Garlic Importer Ends Racketeering Lawsuit on Chinese Collusion in AD Duty Case

A hotly contested racketeering lawsuit involving antidumping duties on garlic imports from China has reached an end, after Harmoni International opted to drop its case before the Central California U.S. District Court Sept. 16. Lawyers for the defendants in the case claimed victory for their clients, and all Americans, in a news release emailed the following day. Harmoni’s lawyer tells a different tale, saying the case had largely wrapped up and it was no longer in his client’s financial interest to continue.

Harmoni had alleged that its Chinese competitors, in a bid to end the zero-rate status Harmoni’s Chinese affiliate has enjoyed since 2004, worked with U.S. lawyers and low-volume New Mexico garlic farmers to file “sham” requests for administrative reviews (see 1603100018). The Commerce Department found merit in Harmoni’s allegations in an administrative review it conducted in 2017, citing misstatements by the New Mexico farmers and their lawyers in their refusal to review Harmoni (see 1706150059).

The District Court dismissed Harmoni’s separate, but related, racketeering case in 2017, finding Harmoni had not demonstrated concrete injury from the alleged racketeering scheme (see 1707050021). The 9th U.S. Circuit Court of Appeals overturned aspects of the lower court’s decision and resurrected the suit in January 2019 (see 1901240022).

The sole remaining New Mexico farmer and his lawyer -- the other New Mexico farmer had turned state’s evidence during the Commerce proceeding -- settled later that year. The settlements required that they cooperate with Harmoni by providing “detailed information about the business operations and potentially illegal conduct of the Chinese garlic cartel and individuals for whom they work,” emailed Harmoni’s lawyer, George Mastoris of Winston & Strawn. “Two of them have done so already, and we intend to interview the third in the coming months. Once that interview has been completed Harmoni will consider its options,” Mastoris said.

“In light of that backdrop, it made sense to voluntarily dismiss the case against the remaining Chinese defendants, only two of whom have even been served with legal papers (after years of trying),” Mastoris said. “Although we are confident we would have eventually prevailed, especially given the information we have already received and expect to receive from the US-based defendants who settled with us, there is little if any prospect of actually getting the Chinese government to help us enforce a monetary judgment against the Chinese defendants. This is especially true given the current state of US-China relations and how well connected these particular Chinese defendants are.

“RICO cases are long, time-consuming, and expensive, and given current circumstances globally and in the US, Harmoni decided it was better off expending that effort on its business instead of chasing a bunch of Chinese companies who appear to constantly reincorporate under different names in order to evade antidumping duties as well as individuals determined to hide out in China and avoid the US justice system at all costs,” Mastoris wrote. He added that the voluntary dismissal was without prejudice, leaving Harmoni free to bring the case again should it desire.

On the other hand, Lanza & Smith, the law firm of Anthony Lanza, who represents two of the remaining defendants in the case and had represented the New Mexico farmer and his lawyer before they settled, called the case a “small victory” in the U.S.-China trade wars that the growers can “celebrate.” The firm’s news release said the real conspiracy was Harmoni’s attempt to keep its zero AD rate despite dumping garlic in the U.S. market.

Lanza & Smith said Harmoni, after receiving its zero rate in 2004, ramped up its imports in partnership with several California companies, at prices that should have triggered antidumping duties. “Harmoni employed its California partners -- and their partners’ team of lawyers -- to exercise influence in the Commerce Department and ensure that Harmoni’s duty exemption wasn’t revoked, so as to permit unlawful dumping in US markets,” according to the firm in the news release, which refers to the zero rate as a duty exemption.

“For now, at least, the American growers can celebrate a small victory in the U.S.-China trade wars,” Lanza & Smith said. “Harmoni, however, continues to enjoy a duty exemption, despite being the largest Chinese exporter of garlic to the U.S. The Commerce Department continues in its refusal to re-assess Harmoni’s import volumes or duty exemptions,” the release said. “The 2004 exemption remains preserved almost as if in a time capsule, raising the question: If the Americans won this most recent battle, who is winning the war?”