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Published: Wednesday, 11/21/2012 - Updated: 1 year ago

Heidt­man Steel Products Inc. says Chinese firm owes it $7M

BY IGNAZIO MESSINA
BLADE STAFF WRITER
Steel at Heidtman Steel Products says it was duped eight years ago by a Chi­nese busi­ness that claimed to have a great sup­ply of cok­ing coal for sale. Steel at Heidtman Steel Products says it was duped eight years ago by a Chi­nese busi­ness that claimed to have a great sup­ply of cok­ing coal for sale.
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A Toledo com­pany that has sup­plied steel for the Detroit Three auto­makers and raw ma­teri­als to steel mills says it was duped eight years ago by a Chi­nese busi­ness that claimed to have a great sup­ply of cok­ing coal for sale.

After nearly a de­cade of le­gal wran­gling over­seas, Heidt­man Steel Products Inc. is still owed nearly $5.9 mil­lion, plus 5 per­cent in­ter­est from the Chi­nese com­pany. The in­ter­est brings the award to about $7 mil­lion.

“A sim­ple busi­ness trans­ac­tion. Well, it never shipped and they never re­turned the money,” said Mark Ride­nour, chief fi­nan­cial of­fi­cer for Heidt­man Steel. “I think we got ripped off, to be per­fectly hon­est. I think we got shang­haied.”

Toledo Mayor Mike Bell and about 20 lo­cal busi­ness­men left for China on Nov. 13 and are to fly back to­day.

The mayor has been urg­ing Toledo busi­nesses to ex­plore do­ing busi­ness with Chi­nese in­ves­tors and busi­ness­men.

The trip to China to seek in­ves­tors is Mr. Bell’s fourth. His spokes­man, Jen Sor­gen­frei, reached in China on Tues­day morn­ing, de­clined to make the mayor avail­able for com­ment about the prob­lems Heidt­man Steel had in China.

In Decem­ber, 2010, an ar­bi­tra­tor in Ge­neva agreed with Heidt­man and or­dered the Chi­nese com­pany — He­bei Huiyuan Group Tang­shan Im­port & Ex­port Co. Ltd. — to re­pay $3.5 mil­lion plus other costs for 44,000 tons of coke it had prom­ised to de­liver but did not. Two years later, Heidt­man is still with­out its money and never re­ceived the ship­ment.

In 2004, when coke was dif­fi­cult to ob­tain and the price of steel was sky-high, John Bates, Heidt­man’s chief ex­ec­u­tive of­fi­cer, thought he had found a sup­ply of coke to sat­isfy his cus­tom­ers.

“We be­came aware that there was maybe some cok­ing coal avail­able in China for ex­port to the United States, so our CEO went over and met with some in­di­vid­u­als,” Mr. Ride­nour said. “We signed a con­tract [and] made a pay­ment in or­der to ob­tain this cok­ing coal, which we would then turn around and sell to a steel pro­ducer; in this case, it was SeverStal.”

The deal with He­bei was signed on Nov. 13, 2004, and the money was wired three days later. The coke was sup­posed to be wait­ing on a dock in China north of Bei­jing on Dec. 5, 2004.

After He­bei failed to de­liver the coke, Heidt­man agreed to cover the dif­fer­ence be­tween the con­tract price and the cost of buy­ing 44,000 tons of coke on the dock from an­other seller to honor its com­mit­ment to SeverStal. In Jan­u­ary, 2005, SeverStal de­manded $1.68 mil­lion from Heidt­man for the pur­chase price dif­fer­ence of that coke and ex­tra ship­ping costs.

The ar­bi­tra­tor awarded Heidt­man $3.51 mil­lion as re­im­burse­ment and the $1.68 mil­lion it had to pay to SeverStal. Heidt­man was also awarded $440,000 plus $185,876 in le­gal fees, hear­ing costs, and ar­bi­tra­tion fees.

Xu Jian­guo, chair­man and le­gal rep­re­sen­ta­tive of He­bei, could not be reached for com­ment at his of­fice in China. Mr. Xu and the com­pany are listed on a va­ri­ety of Chi­nese-lan­guage Web sites. One site calls him “the city of Tang­shan coke king” and says that he has been chair­man of the board of the En­tre­pre­neurs As­so­ci­a­tion of He­bei Prov­ince, Tang­shan City Fed­er­a­tion ex­ec­u­tive com­mit­tee.

Mr. Ride­nour al­leged Mr. Xu asked for an ad­di­tional $10 mil­lion af­ter the coke ship­ment didn’t ar­rive at the docks.

John Carey, a law­yer with East­man & Smith Ltd. who is work­ing for Heidt­man, said the ar­bi­tra­tion award has been ig­nored but there are le­gal op­tions in China.

“We have a two-year win­dow to do some­thing with it in China,” Mr. Carey said. “We have had a Chi­nese law­yer in Bei­jing for about a year try­ing to help us. ... We have been told by ev­ery­body and their aunt that you can go through the Chi­nese ju­di­cial pro­cess if you want to; it will take a re­ally long time; it will be re­ally ex­pen­sive, and re­ally there is no cer­tainty for out­come.”

Derek Scis­sors, an ex­pert on China and an Asian scholar at the Her­i­tage Foun­da­tion in Wash­ing­ton, said he was not sur­prised to hear about Heidt­man’s trou­bles with the Chi­nese com­pany. He said Amer­i­can com­pa­nies should first check out busi­nesses in China be­fore pro­ceed­ing be­cause re­cov­er­ing money in a le­gal dis­pute is very dif­fi­cult.

“No cer­tainty for an out­come is an un­der­state­ment,” Mr. Scis­sors said. “The fun­da­men­tal prob­lem for the U.S. is that it wants to en­cour­age pri­vate Chi­nese com­pa­nies, but pri­vate does not mean eth­i­cal or well run. ... It could be owned by thieves and all of these com­pa­nies have the shel­ter that they are not go­ing to be forced to pay un­less they have other over­seas ex­po­sure.”

Mr. Scis­sors said Amer­i­can com­pa­nies in sim­i­lar dis­putes will not get a judg­ment on any ba­sis of law. “There is no rule of law in China,” he said. “De­ci­sions are made on a po­lit­i­cal ba­sis and the top one is keep­ing peo­ple em­ployed, so if the Chi­nese com­pany says it would have to lay off work­ers to pay this or­der, then for­get it, you are not go­ing to get squat.”

Mr. Ride­nour ad­mits Heidt­man should have used an in­ter­na­tional let­ter of credit rather than pay­ing up front for the coke.

“This was our first foray into China and maybe our last,” he said. “It’s a story about the per­ils of do­ing busi­ness in China with­out hav­ing your be­hind pro­tected.”

Heidt­man and its law firm have asked for help from U.S. Sen. Rob Port­man (R., Ohio), U.S. Rep. Marcy Kap­tur (D., Toledo), the U.S. Depart­ment of State, the U.S. Depart­ment of Com­merce, the Amer­i­can Em­bassy in Bei­jing, and the In­ter­na­tional Cham­ber of Com­merce.

Miss Kap­tur said she is try­ing to “get justice” for Heidt­man by go­ing through of­fi­cial chan­nels.

“I am seek­ing a per­sonal meet­ing with the am­bas­sa­dor from China to the United States and we have asked for that meet­ing and we are wait­ing for a re­ply,” she said. “We are op­er­at­ing with a coun­try that does not have re­cip­ro­cal trade prac­tices. They do not have a rule of law and they do not abide by the nor­mal prac­tice of global trade.”

She said Heidt­man’s sit­u­a­tion is a cau­tion­ary tale.

“This is in­dic­a­tive of many Amer­i­can com­pa­nies do­ing busi­ness in China,” Miss Kap­tur said.

Con­tact Igna­zio Messina at: imessina@the­blade.com or 419-724-6171.



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