U.S. Stops Short of Faulting Drywall By Melanie Trottman and M.P. McQueen Wall Street Journal 10-30-2009

U.S. Stops Short of Faulting Drywall
By Melanie Trottman and M.P. McQueen
The Wall Street Journal
October 30, 2009

Federal product-safety regulators said Thursday that their sampling of Chinese drywall emits higher concentrations of sulfur gases and strontium than U.S.-made product, but found no evidence so far that the emissions were to blame for health problems and metal corrosion reported by at least 1,900 U.S. homeowners.

The Consumer Product Safety Commission's inconclusive preliminary report promises to continue the uncertainty over who will pay for damage claimed by homeowners in 30 states, the District of Columbia and Puerto Rico—China, the home builders, distributors, insurers or the U.S. government. Federal studies on the health and corrosive effects of the drywall are continuing.

Before CPSC Chairman Inez Tenenbaum visited China earlier this month for a U.S.-China summit on consumer product safety, she said she planned to ask Chinese officials whether they were prepared to help pay for any drywall damages. But the agency has since sidestepped answering whether Ms. Tenenbaum discussed the cost issue with Chinese officials. A CPSC spokesman said only that Ms. Tenenbaum, in private and public meetings with senior Chinese officials, stated her expectation that Chinese companies "should do what is just and fair" and accept responsibility if any of their products are at fault.

A spokesman for the Chinese Embassy said he wasn't aware of any agreement between the U.S. and China on payment for any damages.

The drywall issue comes at a time of strain in U.S. and Chinese trade relations. The Obama administration in September ordered tariffs on certain Chinese tires, prompting the Chinese government to announce it may raise tariffs on U.S.-made luxury cars and other goods. Thursday, U.S. and Chinese officials said they will relax trade restrictions on agriculture, technology and travel ahead of a planned visit to Beijing in November by President Barack Obama.

Democratic Sen. Bill Nelson of Florida—the state that has seen the majority of homeowner complaints—said in an interview that the CPSC results "defy common sense," and added that he is frustrated by "the slowness of the testing." Mr. Nelson sent a letter to President Barack Obama Thursday asking him to raise the issue of contaminated drywall when he meets with Chinese President Hu Jintao next month in Asia.

Mr. Nelson said the Chinese government has pledged technical support on drywall testing "but has yet to offer any additional assistance." Mr. Nelson said he is concerned that a more extensive, 50-home study on drywall won't be released until around late November, which is after Mr. Obama departs for his trip.

The CPSC, the lead agency in the investigation, said it has received 1,900 complaints about defective drywall. But it estimates that number likely understates the reach, as additional reports are being made to state officials. Federal regulators cautioned that Thursday's conclusions are preliminary and could change as the research continues.

Christine Glunz, a spokeswoman for the White House Council on Environmental Quality, said officials from the multiple federal agencies working on the investigation have kept the White House apprised of their probe and draft findings. "We appreciate the leadership CPSC and the other members of the task force are showing and we look forward to working with the task force as it learns more and develops an appropriate response to this problem," she said.

Investigators aren't sure whether sulfur will turn out to be the cause of the reported health problems. Investigators also found concentrations of "known irritant compounds" formaldehyde and acetaldehyde in homes built with and without Chinese drywall, and at levels that could exacerbate conditions such as asthma in sensitive populations. The chemicals are used as adhesives in wood products. The strontium found in this drywall doesn't pose a radiological risk, regulators said.

Nearly 70% of the complaints have come from Florida, and Louisiana represents most of the rest. Most of the affected homes were built in 2006 and 2007 during a surge in new construction that occurred in part due to homeowners rebuilding after hurricanes in 2004 and 2005. Some builders used Chinese drywall because of a domestic shortage.

Consulting firm Towers Perrin estimates that the tab for drywall damage could range from $15 billion to $25 billion, and housing experts have estimated it costs about $100,000 per average-sized home to pull out bad drywall and replace corroded electrical wiring and appliances.

Douglas Saunders, outside legal counsel for Chinese drywall maker Knauf Plasterboard Tianjin Co., said the CPSC report "is not surprising" and "is consistent with our research findings that there is no information that reveals any adverse health effects."

The company said it will keep working with officials evaluating product concerns. "These cooperative relationships are important to us because the quality of our products and the safety of consumers are our number one priority," he said. Regarding home-builder and homeowner lawsuits filed against Knauf Plasterboard, he said: "It would not be appropriate to discuss specifics regarding pending litigation. However, we will vigorously defend ourselves. "

Miami-based Lennar Corp. which as of Aug. 31 had identified 500 homes it built in Florida with Chinese drywall it said was problematic, declined to comment.

Lennar, which has set aside $39.8 million to repair homes, is one of several builders that have filed product liability lawsuits against Knauf Plasterboard and several other drywall manufacturers in China, as well as importers and distributors of the material and subcontractors who installed it.

John Kuczwanski, spokesman for Citizens Property Insurance Corp., the state-run nonprofit and largest insurer in Florida, also declined to comment on the report.

The CPSC began its probe in February after it started getting complaints in December 2008 from consumers. Homeowners and renters said they smelled rotten egg odors in their homes and had metal items, including air-conditioning units, that had blackened or corroded and in many cases stopped working. Consumers also complained of health problems including bloody noses, recurrent headaches, shortness of breath and asthma attacks. Many consumers say they have to move out of their homes.