Companies

Chinese drywall enterprises facing US litigation

(chinadaily.com.cn)
Updated: 2010-02-05 17:18

In fact, a similar case happened two years ago with Chinese toys. At the beginning of the incident, all accusations were directed to Chinese toy manufacturers but when they informed the public that the production was done according to the US toy designing and manufacturing standards, then the US toy manufacturer Mattel had to assume the responsibility and paid compensation to Chinese toy manufacturers.

This may serve as a precedent for China's drywall manufacturers.

Chinese enterprises should actively respond and defend themselves.

The Chinese government is taking action. A recent example is the commercials on "Made in China" launched in the US.

Because of the global economic crisis and the deterioration of the international trade environment, in many European countries and in the US, trade protectionism is on the rise. According to the Ministry of Commerce statistics, in the first three quarters of this year, 19 countries and regions initiated 88 trade remedy investigations on Chinese products, including 57 anti-dumping and 9 countervailing duty cases, for a total of approximately $10.2 billion. These include Chinese toys, drywall, tires and steel. The Commerce Ministry has also warned domestic export enterprises that the threat of trade protectionism around the world is increasing, and next year trade friction will be even worse. Export enterprises should be wary of rising exchange earnings and trade risks.

Chinese enterprises often endure a painful experience caused by the lack of awareness about the country's exporting system, related policies and regulations. They are always in a passive position.

The US legal system encourages litigation. When the plaintiff wins the litigation the lawyer will be awarded a high commission. Moreover, there are many rules and terms of the US legal system which are advantageous to US companies and citizens. These rules make Chinese companies the sole party responsible for enormous costs in international litigation suits. During the long period of litigation, the US companies and some institutions use the power of the media to negatively influence public opinion by misleading consumers, and by doing so destroy the reputation of Chinese companies, which adversely affects the market. . The usual trick of US complainants is to sue one or a few individual or small Chinese companies that are easy to defeat in the proceedings. Currently, a few leading Chinese drywall enterprises are being forced into a position of having to protect and defend themselves and the reputation of the whole Chinese drywall industry.

In response to these situations,experts pointed out that: the modern law in many countries protects consumer's legitimate rights and interests but also protects the manufacturer's rights and interests from being violated. A valid defense in US product liability litigation includes "individual/personal risks", "fault-sharing", the unconventional use of products, special sensitivity, stipulation of contract, limitation of technology and development risks. These factors should be carefully analyzed by Chinese drywall enterprises. For the Chinese drywall case, in order to defend themselves, Chinese enterprises could adopt the argument that their production followed the requirement of the importers, which at the time failed to reveal known defects.

The most crucial thing is that Chinese enterprises should have the courage to defend themselves in US litigations.

An expert said only a serious study of the law, active response and distinguishing the attribution of responsibility are the best ways to expose and eliminate the stigma of Chinese drywall. At the same time, the government should improve the regulatory system and develop and promulgate quality standards complying with international standards, especially with attention to products affecting people's livelihood. "The goal is to issue ' certification' only for products from companies which devote efforts on research and development and product testing." The purpose is to minimize the disputes caused by the differences between laws and standards among countries and to minimize or avoid reputation or economic losses suffered by Chinese companies.