Hard to Hold Chinese Drywall Makers Accountable, Thanks to Legal BarriersOct 6, 2009 | Parker Waichman LLP The Chinese drywall debacle has highlighted some serious problems in the U.S. legal system. According to a report in the New Orleans Times-Picayune, those flaws make it likely that many Chinese drywall manufacturers will ignore the product liability litigation now underway in New Orleans.
According to the Time-Picayune article, international trade agreements treat health and safety regulations as barriers to commerce. This makes it possible for foreign firms to import products to the U.S. that don't meet safety standards. That can be a problem when products like drywall are coming from China, a country that has imposed few health and safety regulations on its manufacturers.
The failure to impose U.S. safety standards on imported products can have serious consequence. In fact, the Chinese drywall disaster is just the latest scandal involving imports from that country. In 2008, nearly 80% of all product recalls in the U.S. involved imports from China. Many Chinese products have been found to have been made with toxic materials, such as lead paint, and even counterfeit ingredients. In the past, dangerous toys, toxic foods and even tainted heparin have been among the scores of Chinese products that have put U.S. consumers at risk.
According to the Times-Picayune, it is also very difficult to hold foreign manufacturers accountable when their products cause harm to U.S. consumers. They don't even have to respond to lawsuits filed in the U.S., and there is no way of enforcing U.S. legal judgments against them.
Some Chinese drywall manufacturers are ignoring the lawsuits. We reported last month that Judge Eldon E. Fallon, who is presiding over the consolidated Chinese drywall litigation in New Orleans, hit Chinese drywall manufacturer Taishan Gypsum Co. Ltd. with a default judgment in favor of plaintiffs after it failed to respond to a class action lawsuit. Some other drywall manufacturers, such as the German company Knauf Gips, have argued that the proper venue for Chinese drywall lawsuits is the International Court of Justice in The Hague, the Times-Picayune said.
The Chinese drywall fiasco has prompted calls for reforms that would eliminate some roadblocks facing U.S. consumers who are injured by imported products. The Foreign Manufacturers Legal Accountability Act, which was introduced in the U.S. Senate earlier this year, would, among other things, require foreign manufacturers to agree to be held accountable by U.S. courts. However, according to the Times-Picayune, it would not require overseas companies to pay U.S. legal judgments.
The Consumer Federation of America has called for requiring overseas manufacturers to post bonds when they sell products here so consumers could collect against them in the event of problems. According to the Times-Picayune, such a provision is included in the Food and Product Responsibility Act of 2007 that is scheduled to be reintroduced in Congress this fall.
U.S. regulators are also trying to find a way to make Chinese manufacturers more accountable for the drywall mess, the Times-Picayune said. The Consumer Products Safety Commission, for example, is working with the Chinese government and its two sister agencies in China, and has added drywall to the agenda of a biannual safety conference with the Chinese government and manufacturers set for mid-October in Beijing.
Finally, the Times-Picayune is reporting that Rep. Anh "Joseph" Cao, R-New Orleans, plans to introduce legislation to create a fund to compensate homeowners and ultimately find a way to make the Chinese government reimburse U.S. taxpayers for the Chinese drywall bailout.