Dozens of small and midsize Korean flooring manufacturers were hit with 10 billion won (or US $7 million) in extra duties after the Korea Customs Service misidentified the species of imported Indonesian plywood and stripped the shipments of a 5 per cent FTA tariff, a court ruled last week.
The Seoul Administrative Court found that Customs had wrongly treated “Meranti Down Lebar (Shorea sp.)” as identical to “Shorea uliginosa Foxw.,” known as Meranti Bakau, which carries a 10 per cent general tariff, and ordered the agency to return the additional duties it had collected. The decision overturns a years‑long tax burden that, small business owners say, nearly strangled their cash flow.
Court filings and agency reports show the dispute was not a clerical slip but a contested scientific judgment. In 2018, Korea Customs visited Indonesia’s Forest Products Research and Development Center seeking clarity on local timber names and scientific identifications. Indonesian experts warned that local names cannot substitute for scientific analysis and recommended laboratory tests to determine the exact species. A July 2020 letter from the Indonesian Ministry of Environment and Forestry’s research arm stated that “wood cannot be compared by local names and that experts need to conduct wood analysis tests to clarify which wood species were exported to Korea.”
Despite that warning, a Korea Customs field report dated August 2018 asserted that “The scientific name of Meranti Down Lebar is Shorea uliginosa, and we confirmed it is the same species as the standard name Meranti Bakau.” Indonesia’s Ministry of Trade later replied in 2019 that “Meranti Down Lebar is not included among the 88 specified tropical timber species,” citing its Environment and Forestry decree as the authoritative classification.
Customs nonetheless issued notices demanding the 5 per cent shortfall on past imports, and the affected companies paid. One small business official said, “Because of a one-line official document from the Korea Customs Service, our company’s cash flow stopped.”
The firms filed administrative appeals and then sued. In May, the court concluded that Customs’ imposition of an adjustment tariff was unlawful and ordered refunds, but it declined to find criminal wrongdoing, saying there was “no grave and obvious defect that would constitute, for example, drafting a false report.”
“The Korea Customs Service pushed through taxation even though it knew the additional taxation was unjust,” Company A said. “It is an irresponsible attitude that suggests wrongly levied taxes can simply be returned and that’s the end of it.”
Customs defended its actions, saying, “There was no reason to draft a false report, and all taxation followed legitimate procedures under the law.” The ruling has nevertheless intensified calls for oversight from lawmakers and industry groups, with experts warning that the credibility of FTA origin determinations is at stake and that the agency “interpreted it arbitrarily and shifted the burden onto corporations.” They added, “Institutional improvements are urgently needed to prevent similar cases from recurring.”
Lawmakers and trade groups are urging a Board of Audit and Inspection probe or a National Assembly investigation to determine how a scientific dispute over timber species became a multimillion‑dollar tax claim on vulnerable businesses. For the flooring makers, the court’s order for refunds offers immediate relief but leaves a broader damage: a warning that errors in taxonomy can cascade into existential threats for small importers who rely on predictable treatment under trade agreements.
