Insurers Sued Over Claim of 'Dumped' Chinese Crawfish (Update2)

By Bob Van Voris
Bloomberg News
April 7, 2009

April 7 (Bloomberg) -- A group of insurers, including several units of Hartford Financial Services Group Inc., were sued by U.S. food producers for selling customs surety bonds that allegedly allowed Chinese producers to "dump" low-cost food products on the American market.

Five U.S. producers of crawfish tail meat, honey, canned mushrooms and fresh garlic sued the insurers, which include Lincoln General Insurance Co. and Great American Insurance Co., in the Court of International Trade in Washington today. The suit claims the insurers were negligent in selling the bonds, which guaranteed payment of any dumping duties imposed by the U.S. government, then refused to pay on them.

"Without these customs surety bonds, the importers could not have brought in and sold the Chinese goods in the U.S. market at steeply dumped prices," lawyer Michael Coursey of Kelley Drye & Warren LLP, which represents the U.S. producers, said today in a statement.

The plaintiffs claim U.S. producers suffered as much as $1 billion in damages because the imports from China took away sales and artificially depressed market prices. The complaint seeks class-action, or group, status on behalf of all U.S. food producers that were harmed.

The suit also names as defendants the U.S. Department of Commerce and U.S. Customs and Border Protection. In their complaint, the producers claim that U.S. Customs has failed to collect 93 percent, or $723 million, of the $771 million in anti-dumping duties assessed in the past six years against companies importing Chinese goods.

Producers' Argument

The producers argue they should be permitted to collect the duties and claim they are intended beneficiaries of the bonds between the insurers and the importers.

They claim the insurers sold the bonds to new importers that were poorly capitalized and had inadequate credit histories. The importers took advantage of the ability to charge low-ball prices in the U.S. market, and then defaulted on anti- dumping duties charged by the government, the plaintiffs said.

The system unfairly benefited the insurers and importers at the expense of the U.S. producers, they claim.

The case is Sioux Honey Association v. Hartford Fire Insurance Co., 09-00141, U.S. Court of International Trade (Washington).

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