Food Producers File $1 Billion Lawsuit Against Import Insurers and Federal Government
Companies that produce honey, mushroom, garlic, and crawfish products have filed a putative class action against major insurance companies and the U.S. government, alleging that the negligent issuance of customs surety bonds allowed the sale of massive quantities of competing, lower-cost Chinese products. Sioux Honey Ass’n v. Hartford Fire Ins. Co., No. 09-00141 (Ct. Int’l Trade, filed April 7, 2009).
Filed in the U.S. Court of International Trade, the lawsuit claims that for eight years, insurers issued hundreds of the bonds to “thinly capitalized” and inexperienced shippers, guaranteeing the payment of any anti-dumping duties the government might decide were owed by U.S. importers for specific Chinese goods. The plaintiffs contend that the insurers failed to follow underwriting standards and thus issued bonds to importers posing an unacceptable risk of default. Had the insurers not issued the bonds to importers, “little if any of the imports that were secured by those bonds would have entered the U.S. market,” according to the complaint. The importers have allegedly now defaulted on paying hundreds of millions of dollars in dumping duties assessed by the government.
The plaintiffs also claim that U.S. Customs and Border Protection and the Commerce Department have failed to enforce four anti-dumping orders that were issued to protect domestic producers. They allege that the insurers have failed to pay the uncollected anti-dumping duties and that Customs has not filed any collection lawsuits against them to recover the duties. Alleging that they are intended third-party beneficiaries of the bonds, the plaintiffs claim that they suffered “severe financial damages” because they were forced to significantly lower the prices for their competing products and because the government is legally obligated to distribute to them the dumping duties ultimately paid by competing importers or their insurers. See Dow Jones Newswire, April 7, 2009.
