Chinese Garlic Exporters Tussle in L.A. Federal Court Over Alleged AD Duty Fraud
Competition between Chinese garlic exporters recently spilled over into Los Angeles federal district court, with both sides alleging manipulation of antidumping duty rates in order to obtain a commercial advantage. Harmoni International and its Chinese subsidiary, Zhengzhou Harmoni, allege a constellation of Chinese companies, many with common ownership, are working a racketeering scheme designed to fraudulently obtain lower AD rates, while artificially inflating Harmoni’s. Those companies contend that it is Harmoni that has been engaging in rate manipulation by colluding with the coalition of domestic garlic distributors that originally requested AD duties on garlic.
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According its amended complaint filed March 2, Harmoni currently has maintained a zero percent AD duty rate since 2004, giving it an edge over competitors with rates that in some cases approach 400 percent. However, some of these competitors are seeking to undermine that advantage through underhanded practices, including fraud, it said. Wenxuan Bai, owner of Qingdao Tiantaixing (QTF) and Qingdao Lianghe International Trading; Jicheng Ye, owner of Jinxiang Hejia; and Ruopeng Wang, owner of Golden Bird, are working with the U.S.-based law firm Hume & Associates to lower their own rates and increasing Harmoni’s rates through misstatements to the Commerce Department, says the complaint.
Harmoni, which originally filed suit Jan. 27, said Bai, Ye and Wang formed a succession of companies and obtained low rates for them via new shipper reviews, then used these companies to funnel garlic from other producers into the U.S. while falsely claiming the garlic as their own. Commerce has been able to uncover discrepancies that suggest funneling and, when these discrepancies went unexplained by these companies’ U.S. representative, Hume & Associates, has applied high penalty rates, as it did to Golden Bird in 2014 (see 14072402). But in response, Bai, Ye and Wang would “simply hang a different shingle on their operations, either by opening up nominally different additional entities or going back to dormant ones,” said the amended complaint.
Recently the conspirators have gone on the offensive, arranging with the assistance of Hume & Associates for two New Mexico farmers to request an administrative review of Harmoni, said the complaint. Harmoni says these farmers are hobby farmers that are not in competition and have no reason to seek a review. Another Chinese company with close relations, C Agriculture, recently sent a letter to Harmoni and its main customer, Christopher Ranch, alleging Harmoni’s garlic is produced via forced labor and asking for over $30 million to keep quiet, said the complaint. Harmoni alleges Racketeer Influenced and Corrupt Organizations (RICO) violations, unfair competition and trade libel, among other charges, and asks for an injunction barring further false statements by C Agriculture and the two New Mexico farmers.
In response, attorneys representing Hume & Associates allege Harmoni is engaged in its own anticompetitive scheme, colluding with the Fresh Garlic Producers Association (FGPA), the coalition of domestic garlic companies that originally requested the AD duty order on garlic, to exclude both other Chinese exporters and other U.S. distributors from the marketplace. Harmoni’s zero rate allows Christopher Ranch, a member of the FGPA, to act as a conduit for Harmoni’s garlic and expand “U.S. market control with the lowest priced garlic in the world,” according to their March 7 response to a discovery motion. “The effect has been to eliminate or cripple most competition in the U.S. market for fresh garlic,” they said. FGPA did not comment.
In order to guarantee its flow of low-priced garlic, the FGPA has withdrawn its request for review for Harmoni in every administrative review since Harmoni got its zero rate in 2004, while at the same time ensuring that the review continues for all other Chinese exporters, they said. This time, the two New Mexico farmers that requested a review of Harmoni may ensure that Harmoni is reviewed for the first time since 2004 even if the FGPA withdraws its request. Though Harmoni alleges they are only “hobby farmers,” the reason they are unable to compete is because of Harmoni’s collusion with the FGPA, said the representatives for Hume & Associates. Commerce is now set to review Harmoni’s rate in an administrative review launched in January (see 1601060014), unless the two New Mexico farmers withdraw their request by April 11, they said.
Email ITTNews@warren-news.com for documents related to this case.
(Harmoni International Spice Inc. et al v. Wenxuan Bai et al, C.D. Cal. #16-00614)