There are signs that the conflict between the flooring industry and the tax authorities, which has been going on for three years over the country of origin standards for plywood for flooring manufacturing, will become prolonged. In the flooring industry, it is argued that “if they have to bear additional costs of tens of billions of won due to unfair tariff collection, it is inevitable that small businesses will go bankrupt.”
According to the flooring industry on the 27th, since the 2016 Korea-ASEAN Free Trade Agreement (FTA) agreement tariff was applied to plywood for flooring manufacturing, general tariffs (8-10%) for ’88 tropical timbers’ specified in the tariff rate table, and ‘other tropical timbers’ have been imposed. ‘Cooperative tariff (5%) is applied. After the ASEAN-Korea FTA took effect, the flooring industry imported plywood from Indonesia called ‘Meranti Down Lebar’, which is not on the list of 88 tropical timber products, to be subject to the customs duty.
At the end of 2019, the flooring industry heard news like a thunderbolt. This is because the Incheon Customs notified that the Meranti down Levar species imported and used by the flooring industry are subject to general tariffs. Incheon Customs determined that this tree species was identical to the tree species ‘Meranti Bakau’ on the list of 88 tropical timbers. Therefore, the flooring companies that imported and used plywood of the Meranti Down Lebar type notified that they should additionally pay the difference between the general customs duty and the conventional customs duty that had not been paid since the Korea-ASEAN FTA took effect.
About 10 flooring companies were forced to face additional tariffs and additional taxes of 3 to 5 percent overnight. According to the flooring industry, the five-year tariff that these companies will have to pay amounts to regarding 30 billion won. It is explained that some small businesses that lack financial resources are already going through the process of closing as they have to bear the burden of billions of won per business.
The flooring industry has devoted all efforts to prove that the tree species is not Meranti Bakau. As a result, in September 2020, the Indonesian government analyzed samples of 27 plywood of the Meranti Down Lebar species for export in the country and issued an official position saying, “Meranti Bakau was not found in the sample.” The results were also delivered to the Ministry of Foreign Affairs, the Forest Service, and the Korea Customs Service. In December of the same year, a pre-tax review was held and a reinvestigation was conducted. However, following completing the investigation, the tax authorities notified the taxation decision in June of last year, saying, “Meranti Down Lebar species is tropical timber.”
Dissatisfied with this, the flooring industry filed a request for judgment with the Tax Tribunal since September of last year, and dozens of related trials are currently underway. According to Incheon Customs’ statement of opinion obtained by the Korea Economic Daily, Incheon Customs claims that “Meranti Down Lebar species belongs to the Shorea genus in a comprehensive sense, and Shorea belongs to tropical timber.” In addition, “Meranti Down Lebar is the local name for ‘Dark Red Meranti’, one of 88 types of tropical timber, and there have been cases in the industry where products of the Meranti Down Levar species have been traded under the name of Dark Red Meranti, so general taxation is reasonable. do” is the position.
On the other hand, the flooring industry said, “It is not in principle to classify species by specifying species by genus,” and “when it was revealed that Meranti Daun Levar and Meranti Bakau are not the same species, they are making a completely new and unreasonable claim.” there is.
The flooring industry expects that the final result of the tax judgment will be released in the first half of next year. If the request for tax adjudication is rejected, it is a policy to go to administrative litigation. Yoon Hyung-woon, director of the Korean Society of Wood Engineers, was concerned that “the flooring industry, which has already been pushed to the brink due to soaring raw material prices and high exchange rates due to unfair taxation, might continue to close.”
An official from Incheon Customs said, “It is difficult to express our position on the matters currently under review.”
Reporter Min Kyung-jin [email protected]