(Adds details, background) SEOUL, Dec 6 (Reuters) - South Korea rejected a third batch of U.S. beef, this time from Iowa, after bone chips the size of pea were found in a package, the agriculture ministry said on Wednesday, adding it plans to return the 10.2-tonne shipment. The consecutive rejections are likely to escalate tensions at free trade talks between South Korea and the United States currently underway in Montana. Agriculture is a focus of the talks which cover subjects from drugs to financial services. South Korea, once the third-largest market for U.S. beef, has decided to return all 22 tonnes of U.S. beef recently received since the country lifted a three-year ban on the meat to the United States due to bone fragments. The country said in September it would resume imports but place tough checks on products to make sure that parts it deemed as risky, such bones, were not included in the shipments. "All of the imported beef from that (Iowa) shipment will be disposed (of) or returned to the United States and beef exports from that U.S. plant will be suspended temporarily," the ministry said in a statement. Quarantine officials found seven bone chips in the cargo of chilled beef that arrived on Dec. 1, the ministry said. South Korea accepts only boneless beef from cattle up to 30 months of age to guard against mad cow disease. Officials at the ministry said trade will continue from other U.S. plants but caution that they will bar all U.S. beef if material like brains or spinal cords is found. The third rejection marked cast a further shadow over meat imports from the United States, which restarted in September. A key U.S. senator and the U.S. meat industry recently accused South Korea of unfairly blocking U.S. beef shipments, saying the ban was on not based on sound science. The dispute over beef is not the only agricultural issue likely to present difficulties in the talks. The South Koreans also want to leave out rice -- a sensitive subject -- from the deal, which U.S. officials have said is impossible. Thousands opposed to a free trade deal between South Korea and the United States took to the streets of Seoul and other cities on Wednesday demanding an end to talks between the two countries, saying such a deal would destroy the livelihood of South Korean farmers. The United States once accounted for more than two-thirds of South Korea's beef imports, or about $850 million in products annually. (Additional reporting by Jon Herskovitz)
