The High Court in Auckland has been told exporters are exploiting the rules to ship tonnes of ancient swamp kauri to offshore markets like China and the US.
The Northland Environmental Protection Society has taken the Ministry for Primary Industries (MPI) to court saying it's allowing vast amounts of the ancient wood to leave the country unlawfully.
Swamp kauri is timber tens of thousands of years old which has been preserved in Northland's peat swamps. It's worth millions overseas, but the Forests Act 1949 says you can only export "finished items" or kauri stumps.
However, huge slabs of the wood are frequently sent overseas as so-called table tops or as totem poles or Maori carvings.
A lawyer for the Northland Environmental Protection Society, Davey Salmon, told the court totem poles with the bare minimum of chisel marks and paint are being sent overseas as finished products, which he says "is an insult to our intelligence".
He says there's no market on earth for such sparsely decorated pieces of wood and it's clear they're not finished items and are being manufactured into other items.
The group wants the High Court to rule on how the rules should be interpreted.
MPI has always maintained that all exports complied with the law. The case is set down for two days.