Business, Finance & Economics

Made in China: A stinking, rotting mess?

Updated:

PITTSBURGH, Pennsylvania — On the outside, they are new and sunny looking. On the inside, they are strange-smelling and rotting. These are the thousands of new houses built in the United States within the past few years that owners allege may contain yet another problem export from China: bad drywall.

Since 2006, new home owners in 23 states have been suffering from what they say are odorous batches of corrosive drywall that were imported from at least one gypsum mine in China and used by U.S home builders.

Owners say their houses smell like rotten eggs and are causing breathing problems and skin irritations. They worry their homes have become worthless as air conditioners and other mechanical parts corrode and become non-functioning. The problem is thought to be high levels of sulfur-compound gases being released from the drywall.

Homes that are affected were built in the aftermath of hurricanes in 2005 when building booms in Florida and Louisiana contributed to domestic drywall shortages, causing suppliers to look to China.

Unlike other tainted imports from China — such as formula, toothpaste and pet food, which can be swiftly taken off retail shelves — gypsum drywall cannot be easily removed since it is behind walls and ceilings, affecting the performance of plumbing, wiring, and electrical systems. It is a ubiquitous homebuilding material.

Attorneys representing homeowners estimate more than 2,000 lawsuits already have been filed in state and federal courts, targeting Chinese, U.S. and German companies, as well as builders, installers, suppliers, distributors and import brokers.

"We expect about 20 manufacturers of Chinese drywall to be involved in these cases,” said Jeremy Alters, an attorney in Miami handling many of the cases. "There is no quality control in this drywall. It’s hard to believe no one knew it was bad. It is destroying homes and it will cost billions.” One of the most prominent Chinese manufacturers named is Knauf Plasterboard Tianjin Co. Ltd. Others are Knauf Plasterboard Wuhu Co. Ltd and Knauf Plasterboard Dongguan Co. Ltd., as well as a German affliate, Knauf Gips KG. There are numerous other Chinese companies being added to legal complaints as time goes on, such as Beijing New Building Material PLC.

So serious are the potential cost and health implications that several U.S. federal agencies, members of Congress, states, and health and legal authorities are assessing the scope of the problem.

 

The U.S. Consumer Product Safety Commission in Washington is leading the investigation. It received permission from the Chinese government to send a team of scientists and compliance officials to China on Aug. 16 to investigate what is thought to be the source of the problem — the Luneng mine in Shandong province, and other mines in the area.

“To visit the mines that this came out of will be a valuable part of our investigation,” said Scott Wolfson, CPSC spokesman.

The agency estimates 6.2 million sheets of the drywall were imported into the U.S. At least three dozen builders are involved, not counting those who went out of business during the current economic crisis.

Some 810 complaints have been filed with the CPSC.

“I have personally visited a number of these homes and have seen first-hand how serious this situation is for families living with this toxic drywall,” said Rep. Robert Wexler (D-FL).

Wexler, a leader in the newly formed, 14-member Congressional Contaminated Drywall Caucus, said homeowners have reported bronchitis, pneumonia, and other respiratory illnesses while, “Pregnant women have been instructed … to move out of their homes to avoid health risks to their unborn children.”

The CPSC said in a report that two Chinese experts were in the U.S. inspecting homes in Florida and Louisiana for two days in June. While U.S. and Chinese regulators huddle over the extent and effect of the tainted drywall, the legal thicket is growing.

In January, one of the nation’s largest home builders, Lennar Corp. in Miami sued more than 20 manufacturers, suppliers and installers of what it called “defective Chinese-manufactured drywall.” The homebuilder itself is battling dozens of lawsuits.

Lennar said in a securities filing in the U.S. it has identified approximately 400 homes in Florida built with Chinese drywall and has set aside $40 million to pay for repairs.

Lennar would not comment beyond what it has filed in court and with regulators. “We have no updates available,” said Marshall Ames, a spokesman for Lennar.

Knauf Plasterboard Tianjin insists it has taken brunt of criticism because it properly marked its product and it is identifiable. It said in statements it accounts for only 20 percent of the Chinese product in question and “the low levels of gases do not present a health risk.”

Federal studies are to be completed by the end of the month and it is expected any federal action will be based on what heath and safety effects are found. One possibility is that the U.S. Internal Revenue Service will allow casualty loss deductions to homeowners if it found that the damage is “sudden, unexpected and unusual.”

Alters said the object of the litigation is to get proper repair of the homes, replace ruined personal property, address health concerns, and erase the stigma of owning a home with Chinese drywall.

“These are major Chinese companies. Ultimately, they will have to do the right thing,” he said.