South Korea kicked up its trade war with Japan by making it 3 times harder for companies to export goods there

Reuters/Kim Kyung Hoon

South Korean President Moon Jae-In is welcomed by Japanese Prime Minister Shinzo Abe upon his arrival for an welcome and family photo session at G20 leaders summit in Osaka.

• Japan and South Korea are locked in a trade war that has escalated in recent months.
• South Korea's government on Tuesday formally dropped Japan from a list of preferred trading partners, and put it in a new category of downgraded countries.
• The downgrade means that South Korean companies selling certain goods deemed "strategically important" have to jump through more hoops to sell those goods to Japan.
• Japan had already downgraded South Korea's status as a trading partner,.
• Relations between Seoul and Tokyo deteriorated last year after South Korea's Supreme Court ordered Japanese companies to compensate forced Korean laborers during World War II.
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The growing trade war between South Korea and Japan escalated further on Tuesday when Seoul officially downgraded Japan's status as a trading partner.

South Korea dropped Japan from its "white list" of countries with fast-track trade status.

It demoted Japan to a newly-created category of trading partners for countries that operate an "export control system that violates international norms," South Korean news agency Yonhap reported.

The move was first announced in August, and is in effect as of Wednesday.

Under the new rules, Japan will still be able to trade with South Kore,a but will be subject to lengthier export application processes.

Lee Jin-man / Associated Press

Companies from South Korea selling "strategic" goods to Japan and other countries not on the trading white list have to complete a greater amount of paperwork, filling out five forms rather than the previous three.

They will also have to wait 15 days for approval, where they previously waited five, Yonhap said.

Lee Ho-hyeon, an official from the South Korean Ministry for Trade, Industry, and Energy said that the move will affect around 100 companies, the Associated Press reported.

He said the firms largely export goods such as telecommunications security equipment, semiconductor materials and chemical products.

Isshu Sugawara, the Japanese minister of economy, trade and industry called South Korea's move "regrettable."

Japan had previously downgraded South Korea's status as a trading partner in August.

South Korea said it was not taking the steps as an act of retaliation.

"The purpose of the amended trade regulations are to improve South Korea's export control system, not retaliation against Japan," a statement from the trade ministry said.

Read more: A selfish, destructive act': Japan and South Korea cut each other from export whitelists as their trade war reignites World War II tensions

Kusakabe via www.flickr.com creative commons

The two nations' growing trade war is linked to historic tensions between dating back more than 100 years.

Last year, the South Korean Supreme Court ordered Japanese companies to compensate South Korean laborers who were forced to work for them during their occupation of Korea in World War II.

Japan colonized the then-united Korean Peninsula in 1910 and ruled it harshly until 1945. During those 35 years, Japan forced hundreds of thousands of Koreans to fight and work, and forced many Korean women to have sex with Japanese men.

Read more: There's another major trade war that's starting to heat up while everyone is focused on the US and China

Japan and South Korea normalized diplomatic relations in a 1965 pact that saw Tokyo give Seoul grants worth $300 million and loans of $200 million over 10 years.

The Japanese government maintains that the 1965 treaty settled all colonial-era debts. Recent South Korean governments have said Japan's repayments cover only some debts.

Many Japanese companies refused to comply with the court order, further increasing tensions.

AP Archive/YouTube

Then-South Korean trade minister Kim Hyun-chong at a press conference in Seoul in March 2018.

Read more: South Korea accuses Japan of treating it like a 'hostile nation' after it was officially downgraded as a trading partner amid escalating tensions

The dispute increased in intensity in late August when Japan officially downgraded South Korea's status as a trading partner.

South Korea was relegated from Group A- the "preferred trade partner list" - to Group B, which consists of countries and regions that are part of international export control agreements.

At the time the move was enforced, Kim Hyun-chong, South Korea's deputy national security adviser, accused Japan of acting like a "hostile nation."

Both sides have continually blamed each other to justify their actions.