[Customs Service Betrayal] Mung Beans Become Trade Dispute... Peru Vice President Urges Korean Prime Minister to "Resolve the Issue"

Peruvian Mung Bean Crisis Escalates into National Issue
Peruvian Farmers Send Protest Letter Urging "Respond to Korea"
Concerns Over Declining Trust in Korea if Similar Incidents Recur
Analysis: "Tariff Administration Undermines Original Purpose of FTA"
Dispute Prevention Needed Through Activation of 'Pre-Verification of Origin'

On November 18 last year, at the APEC Summit held in Thailand, Prime Minister Han Duck-soo and Peruvian Vice President Dina Boluarte are taking a commemorative photo before the bilateral meeting between Korea and Peru. Photo by the Prime Minister's Office

The issue of Peruvian mung bean imports, which began with an origin investigation by the Korea Customs Service, is escalating into an international dispute. The harsh investigation by Korean customs has worsened local sentiments, and the dissatisfaction of Peruvian companies and farmers, whose profits have declined, has grown. Peruvian politicians representing these groups have started voicing their concerns, and it has been confirmed that even the Vice President has requested Prime Minister Han Duck-soo to resolve the matter.

According to Asia Economy's report on the 10th, in November last year, then-Vice President Dina Boluarte of Peru held a bilateral meeting with Prime Minister Han Duck-soo at the Asia-Pacific Economic Cooperation (APEC) summit held in Thailand, demanding a resolution to the mung bean issue between the two countries. Vice President Boluarte reportedly expressed regret over the fact that Peruvian mung beans were held at customs clearance in Korea and the origin investigation conducted by Korean customs. A month later, Boluarte assumed the presidency, and in January this year, customs authorities lifted the customs clearance hold.

Currently, the Korea Customs Service is conducting a high-intensity investigation into the origin of Peruvian mung beans imported by companies, citing a surge in production volume. Peruvian mung beans have been imported duty-free under the Free Trade Agreement (FTA) between the two countries, but the Customs Service notified importers who failed to prove the origin to pay the original tariff (607.5%). Companies argue that the level of documentation required by the Customs Service is excessive. If they fail to provide evidence, these companies may have to shut down. [Related article: How Customs Destroyed Import Companies]

The involvement of prominent Peruvian politicians in resolving the mung bean issue is closely related to the local political landscape. Over 80% of Peru's population is engaged in agriculture, resulting in a high proportion of farmers. Consequently, agricultural cooperatives formed by farmers wield strong political influence. When farmers suffered losses due to the Korean customs investigation into the origin of Peruvian mung beans, the cooperatives sent multiple protest letters to the Peruvian government demanding resolution. The letters contained requests for active responses, emphasizing that their citizens were harmed by the Korean customs investigation.

Some Korean import companies have also filed petitions urging the Peruvian government to respond strongly. Although these companies are composed of Koreans, there have been cases where they requested the Peruvian government to impose trade retaliation. A representative of one importing company said, “There are Korean companies asking the Peruvian government to strictly investigate Korean exporters,” adding, “Since our government's stance has not changed, Peru is rather demanding sanctions on Korean exports based on reciprocity.”

Concerns Over Declining Trust in Korea... Need to Activate 'Pre-Verification'

The problem is that repeated incidents like this could damage Korea's credibility in the international community. Although free trade was expected under the FTA, signals have spread that Korea's non-tariff barriers are very strong. Despite the Peruvian government guaranteeing at the national level that the mung beans are of Peruvian origin, dissatisfaction and concerns remain over the ongoing customs origin investigations. A local official who requested anonymity said, “The Peruvian government is also worried about mango exports to Korea,” adding, “If the Korean government continues to demand origin proof with the current standards, Peruvian mangoes may also fail to be recognized.”

Mung beans for sowing growing locally in Peru. Photo by Contributor Provided

Experts have warned that frequent disputes could increase various social costs. Professor Kim Eun-mi of the Department of Trade at Jeonbuk National University analyzed in a paper submitted to the Journal of Customs that “The Korea Customs Service's rigid interpretation of origin verification laws has led to frequent cases of companies being retroactively charged,” and “If origin is not recognized, importers must pay punitive additional taxes and fines, imposing a significant burden.” She explained, “This causes economic burdens for importers, administrative burdens for tax authorities, and damage to the country's image internationally.”

There are also criticisms that the current FTA system and the Korea Customs Service's administration undermine the original purpose of free trade. Professor Ahn Tae-geon of the Department of International Trade at Pukyong National University pointed out, “Korea abolished tariff barriers through FTAs, but origin rules have become new trade barriers,” and “Complex origin regulations cause many disputes between customs authorities and import-export companies, making it difficult to utilize FTAs.”

Origin verification process. Photo by Korea Customs Service

As an alternative, there are calls to activate the pre-verification system for origin. Instead of holding importers responsible after the fact, the government should verify origin in advance to reduce disputes. In the United States, the Customs and Border Protection agency operates a system where companies can receive prior review of goods imported into the country. Customs, not the companies, verify the origin of goods, and the U.S. government guarantees the decision for three years. Australia operates a pre-verification system under administrative guidelines, with the government guaranteeing origin for five years. The United Kingdom also provides government-led pre-verification when the interpretation of origin determination is difficult.

There are also voices calling for improvements to Korea's pre-review system regulations. Baek Hye-young, a lawyer affiliated with the Korea Customs Service, analyzed in a personal paper last year that “Although the FTA origin pre-review system is advantageous for import-export companies, it has not been widely used,” and “To increase utilization, regulatory improvements must also be supported.”