Promoting Fair Trade Practises
Supporting compliance and preventing illegal Soju imports in Australia.
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About Soju Fraud Watch
Our Mission
At Soju Fraud Watch, our mission is to assist Australian authorities in identifying and preventing illegal Soju imports. We are dedicated to promoting legal compliance and fair trade practises within the beverage industry.
Soju Fraud, THE PROBLEM
Soju Fraud Is hurting all Australians!
SOJU FRAUD: THE PROBLEM
Introduction
Soju, the Korean alcoholic beverage that has captured global attention, is facing a significant regulatory crisis in Australia. The rapid growth of Soju imports into Australia has brought with it a complex web of false declarations, duty evasion, and non-compliance with Australian excise and labelling laws. This issue has caused massive market disruptions, disadvantaging legitimate businesses while costing the Australian government hundreds of millions in lost revenue.
Background of the Issue
Traditionally, Soju is a distilled spirit, much like vodka, derived from grains, sweet potatoes, or tapioca starch. Despite this, many importers have been falsely declaring flavoured Soju products as “fruit wine” or “grape wine products” to exploit the favourable tax treatment under the Wine Equalisation Tax (WET). This classification circumvents the higher excise duties imposed on distilled spirits under Australian customs law.
The root of the issue lies in mislabelling and fraudulent import declarations, allowing these products to be sold at significantly lower prices compared to duty-compliant alternatives. Investigations have revealed widespread market manipulation, with products like Good Day, Chum Churum, and Jinro at the centre of the controversy.
Key Findings of the Investigation
1. False Classification and Duty Evasion
- Flavoured Soju products are declared as fruit wines, despite not undergoing the fermentation processes required under the WET Act.
- Laboratory analysis of several Soju products revealed no traces of fermentation markers, such as sulphur dioxide (SO2) or residual sugars, further supporting the claims of misclassification.
- Major players, including Good Day and Chateul Soorok, have been found diluting ethanol with water and adding artificial flavours, bypassing Australian regulations for wine classification.
2. Market Impact and Unfair Competition
- These illegally imported products are sold at prices well below the cost of duty-compliant products. For instance, Good Day has been sold at Costco for as low as $5 per bottle—less than the expected excise tax alone.
- The artificially low pricing has enabled these products to dominate retail shelves, with major retailers like Dan Murphy’s and Coles Liquorland allocating significant shelf space to them.
- Legitimate Australian producers and duty-compliant importers are losing market share, while the government loses substantial tax revenue.
Regulatory and Legal Issues
The following legal breaches have been identified:
- Wine Equalisation Tax (WET) Act 1999: For a product to be classified as fruit wine, it must undergo fermentation and derive flavours naturally from the fruits used. Flavoured Soju products violate these criteria by adding artificial flavours post-distillation.
- HS Code Misuse: Many of these products are falsely classified under HS Code 2206 (wine), instead of 2208 (spirits), which carries significantly higher excise duties.
- Label Fraud: Labels misleadingly claim ingredients like “apple wine” or “grape wine” to create a façade of compliance. Products like Soonhari Blueberry and Good Day Peach have been flagged for using deceptive labelling practices.
The Scale of Tax Evasion
The estimated scale of duty fraud is staggering, reaching hundreds of millions of dollars annually. Investigations reveal that major players in the market have adopted a “phoenixing” strategy, wherein companies dissolve and reappear under new names to avoid liabilities. Customs brokers and freight forwarders are suspected of being complicit in facilitating these fraudulent imports.
Impact on Retailers and Consumers
Major retail chains such as Dan Murphy’s, Coles Liquorland, and Costco are unwittingly—or perhaps knowingly—facilitating this illegal trade by stocking these products without proper checks on their legal compliance. This not only distorts the market but also misleads consumers who believe they are purchasing legitimate products.
What Needs to Be Done
To restore market fairness and compliance, we urge the Australian government and regulatory bodies to:
- Conduct thorough investigations into import declarations of Soju products.
- Enforce stricter penalties on importers and retailers involved in this fraudulent activity.
- Collaborate with South Korean authorities to ensure accurate export documentation and product classifications.
- Work with major retailers to establish compliance protocols, ensuring only duty-compliant products are stocked.
Conclusion
The ongoing issue of Soju fraud poses a significant threat to Australian producers, consumers, and government revenue. By addressing the loopholes and enforcing compliance, Australia can protect its market integrity and ensure that businesses operating within the law are not unfairly disadvantaged.
We call on all stakeholders—regulators, importers, and retailers—to act swiftly to end this fraudulent practice and restore fairness to the alcoholic beverage market.
retailer responsibility
liability under the law
If a retailer knowingly or recklessly purchases and sells alcohol on which excise duty has not been paid, they can be held liable. Engaging in such activities is illegal and can result in significant penalties. The Australian Taxation Office (ATO) has issued warnings and taken compliance actions against entities involved in the sale of illicit alcohol. The ATO's Taxpayer Alert TA 2021/1 specifically addresses the retail sale of illicit alcohol, highlighting the consequences for entities engaging in these arrangements.
The ATO advise "that to avoid the risk of becoming involved in these arrangements, we recommend retailers check our website for the excise rates on alcohol, check their internal controls (including stock controls), verify the bona fides of any new suppliers, and be alert to the following which may indicate a supplier is involved in the supply of illicit alcohol:
- the supply is at a commercially-unrealistic price given the excise duty that should apply
- the supplier is the manufacturer of the alcohol but does not hold an ATO-issued manufacturer or storage licence
- whether the product is labelled correctly (including, but not limited to, country of origin, supplier details, lot identification, barcode, tampered lot codes)
- bonus stock is offered, or received, in substantial amounts and/or on a regular basis which reduces the overall unit average price
- the amount of product specified on the invoice differs to what was delivered
- missing, vague, or incorrect product descriptions on invoices, and
- requests by suppliers to hold or temporarily store product without purchasing it.
Further information can be found on the internet at: What attracts our attention - illicit alcohol, or through the contact details at the end of this Alert.
Penalties may apply to participants in, and promoters of, these types of arrangements. This includes serious penalties under Division 290 of Schedule 1 to the Taxation Administration Act 1953 for promoters. In more serious cases, sanctions under criminal law may apply. Registered tax agents involved in the promotion of these types of arrangements may be referred to the Tax Practitioners Board to consider whether there has been a breach of the Tax Agent Services Act 2009.
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To provide information about this type of arrangement:
