       | planning is     | recognition,    |
| sophisticated   | experience and  | crucial for     | France has      |
| taste for wine. | can             | trade shows and | marketed it     |
|                 |                 | wine tastings.  | wines heavily   |
| Shanghainese    | cover all       |                 | for over 10     |
| have a taste    | details of      | Wine education  | years.          |
| preference for  |                 |                 |                 |
| U.S. wines.     | wine sale and   | is still in its | Wine tastings   |
|                 |                 |                 | are so common   |
| The Chinese     | distribution.   | infancy. Few    | that it is      |
| government has  |                 |                 | increasingly    |
| promoted wine   |                 | consumers know  | difficult to    |
| over other      |                 |                 | attract top     |
| stronger        |                 | the advantages  | buyers.         |
| alcohols for    |                 |                 |                 |
| official        |                 | of U.S. wines.  | Importers face  |
| functions.      |                 |                 | a high import   |
|                 |                 |                 | tax, making     |
|                 |                 |                 | them less       |
|                 |                 |                 | competitive     |
|                 |                 |                 | with domestic   |
|                 |                 |                 | wines.          |
+-----------------+-----------------+-----------------+-----------------+
| *               | Bottling in     | Many            | **[Threats      |
| *[Opportunities | China           | established     | ]{.underline}** |
| ]{.underline}** |                 |                 |                 |
|                 | is a cheaper\   | And newly       | Counterfeiting  |
| HRC sales are a | alternative to  |                 | and IPR         |
| large and still | shipping in     | established     | violations in   |
| largely         | bottles, and    |                 | China continue  |
| untapped        | wineries can    | competitors     | to be a problem |
| market.         | still keep      | (France,        | in all          |
|                 | their foreign   | Australia,      | industries.     |
| Listing in      | brand name and  | Chile, Spain)   | Counterfeit     |
| Shanghai's mid- | market image.   | could threaten  | U.S. wines      |
| to high-end     |                 | US              | could lower     |
| chain           | As wine         |                 | sales and       |
| restaurants is  | knowledge       | potential       | damage          |
| a good way to   | improves, more  | market share.   | reputations.    |
| develop brand   | specialty       |                 |                 |
| awareness and   | stores are      | The Chinese     | Improving       |
| mass-market     | opening that    | government will | quality of      |
| sales.          | offer many      | enforce its     | domestic wines  |
|                 | high-end wines. | labeling        | make them more  |
| Distributors    |                 |                 | internationally |
| and retailers   |                 | requirements    | competitive.    |
| are developing  |                 | more strictly.  |                 |
| an online       |                 |                 |                 |
| presence and    |                 |                 |                 |
| increasingly    |                 |                 |                 |
| offering online |                 |                 |                 |
| sales.          |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+

#   {#section-5 .unnumbered}

# Useful Contact Information

#  Agricultural Trade Office

Suite 331, Shanghai Center

1376 Nanjing West Road

Shanghai CHINA 200040

Tel: +86 (21) 6279-8622

Fax: +86 (21) 6279-8336

<atoshanghai@usda.gov>

**Emerge Logistics**

Jeff Bernstein

1576 Nanjing Road West, Suite 510

Shanghai, China 200040

Tel: +86 21 5213 8833

Fax: +86 21 5213 1899

<jbernstein@online.sh.cn>

**Wine Institute**

Barbara Lee

Room 3A, 3^rd^ Floor

886 Tianbao Road

Shanghai, CHINA 200086

Tel: +86 (21) 5557-0142

Fax: +86 (21) 6515-6498

<leesmarket@sh163.net>

**Washington State Dept. of Agriculture**

Li Haidong

15F Aile Building, No. 631 Lingling Road

Shanghai, CHINA 200030

Tel: +86 (21) 5424-4336

Fax: +86 (21) 6489-9665

<lhaidong@163.net>

**Agricultural Development and**

**Marketing Division**

Oregon Dept. of Agriculture

1207 NW Naito Parkway, Suite 104

Portland, OR 97209-2832

Tel: (503) 872-6600

Fax: (503) 872-6601

<agmarket@oda.state.or.us>

# Appendix A: Discrepancies Between U.S. and China Data 

![](media/image8.wmf){width="3.0631944444444446in"
height="2.2805555555555554in"}

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## ![](media/image10.wmf){width="2.702777777777778in" height="2.140277777777778in"}

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##  

# Appendix B: List of Required Product Information on Chinese Labels

A.  Name/Brand

B.  Ingredients

C.  Net volume (ml)

D.  Alcohol content (%)

E.  Production place

F.  Production date (yy/mm/dd)

G.  Packer/distributor/importer (Name and address)

H.  Must content (%)

I.  Country of origin

J.  Quality guarantee or storage period (yy/mm/dd)

K.  Sugar content (g/L)

# Appendix C: Formula to Determine Import Tax on U.S. Wine

Total import taxes for bulk and bottled wine factor in an import tax,
consumption tax, and VAT:

Import tax rate (ITR)

Bulk wine 20%

Bottled wine 14%

Consumption tax rate (CTR) 10%

VAT rate 17%

Rather than being the simple sum of these percentages, however, the
total import tax is calculated using a compound formula. Using bottled
wine for an example, the compound rate is calculated as follows:

  -------- --- -------- -------- ---- ----- -------- ---- ------- -------- ---- ------ -------- --- ------ ---------
  Total    =   ITR      (0.14)   \+   CTR   (0.10)   \+   VAT     (0.17)   \+   (ITR   (0.14)   X   VAT    (0.17))
  import                                                  rate                                      rate   
  tax                                                                                                      

               1 -- CTR                                                                                    
               (0.10)                                                                                      
  -------- --- -------- -------- ---- ----- -------- ---- ------- -------- ---- ------ -------- --- ------ ---------

Simplifying,

  ----------- --- ------ ---- --------- --- --------- --- -------- --- ------------
  Total       =   0.41   +    0.0238    =   0.4338    =   0.482    =   **48.20%**
  import tax                                                           

                  0.9                       0.9                        
  ----------- --- ------ ---- --------- --- --------- --- -------- --- ------------

Source: 2005 Customs Import and Export Tariff of the People's Republic
of China

We can calculate that the total import tax on bottled wine is 48.2
percent and on bulk wine is 56 percent.

## 

# Appendix D: U.S. Wine Exports to China, 2000-2005

+-------------------+---------+----+----+----+----+----+----+------+
| COMMODITY         | HS      | V  |    |    |    |    |    | \%   |
|                   | TARIFF  | al |    |    |    |    |    |      |
|                   | CODE    | ue |    |    |    |    |    | CH   |
|                   |         | (1 |    |    |    |    |    | ANGE |
|                   |         | ,0 |    |    |    |    |    | '04  |
|                   |         | 00 |    |    |    |    |    | -'05 |
|                   |         | U. |    |    |    |    |    |      |
|                   |         | S. |    |    |    |    |    |      |
|                   |         | d  |    |    |    |    |    |      |
|                   |         | ol |    |    |    |    |    |      |
|                   |         | la |    |    |    |    |    |      |
|                   |         | rs |    |    |    |    |    |      |
|                   |         | )/ |    |    |    |    |    |      |
|                   |         | Ye |    |    |    |    |    |      |
|                   |         | ar |    |    |    |    |    |      |
+-------------------+---------+----+----+----+----+----+----+------+
|                   |         | 20 | 20 | 20 | 20 | 20 | 20 |      |
|                   |         | 00 | 01 | 02 | 03 | 04 | 05 |      |
+-------------------+---------+----+----+----+----+----+----+------+
| SPARKLING WINE    | 220     | 13 | 3  | 18 | 11 | 53 | 22 | -5   |
|                   | 4100000 |    | 13 |    |    |    |    | 8.49 |
+-------------------+---------+----+----+----+----+----+----+------+
| EFFERVESCENT WINE | 220     | 42 | 23 | 0  | 0  | 1  | 7  | -9   |
|                   | 4212000 |    |    |    |    | 94 |    | 6.39 |
+-------------------+---------+----+----+----+----+----+----+------+
| WINE, \<2L, \<14% | 220     | 5  | 1  | 2  | 2  | 4  | 5  | 5.45 |
| alcohol           | 4214000 | 41 | ,1 | ,6 | ,3 | ,9 | ,2 |      |
|                   |         |    | 50 | 72 | 54 | 57 | 27 |      |
+-------------------+---------+----+----+----+----+----+----+------+
| WINE, \<2L, \>14% | 220     | 0  | 0  | 8  | 17 | 83 | 2  | 1    |
| alcohol           | 4217000 |    |    |    |    |    | 28 | 74.7 |
+-------------------+---------+----+----+----+----+----+----+------+
| WINE, \>2L, \<14% | 220     | 3  | 0  | 1  | 60 | 86 | 3  | 27   |
| alcohol           | 4290020 | 18 |    | 30 |    |    | 22 | 4.42 |
+-------------------+---------+----+----+----+----+----+----+------+
| WINE, \>2L, \>14% | 220     | 8  | 25 | 0  | 22 | 0  | 98 | \--  |
| alcohol           | 4290040 |    |    |    |    |    |    |      |
+-------------------+---------+----+----+----+----+----+----+------+
|                   | **      | *  | *  | *  | *  | *  | *  | **9. |
|                   | TOTAL** | *9 | *1 | *2 | *2 | *5 | *5 | 90** |
|                   |         | 22 | ,5 | ,8 | ,4 | ,3 | ,9 |      |
|                   |         | ** | 11 | 28 | 64 | 73 | 04 |      |
|                   |         |    | ** | ** | ** | ** | ** |      |
+-------------------+---------+----+----+----+----+----+----+------+

Source: U.S. Customs

[^1]: This report primarily uses data from the USDA's Foreign
    Agricultural Service (FAS) and China Customs as reported in the
    World Trade Atlas (WTA). FAS and China Customs records vary widely
    on U.S. export data for China. In this report, FAS data is used for
    U.S. statistics, and China Customs data is used for information on
    all other exporting countries. For more details on the differences
    in reporting, please see Appendix A.

[^2]: Does not factor in the amount of imported bulk wine that is mixed
    with Chinese wine and labeled as "domestic", even if the domestic
    wine is actually 30-40 percent from foreign grapes.

[^3]: Producers of bulk wine may deduct consumption tax import costs
    from their general costs. The formula for the import tax, including
    tariffs, VAT, and consumption tax, is provided in Appendix C.