Chinese fertilizer firm demands US$8mn in damages from Sri Lanka testing agency

ECONOMYNEXT – China’s Qingdao Seawin Biotech Group Co Ltd, whose organic fertilizer, which Sri Lanka’s National Plant Quarantine Service (NPQS) said contained bacteria, has demanded 8 million US dollars from the agency, alleging negligence.

The Letter of Demand, seen by EconomyNext and dated November 5, has been addressed to NPQS Additional Director W A R T Wickramaarachchi.

The move comes a week after Chinese Embassy in Sri Lanka blacklisted People’s Bank, one of the country’s largest state banks for not honouring a letter of credit (LC) for the disputed fertilizer shipment following a court order to halting payment.

Related: Sri Lanka blocks payment to China Qingdao Seawin Biotech over fertilizer with bugs

Sri Lanka’s refusal to accept the shipment has caused some strain in diplomatic relations with China, especially after a cabinet minister accused China without the real facts, sources familiar with the ongoing tussle between the two countries at the diplomatic level said.

The letter stated that NPQS had claimed that the organic fertilizer had been found to have gram-positive and gram-negative bacteria and said that the “preliminary studies had revealed that bacteria to be Bacillus spp. and Erwinia spp. which can be pathogenic to plants.”

“I am instructed to inform you that my client specifically and categorically deny and refute the purported findings stated in your reports referred to herein above to the effect that the samples of my client’s product does not contain the Erwinia bacteria,” Attorney at Law M J S Fonseka stated in the LOD on behalf of the Chinese company.

“Therefore I am instructed that the contents of your reports to the effect that the samples of my client’s product contain ‘Erwinia’ are wrong, incorrect and untrue which has caused and continues to cause my client enormous loss and damage.”

The LOD also said the process of manufacturing kills all pathogenic pests and bacteria as there is a “Roller Double Drying Process at temperature of 600 degree Celsius and Chinese authorities have confirmed that there was no presence of Erwinia.

It also said the NPQS had used the wrong temperature and the test was “unscientific”.

“Such erroneous conclusion has been reached by you due to your negligent conduct inter alia by not complying or conforming with the testing,” the LOD stated.

The incorrect testing due to such negligent conduct from the Sri Lanka agency has suffered significant loss and damage of around US 8 million dollars and [the company] continues to suffer further loss and damage due to loss of reputation and goodwill as well as existing and potential business, it said.

“In the above circumstances, I am instructed to demand from you and the demand is hereby made for you to make a payment of United States Dollars (USD) 8 million to my client within 3days from the date hereof for the loss and damage caused to my client due to your negligent conduct set out herein above.”

“In the event of your failure to accede to the above demand of my client I have been further instructed to institute action against you in your personal capacity to recover the aforementioned damages from you and to vindicate the rights of my client without any further notice.” (Colombo/Nov07/2021)

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