illegal trade in ozone depleting substances · 2006-08-10 · illegal trade in ozone depleting...

ILLEGAL TRADE INOZONE DEPLETING

SUBSTANCES:is there a hole in

the Montreal Protocol?

The scale of illegal trade

A smuggler’s methodology

The global response

zonActionOzonAction Newsletter Special Supplement • Number 6

UNEP

OzonAction Newsletter Special Supplement • Number 6

C O N T E N T S C O N T E N T S C O N T E N T S C O N T E N T S C O N T E N T S C O N T E N T S C O N

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EDITORIAL 3

THE SCALE OF ILLEGAL TRADE

The Scope of the Problem: an Overview of Illegal ODS Trade 4

Good Intentions and Unforeseen Consequences 8

Facing the Challenge in Countries with Economies in Transition 9

A Master of Disguise: Why Illegal ODS Trade is Difficult to Detect 12

A SMUGGLER’S METHODOLOGY

The Tricks of Illegal Trade: How Criminals Smuggle ODS 14

The Art of Smuggling: What Customs Officers Need to Know 16

THE GLOBAL RESPONSE

Out on the Front Line: Training Customs Officers 20

The Basel Convention and the Montreal Protocol: Working Together 22

The G-8 Nations’ Contribution to the Fight Against Illegal Trade 24

Safeguarding the Success of the Montreal Protocol 25

GLOSSARY, WEBSITES AND REFERENCES 27

Produced by the OzonAction Programme, Division of Technology, Industry and Economics, United Nations Environment Programme as part of its Work Programmeunder the Multilateral Fund

This project was managed by the following UNEP DTIE staff:Jacqueline Aloisi de Larderel, Assistant Executive Director and Director UNEP DTIERajendra Shende, Chief, Energy and OzonAction Unit, UNEP DTIECecilia Mercado, Information Officer, UNEP DTIE OzonAction ProgrammeAndrew Robinson, Information Assistant, UNEP DTIE OzonAction Programme

Contributors:Mr Gilbert Bankobeza, Mr Duncan Brack, Mr Volodymyr Demkine, Dr Janusz Kozakiewicz, Dr Sachiko Kuwabara-Yamamoto, Mr Tom Land, Mr Larry Cook Larson,Mr Julian Newman, Mr Bruce Pasfield, Ms Sue Stendebach, Mr Suresh Wadhwa, Mr Lars Wilcut

Editorial Review Board:Ms Jacqueline Aloisi de Larderel, Mr Steve Andersen, Dr Omar El-Arini, Ms Ingrid Kokeritz, Dr Lambert Kuijpers, Mr Rajendra Shende, Mr C. Vishwanath, Mr Liu Yi

Editor Ms Margie RynnDesign and layout bounford.comIllustrations Joseph KariukiTranslation Carmen Espinosa (Spanish), Catherine and Emmanuel Paumier (French)

© 2001 UNEP DTIE

This publication may be reproduced in whole or in part and in any form for educational or non-profit purposes without special permission from the copyrightholder, provided acknowledgement of the source is made. UNEP would appreciate receiving a copy of any publication that uses this publication as a source.

No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior permission in writing from UNEP.

The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of theUnited Nations Environment Programme concerning the legal status of any country, territory, city or area or of its authorities, or concerning delineation of itsfrontiers or boundaries. Moreover, the views expressed do not necessarily represent the decision or the stated policy of the United Nations EnvironmentProgramme, nor does the citing of trade names or commercial processes constitute endorsement.

No photo used in this document is intended to suggest that any of the companies whose products may be shown is involved in any illegal trading activity.

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Klaus Töpfer, United Nations Under-

Secretary General and Executive Director,

UNEP

The term “illegal trade” usuallyevokes images of plastic bags filledwith drugs and crates packed withguns – not dull metal cylindersfilled with industrial chemicals. Yetillegal imports of chloroflurocarbons(CFC) and other ozone-depletingsubstances (ODS) are threateningnot just the future of internationalenvironmental and tradeagreements, but the very sky aboveour heads – the ozone layer thatprotects life from the sun’s harmfulradiation. Less ozone in thestratosphere means more ultraviolet(UV) radiation exposure on earth, aserious threat to human, plant andanimal life. Skin cancer, weakenedimmune systems, vision problemsand crop damage are just some ofthe adverse effects of uncheckedUV radiation.

The Montreal Protocol onSubstances that Deplete the OzoneLayer was created to confront thisthreat. Fortunately, the gradualglobal elimination of all types ofODS is proceeding according toschedule and the stage is set forthe substantial recovery ofstratospheric ozone levels by themiddle of this century.

However, there is a cloud on thisrosy horizon. When any substanceis banned, it immediately creates apotential black market – and ODS

are no exception to this rule.Dwindling legal supplies causeprices to rise, giving illegaloperators an excellent businessopportunity. In the mid-1990s,while ODS were being phased-outin industrialised countries, a newphenomena appeared: illegal ODStrade. By 1996, illegal ODS tradehad grown to an alarming level.Though reliable figures on thescope of illegal trade are difficult tocome by, it is estimated thatbetween 16,000 and 38,000 tonnesof illegal CFCs were traded world-wide during 1995. Ironically, it isnot a lack of alternatives that fuelsthe demand for illegal ODS asalternative chemicals have provedto be less expensive; rather it is therelatively high cost of adaptingequipment that use ODS.

Clearly, we must take action tostrengthen existing protectionsagainst illegal ODS trade. The1997 Montreal Amendment tothe Protocol stipulated that eachof the Parties needed to establisha licensing system for ODSimports and exports. Furtheragreements regarding funding forODS production facility closuresin Russia (1998) and China(1999) will also help to lessenthe flow of illegal ODS comingfrom those regions.

Education is key to curtailingillegal trade. Ignorance is an ODSsmuggler’s best friend – thecomplexities surrounding themovement of illegal imports, aswell as the scientific nature of theODS chemicals at issue make itthat much easier to deceive a

customs officer or ozone agentwho is not well informed. UNEPhas conducted seven workshops totrain customs and other officials onillegal trade and will hold ten morethis year. The importance of theseprograms is becoming increasinglyapparent, not just for the MontrealProtocol, but for other MultilateralEnvironmental Agreements (MEA)such as the Basel Convention andCITES (the Convention onInternational Trade in EndangeredSpecies of Wild Fauna and Flora). Itis also becoming clear that theprograms need to be harmonisedso that customs officers receivecomprehensive training that coversall MEAs. By sharing expertise,experience and infrastructure, MEAregimes are working together topresent a co-ordinated customstraining front. UNEP supportsthese efforts and will continue toback similar strong action in thebattle against illegal ODS trade.

This special supplement to theOzonAction Newsletter wasassembled to provide informationand assistance, particularly todeveloping nations, to help winthis battle. Through unifiedinternational efforts, illegal ODStrade can be reduced, if notcompletely eliminated. Thefollowing articles explore thecomplexities of illegal ODS trade indetail and offer a wide array ofsuggestions and recommendationsfor putting an end to this problem.Consider them carefully – theultimate success of the MontrealProtocol is at stake.


E D I T O R I A L E D I T O R I A L E D I T O R I A L E D I T O R I A L E D I T O R I A L E D I T O R I A L E D

T H E S C A L E O F I L L E G A L T R A D E T H E S C A L E O F I L L E G A L T R A D E T H E S C A L E

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The final phase-out dates are insight for CFCs and othersubstances that harm the ozonelayer – but smuggling operationsthreaten the continued recovery ofthe earth’s atmosphere. DuncanBrack examines the origins andscope of the problem.

The Montreal Protocol onSubstances that Deplete the OzoneLayer is considered to be one ofthe great success stories ofinternational environmentaldiplomacy. The implementation ofthe ozone regime, however, hasnot been without its challenges.Fortunately, many of these wereforeseen, including the incentivesrequired to commercialise non-ozone-depleting alternatives tochlorofluorocarbons (CFCs) andother ozone-depleting substances(ODS), the need to adapt schedulesin response to scientific analysisand technological developmentsas well as the differentcircumstances and requirementsof developing countries.

One challenge, however, was notanticipated: the growth of athriving black market in illegalshipments of CFCs and halons. Inthe mid 1990s, illegal materialaccounted for up to 15 percent ofthe world trade in CFCs. By theend of the decade, although thevolume of illegal trade in CFCshad declined, halons, to a certainextent, took their place.

Why did this world-wide blackmarket emerge? To find out wemust examine the weaknesses inthe ozone regime – in the Protocolitself and in the national

regulations implemented inresponse – that allowed illegaltrade in ODS to appear andflourish, and consider to whatextent the problem couldhave been anticipated earlierand more effectively.

INCENTIVES FORILLEGAL TRADEIf governments ban theproduction or use of anysubstance, provided that thealternatives are moreexpensive, a black market isbound to develop. This ishardly a new phenomenon inhistory, or even in environmentalpolicy. Illegal trade in endangeredspecies and their products, illegaldumping of hazardous waste,illegal fishing, whaling and loggingall pose threats to the success ofglobal environmental management.

In the case of the MontrealProtocol, many of the alternativesto ODS use have not in fact, provedto be more expensive – indeed, notonly have they been non-ozonedepleting, but they are frequentlymore effective and cheaper as well.This is particularly true in thesolvents and aerosol sectors and toa lesser extent in foams. In therefrigeration, air-conditioning andfire-fighting sectors, however, thereis an incentive for illegal trade.Though the ODS alternativesthemselves are not usually moreexpensive, the problem arisesbecause generally, equipment mustbe retrofitted, or sometimescompletely replaced in order touse alternatives. For example,retrofitting or replacing an air

conditioning system in anAmerican car could cost anywherebetween US$200 and US$800. Butin the mid-1990s it cost aboutUS$100 to acquire a 30lb cylinderof illegal CFCs, which containedenough refrigerant to service sucha system many times over.Similarly, in fire-fighting it hasproved difficult to develop systemsas effective as those using halons.

So the incentive for continueduse is clear and will remain untilall ODS-using equipment is finallyreplaced with newer technologythat can function on ODSalternatives. However, the readyavailability of illegal ODS willitself inhibit the replacementprocess by effectively extendingthe operating life of the equipmentinvolved. Although illegal tradehas so far involved mainlyCFCs and halons, as phase-outdates for methyl bromide andhydrochlorofluorocarbons (HCFCs)approach, it can be anticipated thatillegal trade in these substanceswill develop as well.

THE SCOPE OF THEPROBLEM: an Overviewof Illegal ODS Trade


O F I L L E G A L T R A D E T H E S C A L E O F I L L E G A L T R A D E T H E S C A L E O F I L L E G A L

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TOO MANY SOURCES,TOO MANY ROUTESThe problem of illegal trade in ODSis significantly exacerbated by twofeatures: the fact that there arenumerous potential sources andthat it is difficult to detect ODS intransit. Sources of illegal ODS canbe divided into three categories:legal production in non-Article 5(industrialised) countries, illegalproduction in non-Article 5countries and legal production inArticle 5 (developing) countries.(see illustration, page 17)

The most obvious source isillegal production, or at leastproduction in excess of Protocolrequirements. A number ofcountries with economies intransition (CEITs) in EasternEurope and the former SovietUnion have experienced difficultiescomplying with the terms of theProtocol due to the political andeconomic upheavals theyexperienced in the last decade. Ofthese, the most serious case – andthe only producer – is the RussianFederation. In 1995, the Russiangovernment claimed production of39,000 ODP-tonnes of CFCs andconsumption of 21,000 tonnes.Although Russia has historically

supplied CFCs to other transitioneconomies, Russian production wasstill 13,000 ODP-tonnes higherthan the region’s totalconsumption. Furthermore,external sources estimated a totalproduction capacity of 100,000tonnes, with actual Russianproduction possibly as high as70,000 tonnes. Most of the ODSentering Europe and the USillegally in the mid-1990s almostcertainly originated in Russia.

From 1995 onwards, the partiesto the Protocol put in place a seriesof strictly monitored regimes toachieve phase-out in thesecountries. Also, funding has beenavailable from the GlobalEnvironment Facility (GEF) to assistthem. In 1996, the World Bankpublished a proposal for a SpecialInitiative for SupplementaryFunding to phase out Russianproduction capacity and thisphase-out was completed inDecember 2000 (see “SpecialInitiative in Russia”, page 10).

Illegal production is not, however,the only possible source of illegalconsumption. Under the terms ofthe Montreal Protocol, Article 5parties are permitted to continue toproduce and consume CFCs and

halons until 2010; no controlsapplied to them at all until 1999. Infact, ODS production in Article 5countries grew much more rapidlythan was envisaged by thenegotiators of the Protocol.Although developing countryproduction of CFCs is still lowerthan consumption (they are netimporters1) the relatively easyavailability of CFCs in somecountries facilitates illegal trade.Whereas Russia was thought to bethe main source of illegal CFCs for


Illegal trade in CFCs in industrialisednations seems to have peakedbetween 1994–96, around the 100%phase-out target for developedcountries. In the US, industry andEPA estimates put the black marketin CFCs between 10,000–20,000tonnes in 1994 and 1995 (worthbetween US$150 and $300 million);subsequent years showed lowerfigures, falling to about 1,000tonnes by 2000.

Source: Duncan Brack, Royal Institute ofInternational Affairs, London. As with any other areaof international environmental crime – or, indeed,crime in general – there are no reliable dataavailable on the scale of the problem. In the case ofillegal trade in ODS, the problem is exacerbatedbecause in most countries relatively little effort hasbeen put into investigating the problem. Any figurescited are educated guesswork at best.

1 At least on the latest data, up to 1997.

A s India begins to cut CFC production in accordance with the

Montreal Protocol, illegal trade in ODS has become a subject of

great concern. Surfacing in India sometime in 1996, this illegal

activity reached alarming levels in 1999. According to rough

estimates, about 900 to 1,000 metric tonnes of ODS infiltrated into

India between 1999 and 2000.

One of the most common smuggling methods uses fraudulent

declarations to move illegal ODS through Inland Container Depots

and ports across the country. In the last year and a half, some 131

metric tonnes of ODS were brought into India using false

declarations at various ports when customs officers – due to

ignorance regarding ODS – released shipments. As a first step

towards rectifying this situation, the government of India issued

circulars and directives to customs officials across the country to

educate them on the particulars of illegal ODS traffic.

The efforts bore fruit. After the dissemination of the circulars,

illegal ODS imports were seized in Nava Sheva, Cochin, Varanasi

and Jaipur, where a US$11,000 penalty was levied on each of two

illegal shipments. In addition, police conducted raids on storehouses

holding illegal ODS in Delhi, Mumbai and Calcutta.

Industry associations claim that porous land borders shared with

neighbouring countries provide major routes for illegal ODS

imports. It should be noted that some of these countries have not

ratified the 1997 Montreal Amendment to the Protocol and so are

not yet obliged to have licensing systems and other

control mechanisms in place at this juncture.

Suresh Wadhwa is vice president, corporate marketing at Gujarat Fluorochemicals Ltd, one of the

leading producers of CFCs/HCFCs in India. [email protected]

DIVERSION OF ILLEGAL TRADE: CASE STUDY IN THE SOUTH ASIA REGIONBY SURESH WADHWA



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most of the 1990s, the problem nowseems to have shifted to developingcountries, particularly China, whereODS has been legally produced butthen diverted into illegal markets indeveloped countries.

CFCs and halons have also beenlegally produced in industrialisedcountries, even after phase-out.Non-Article 5 parties to theMontreal Protocol may produceand consume after phase-out foruse as chemical feedstock or asprocess agents, for essential useexemptions agreed by successivemeetings of the parties and forexport to developing countries tomeet their “basic domestic needs.”In addition, ODS produced beforethe phase-out dates may still belegally sold and consumed inmany non-Article 5 countries evenafter phase-out. These may beavailable from stockpiles, or maybe recovered from old equipmentand recycled. As with developingcountry production, theseexceptions to phase-out haveprovided a variety of sources forillegal commerce and a wide range

of opportunities for concealmentor disguise.

The detection of illegal materialis therefore extremely difficult.Unlike illegal drugs, for example,CFCs or halons available for salein an industrialised countrycannot automatically be assumedto be of illegal origin. Thisproblem is compounded by themany different ways smugglerscan place their products on themarket. Since ODS are colourless,odourless gases at roomtemperature, chemical analysis isneeded to determine preciselywhat substances are present.Smugglers have taken advantageof this fact and devised highlyeffective schemes involvingmislabelling containers anddocuments, diverting ODS tothird countries, concealingillegal canisters behind legalones and disguising virgin ODSto appear recycled.

Mislabelling and diversion areprobably the main smugglingmethods, but all these routes havebeen observed in the US, EU and

Taiwan at various times and arenow beginning to appear indeveloping countries as they movetowards their own phase-outtargets. A frequent route for illegalshipments has been through the“triangulation” of trade – ODS areproduced legally in a developedcountry and then, as required bythe Protocol, exported to an Article5 country. Then the same ODS arere-imported illegally for use in theoriginal developed country.European colonies in thedeveloping world have often beenused as re-entry points.

WHAT COULD HAVE BEENDONE DIFFERENTLY?After a slow start, the reaction ofthe authorities has clearly helpedto reduce the volume of smuggledmaterial, particularly in the US,where illegal trade is also a matterof tax evasion. However, it seemshighly probable that the bulk ofillegal ODS is still not beingdetected.

Could the problem have beenanticipated when the Protocol was

T he creation of the Multilateral Fund established a new approach

toward solving global environmental problems – forging a close

partnership between developing and industrialised nations that is

based on equality, rather than dependence. Conceived at the

Second Meeting of the Parties in London, the Fund was designed to

help developing countries meet their ODS phase-out schedules as

set down in the Montreal Protocol. Industrialised nations, being the

major source of ODS, acknowledged their responsibility to assist

developing countries in meeting the financial and technological

costs of adherence to the Protocol. In addition, developing nations

were given a ten-year grace period, with complete phase-out

targeted for 2010, so as not to discourage needed development and

to encourage ratification to the Protocol.

The fund is managed by the Executive Committee, which has been

carefully structured to ensure balanced participation by industrialised

and developing countries. The Executive Committee is assisted by a

Secretariat, which monitors the realisation of projects, a task

accomplished by several implementing agencies. The United Nations

Environment Programme (UNEP) provides the organisational umbrella

for the Fund's Secretariat and also acts as its Treasurer.

From its initial total of US$160 million, the Fund has grown to

over US$1 billion, and has been used to help developing nations

prepare country programmes, get technical assistance, obtain

information and training, and work in harmony with neighbouring

countries to achieve the Protocol’s goals. Over three-quarters of all

distributed funds are invested in factories and equipment that are

necessary for ODS phase-out. Some of the initiatives financed by

the Fund include:

❑ Preparing 97 developing countries Country Programmes and

phase out strategies

❑ Implementing institutional strengthening projects in 77 countries

❑ Helping 48 countries to prepare Refrigerant Management Plans

❑ Public awareness campaigns and training

THE MULTILATERAL FUND: BRINGING DEVELOPING NATIONS INTO THE PICTURE

Financial Assistance under Multilateral Fund

Billion of US $1.2

0

0.2

0.4

0.6

0.8

1991 92 93 94 95 96 97 98 2000

1.0

99

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being negotiated? Almost certainlyit could have, if not when theProtocol was signed in 1987, thenwhen total phase-out of CFCs wasagreed in London in 1990. Bythen it was clear that businessesand consumers would have toreplace or adapt millions ofappliances and pieces ofequipment. The cost of CFCalternatives was at that timeanticipated to be quite high(although that turned out not tobe the case), establishing aclear incentive to keep oldequipment in use after theofficial phase-out dates.

If the problem had beenforeseen, could the Protocol havebeen designed or implementeddifferently? There are a number ofmeasures that at least in theorycould have reduced the likelihoodof illegal trade.

First, the problem could havebeen tackled at its source byrequiring all countries to have thesame phase-out schedule. Thiswould have meant no grace periodfor developing countries, whichwould have been inequitable aswell as economically andpolitically unrealistic – at leastwithout substantial additionalfinancial support through theMultilateral Fund.

Second, the problem could havebeen tackled at its end-point – thepoint of consumption. Phase-out

could have beenaccelerated by theapplication of use and/orsales controls (as the EUhas done in its latestregulations). However,this faster phase-outwould have forcedconsumers to scrap oradapt equipment beforethey would otherwisehave done so. The costof doing so would haveto be weighed against

the cost to the environment and tosociety at large of not controllingillegal trade. The preferred courseof action would therefore dependon the balance of costs andbenefits in a particular country at aparticular time. It does appear thatuse controls can play a valuablepart in the last stages of phase-out;but this level of detail could notrealistically have been written intothe Protocol at the outset.

Finally, the problem could havebeen tackled in its most obviousmanifestation, in the process ofillegal trade itself. This is mainlyan issue for national governments,in terms of investment of politicalwill and resources in detecting andcontrolling smuggling. Mostenforcement authorities, such ascustoms and police, are notfamiliar with environmental crimeand often not predisposed towardsgiving it a high priority, comparedto their more traditional areas ofconcern such as drugs or arms. Forthis reason, it seems likely thatenvironmental agencies should bethe main enforcement authoritiesinvolved, though they will clearlyhave to co-operate with police,customs and judicial authorities.Adequate frameworks, trainingand financing, need to be in placeto make this work.

At an international level, the needfor the system of licences forimports and exports required underthe 1997 Montreal Amendment tothe Protocol could have beenanticipated from the beginning, andprecedents existed in other

environmental treaties, such as theConvention on International Tradein Endangered Species (CITES).Indeed, a more detailed trackingsystem, including identificationcodes for originating plant andlabelling systems for ODS-containing equipment has beensuggested recently and couldprobably have been implementedfrom the start.

LOOKING AHEAD“International environmentalcrime” – the deliberate evasion orflouting of national environmentalregulations with trans-boundary orglobal impacts – is now a fact ofinternational life. The ozoneregime is lucky, compared withmany other environmental treaties,in that illegal trade will eventuallydisappear of its own accord as ODSend uses are gradually phased out.In fact, industrialised countrieshave already seen a fall involumes. Developing countries,however, are just beginning toexperience illegal imports as theyprogress in their own phase-outschedules. Consequently, there isstill much to be done to controlillegal ODS trade. Perhaps mostimportantly, there are manylessons to be learned from theMontreal Protocol that will beinstructive in facing otherenvironmental challenges.

Duncan Brack is the head of the Energyand Environment Programme at theRoyal Institute of International Affairsin London. [email protected]



In June 1999, Richard Schmolkewas arrested in the United Statesfor smuggling 37 tonnes of CFCsfrom Venezuela into the US.Schmolke worked the fraud byshipping refrigeration units out toVenezuela for re-filling and re-export to the US, but on inspectionthe CFCs were found to be virginand not recycled as claimed.

Source: Julian Newman, Environmental InvestigationAgency, London.

12th Meeting of the Parties to the Montreal

Protocol, Ouagadougou, Burkina Faso,

December 2000.


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Gilbert Bankobeza looks athow aspects of the MontrealProtocol affect the problem ofillegal ODS trade.

Though entirely unintentional,there are elements of the MontrealProtocol that actually contribute toillegal trade. The most apparent oneis the staggered schedule of ODSphase-out. Due to economic andtechnical considerations, not allcountries were required to phase-out ODS at the same time. The 10year grace-period given to Article 5countries (developing nations)opened up tremendous potential forsmuggling CFCs and other ODSinto non-Article 5 (industrialised)countries after their 1996 phase-outdeadlines. However, several otherfactors have added to thedevelopment of illegal ODS trade.

First of all, the demand for CFCsin non-Article 5 countries hascontinued beyond the phase-outdeadlines in 1996 due to thecontinued use of old CFC-dependent equipment such as airconditioners and refrigerators.Alternative chemicals for theseappliances were originally moreexpensive than CFCs, whichmade cheaper, illegally tradedsubstances attractive.

Secondly, ODS are still available.The Montreal Protocol permitscontinued production of CFCs innon-Article 5 countries for theirown essential uses, such aslaboratory research, analytical usesand metered dose inhalers forasthma treatment. Industrialisednations are also allowed to exportCFCs to Article 5 countries to meettheir basic domestic needs. Inaddition, since Article 5 countrieshave been given more time tophase-out ODS, they are still

producing CFCs and other ODSbeyond the phase-out deadlinesapplicable for developed countries.

Finally, there is a loophole:recycled substances are not subjectto control measures contained inthe Montreal Protocol, other than arequirement to report thequantities traded – and it isdifficult to distinguish betweennew and recycled substances. Thissituation has allowed illegal tradeto flourish among various legaltrade flows: new CFCs aredisguised as recycled, while newCFCs and halons destined forArticle 5 countries are divertedinto local markets. Similarly,mislabelling of products and otherforms of fraud are taking place atinternational borders.

To combat these activities,measures have been taken by theparties to the Montreal Protocol tocurtail or minimise illegal ODStrade in Article 5 countries. In1997, a framework was adoptedthat required all parties to

implement an import/exportlicensing system to trackcommerce and facilitate datacollection. Such a licensing systemwill also allow for better cross-checking of information betweenimporting and exporting countries.

In order to facilitate the creationof these new licensing systems,UNEP has conducted a series ofregional training workshops forcustoms officers and representativesfrom other government agencies inAfrica, Asia, Latin America and theCaribbean and Eastern Europe (see“Out on the Front Line: TrainingCustoms Officers”, page 20). Theseworkshops, made possible throughfinancial assistance from theMultilateral Fund and GEF, weredesigned to enable participatingcountries to set up and implementefficient legal systems to control andmonitor ODS imports and exports.

Many Article 5 countries havealready adopted licensing systemsand now require strongenforcement to make them work.Stringent enforcement of nationallaws is extremely important. As longas trade in ODS between Article 5and non-Article 5 countriescontinues to be legal, controllingillegal trade will be a challenge thatcould prove to be even moredifficult than enforcing a global banon these substances. However, withcontinued efforts to phase-out CFC-dependent equipment and strongcommitment from governments toenforce the new licensing systems,it is quite possible that illegal ODStrade can be curtailed andeventually eliminated.

Gilbert Bankobeza is a senior legalofficer at the Ozone Secretariat, UnitedNations Environment [email protected]

GOOD INTENTIONSand Unforeseen Consequences


In 1995, Florida shipping agentIrma Henneberg received a 57-month jail sentence for falsifyingshipping documents relating to theexport of CFCs. She was involved ina scam to divert 4,000 tonnes ofCFC-12 imported from Europe intothe US market, falsely claiming thatthe chemicals were for export toArticle 5 countries. A similar casewas uncovered in the US in 1999. Ina sophisticated transhipment fraud,35 tonnes of Russian CFCs werediverted onto the American market.The importer claimed the chemicalswere destined for Mexico, while infact empty cylinders were sent toMexico and the CFCs weretransported to New York.



As many Eastern Europeancountries struggle with hugeeconomic transitions, monitoringand preventing illegal trade inODS has been especially difficult –creating ample opportunity forsmugglers. Volodymyr Demkinereports on this situation and whatis being done to resolve it.

Illegal trade in ODS in countrieswith economies in transition(CEITs) has become a cause ofserious concern in recent years.Inadequate control systems andenforcement are exacerbating thisproblem. At the 1997 Meeting ofthe Parties, the Parties stressedthat these safeguards are crucial.“Together with licensing systems,accurate and reliable datareporting is essential to defeatillegal trade,” the Parties noted intheir report.1 Because of thespecial circumstances in thesecountries, finding a solutionrequires careful consideration ofseveral important issues.

One of the main factorscontributing to illegal trade in thisregion is non-compliance with theMontreal Protocol. The enormouseconomic and political transitioncurrently taking place in CEITs

has made it very difficult for themto ratify and subsequently complywith the Montreal Protocol.Obstacles include a lack offunding and institutional capacityto undertake projects, inadequateinformation and training on theMontreal Protocol and technicalalternatives, communicationdifficulties due to tele-communications and languagebarriers and lack of familiaritywith working within theinternational environmentalprotection system. In fact, severalCEIT officials believe that theyrisk continued non-compliancebeyond 2001 if phase-out actionsare not co-ordinated throughregional initiatives and if they donot receive the necessaryinformation, support and trainingthey require. Since the success ofthe Protocol depends oncompliance by all countries, non-compliance by CEITs poses aserious problem. To rectify thissituation, the Parties haveestablished a special frameworkfor phase-out in CEITs that havenot been able to meet the originalschedule.2

At the present time, several non-Article 5 CEITs are in a state of

non-compliance because theycontinue to consume ODS afterthe phase-out date for developedcountries – January 1, 1996.However, in recognition of thechallenges facing these countriesand their bona fide commitmentto become compliant as soon aspossible, the Parties have decidedto allow certain CEITs tocontinue to consume ODS for non-essential uses.3 In addition, theRussian Federation has beenallowed to supply ODS to formerrepublics of the Soviet Union,some of which are not parties tothe Protocol. Unfortunately,unscrupulous traders have beentaking advantage of this situationand illegally re-exporting Russian-made ODS. Furthermore, thereis indirect evidence that illegalODS trade is taking placebetween CEITs that are partiesto the Protocol.

CONTROLLING ODSTRADE IN UKRAINEUkraine provides a good exampleof the ODS trade situation inCEITs. Like most non-Article 5countries, Ukraine was scheduledto complete phase-out of CFCs by1996. However, due to economicdifficulties it was not able to meetthat goal. In 1995, in anticipationof the problem, the Partiesconsidered the situation anddecided to let Ukraine consumeODS beyond January 1996,

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1 Report of the Ninth Meeting of the Parties to the Montreal Protocol on Substances that Deplete the Ozone Layer, UNEP/OzL.Pro.9/12, September 1997.2 E. g. Decisions X/20 to X/28.3 Non-Article 5 CEITs still allowed to consume ODS for non-essential uses are: Azerbaijan, Belarus, Estonia, Latvia, Lithuania, Kazakhstan, the Russian Federation, Turkmenistan and

Uzbekistan. Several CEITs such as Croatia, Georgia, Kyrgyzstan, Moldova and Romania were classified as Article 5 countries.

FACING THECHALLENGEin Countrieswith Economiesin Transition

12th Meeting of the Parties to the Montreal

Protocol, Ouagadougou, Burkina Faso,

December 2000.



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provided the country did its best tophase out ODS in its territory aspromptly as possible. Theinternational community, in turn,agreed to provide financial supportfor implementation of the proposedCountry Programme (CP) of ODSphase-out for Ukraine. In October1996, the Ukrainian governmentapproved this programme and acorresponding grant agreementbetween Ukraine and the WorldBank was ratified in March of

1999. According to this agreement,Ukraine will phase out ODS in itsterritory by the year 2002.

First attempts to create a clearpicture of the ODS market inUkraine were made by the Ministryfor Environmental Protection andNuclear Safety (MEP) in 1995.Originally, it was supposed thatthere would be no reason forbusinesses to distort data on ODS(mostly CFC) consumption andtrade and that there would be noincentive for illegal imports. Thiswas based on two assumptions:first, that ODS import was notprohibited; and second, thathistorically Ukraine imported thelion’s share of its ODS from theRussian Federation. At that time,cheap CFCs produced by theRussian plants were widelyaccessible in most CEIT countries.CFCs made in the RussianFederation could be bought for lessthan US$1.00 per kilogram, oftenon credit or via barter4 schemes. Asa result, the street price of CFC-12was around US$1.50 per kilogram.

Data was collected mainly fromenterprises and companies thatwere covered by official statistics.Surprisingly, when the consol-

idated data was compared withindependent expert assessmentsand export figures on ODS tradefrom Russia to Ukraine, manydiscrepancies were discovered.In fact, many businesses distorteddata on ODS imports and someenterprises even reported zeroconsumption. The reasons forthese distortions were mostlycommercial in nature. Manycompanies tried to reduce theirreal turnovers to escape taxation,others used barter schemes tohide as many commodities asthey could. Other reasonsincluded poor book-keeping andlack of enforcement on the locallevel. To be fair, the businesseswere not concerned withenvironmental liability becausethere was no relevant regulationin Ukraine at the time.

There were several methods ofbringing uncontrolled ODS intoUkraine. Some businesses preferredto negotiate with customs officers,while others used mislabelling andother means. Again, at the timethere were no restrictions on ODSimports and the reasons for suchbehaviour had to do withcommercial, not environmental

Due to the huge transformation taking place in its economy, the

Russian Federation was not able to meet the 1996 ODS phase-out

deadline for developed countries. Though Russian consumption of ODS

had dropped from over 100,000 tonnes to under 30,000, the continued

production of CFCs and other ODS was a cause of concern because it

provided a potential supply to smugglers – and ample opportunity for

illegal ODS trade.

The Russian government continued in its efforts to support the goals

of the Montreal Protocol, developing an alternate plan that called for

ODS phase-out by 2000. In keeping with its promise, last December the

Russian Federation announced that it had achieved phase out of ODS

production. The World Bank, along with the Global Environment Facility

(GEF) and individual donor countries, is supporting this effort with a

special initiative that provides funds to ensure the permanent closure of

ODS-producing facilities in Russia.

Signed in October 2000, the US$26.2 million grant will be used to

compensate seven ODS-producing enterprises that have ceased

operations and also finance the monitoring and verification of the

closures – to be carried out by Russian and international experts.

SPECIAL INITIATIVE IN RUSSIA

In Europe, industry estimatessuggest illegal imports of up to15,000 tonnes a year in the period1994 to 1996. In January 1997,Dehon Services, the EuropeanUnion’s largest CFC distributioncompany, estimated the volume ofillegal trade by comparing data onend-use sales with total legalsupply from production, stockpilingand recycling capabilities. On thisbasis, an estimated 8,000 tonnes ofillegal material entered the EU in1995 and 6,500 tonnes in 1996.Mirroring the US experience,recent years seem to show lowervolumes.

Source: Duncan Brack, Royal Institute ofInternational Affairs, London.

11

matters. But the fact remains thatthese methods were used to importcontrolled substances illegally. By1996, it was absolutely clear thatthe first thing that needed to bedone was to establish a reliablemonitoring system of ODS trafficin Ukraine.

To that end, the National OzoneOffice – responsible for the day today control and implementation ofthe Montreal Protocol – worked inseveral directions. First, allregional offices of the MEP wereordered to register all ODS users,to include them in a central databank and to regularly requestthem to report ODS consumption.(This task has been significantlyfacilitated since 1999, as anybusiness currently dealing withODS must now obtain a license.)Then the Ozone Office startedestablishing direct contacts withmain ODS traders. In addition,MEP officially approached theCustoms Service of Ukraine toobtain data on import/export ofODS. By the beginning of 1998,there were at least threeinformation channels providinginformation on ODS import, exportand consumption in Ukraine. Thissystem allowed officers tocrosscheck information obtainedfrom different sources and, as aresult, to obtain reliable data.

But the most importantdevelopment was to establish a

system of licensing theimport/export of ODS. This systemwas established by governmentaldecree in March 1998. The decreebans any unlicensed import orexport of ODS and productscontaining them. ODS re-export isalso prohibited. With thismonitoring system in place inUkraine, illegal trade in ODSshould be very difficult. However,some problems and possibleloopholes still remain.

PROBLEMS ANDSHORTCOMINGS A significant problem for manyCEIT countries is unreliability ofthe control on the border. Manybusinesses have been able tonegotiate with customs officers toobtain various indulgences. Sincethen, several countries haveimposed charges on imported ODS.This measure has been applied tocreate an economic incentive forrapid ODS phase-out. However, it

also automatically creates aneconomic incentive for smugglingODS. In this situation, specialattention should be paid to bordercontrols, but unfortunately,environmental authorities do nothave control over customs services.Another obstacle is that customsofficers are still lacking appropriatetesting equipment to checksubstances at the border.

Another problem that is specificto CEITs is that small quantities ofODS that are transported over theborder in a non-commercialmanner may easily escape propercontrol, especially if the carrieruses mislabelled containers. Someozone officers have complainedthat because prices for CFC-12 arevery different in neighbouringcountries and borders aretransparent, it is profitable fortechnicians to purchase CFC-12abroad and bring it back inprivate cars disguised assomething for personal orhousehold use. Nobody knowshow much CFC is transported inthis way, but it is clearly anotherobstacle in the effort to curbillegal ODS trade.

LESSONS LEARNEDSeveral lessons can be learnedfrom the experience of Ukraineand other CEITs. First of all, it isvery important to establish areliable national system ofmonitoring of ODS trade andconsumption as early as possible.Ideally, it should be done before



4 “Barter” is an exchange in goods which avoids transferring monies from the buyer’s bank account to the seller’s bank account. Since barter often allows people to escape taxation, suchschemes are widely used in countries of the former Soviet Union.

V ery few CEITs have been able to compile statistics on actual incidents of violations

concerning illegal trade in ODS. One of these, the Czech Republic, reported 146

incidents of illegal trade in ODS during the period 1995 to 1997. These included:

❑ Delays in forwarding information on ODS quantities to the authorities (118)

❑ Import of ODS without permit (10)

❑ Import of ODS in an amount higher than allowed in the permit (14)

❑ Failure to pay charges for the use and transport of ODS (4)

Fines levied on violators by the Czech Environmental Inspectorate totalled US$53,310.

Source: Paper supplied by Czech republic to the Workshop on Enforcement and Compliance with Multilateral Environmental

Agreements (MEAs), Geneva, 12–14 July 1999.

KEEPING TRACK IN THE CZECH REPUBLIC

A lmost all CEITs have legislation that accords fines of up to US$25,000 for violating

regulations dealing with ODS imports/exports. In a few CEITs, illegal trade in ODS is

treated the same as illegal trade in any other chemical and in one or two legislation

contains penalties of imprisonment. Some CEITs, such as Poland, will soon introduce

imprisonment penalties.

Source: Janusz Kozakiewicz, [email protected]

SMUGGLING PENALTIES IN CEITS


Due to the nature of the chemicalsat issue and the circumstancessurrounding their sale, it is notalways easy to pinpoint when, infact, commerce in ODS is illegal.Janusz Kozakiewicz discusses thereasons behind this conundrumand how smugglers takeadvantage of the situation.

Controlling any type of illegalcommerce is difficult, but becauseof their unique characteristics,controlling trade in ODS isparticularly complex. Theprogressive scarcity of ODS –currently CFCs and halons – hasmade illegal trade that much moreprofitable and this problem is noweffecting not only industrialisednations, but also Article 5 countriesand CEITs that have controls inplace. Because of its broad scope,understanding all aspects of thisphenomenon is essential to bothlimiting this illegal activity andensuring the success of theMontreal Protocol.

Most ODS, including CFCs andHCFCs, are odourless gases orliquids that boil at lowtemperatures. But thesecharacteristics do not necessarilyhelp customs officers identifyillegal ODS, as ozone-friendlysubstitutes, such as HFCs, are alsogases without scent and or low-boiling compounds. Furthermore,the chemical names of ODS andtheir non-ODS counterparts maylook very similar to an officialchecking documentation (forexample, hydrochlorofluorocarbons

vs. hydrofluorocarbons, or 1,1,1-trichloroethane vs. 1,1,2-trichloroethene). To make mattersworse, these substances are oftenimported or exported under tradenames only. Often, a smuggler needonly change around the names ofthe chemicals in question in orderto confuse the customs officer andcross the border.

Although it is possible to testcontainers suspected of holdingODS, necessary equipment isavailable only at a limited numberof customs check points. Butsometimes not even a test willdetect ODS. Some importers/exporters are now transportingODS in special compartmentshidden in containers filled withozone-friendly substances.

Customs officers usually check aspecial customs code to help themidentify a substance. However, fewindividual ODS have their owncode. In some cases, codes identifynot one, but a whole group of ODS,or cover a wide range of mixturescontaining ODS. Even in the most


elaboration of the CP. However,this crucial component is usuallyincluded into the CP’s institutionalstrengthening project, whichcomes after the CP is approved.Such an approach is not effective.

Secondly, the introduction ofenvironmental fines regarding ODSmust be carefully planned. If thefines are put into place too early,they may create economicincentives for illegal trade.

Finally, co-operation with thebusiness sector is essential.Establishing sustainablerelationships with the biggest ODSsuppliers/consumers or theirbusiness associations may be veryhelpful. In addition, companiespromoting ODS alternatives andtechnologies can serve as effectiveexamples and provide leadership inthe market.

To sum up, uncontrolled tradepaves the way to illegal trade. Bycreating a comprehensive system ofmonitoring of ODS transportationand consumption before theintroduction of strict ODS phase-out measures, illegal trade can beminimised. In this context, it isessential to establish national ODSimport/export licensing systemspursuant to the decisions made atthe 1997 Meeting of the Parties aspromptly as possible.

Volodymyr Demkine is the formerDeputy Head of the InteragencyCommission on the Montreal ProtocolImplementation in Ukraine and iscurrently Environmental Affairs Officer,DEWA/[email protected]

A MASTER OF DISGUISE:Why Illegal ODS Tradeis Difficult to Detect

In 1997, customs officers in Taiwandiscovered illegal CFC cylindersconcealed within false jacketslabelled as containing HFC-134a.When samples were taken from themain valve HFC-134a was detected.But when the cylinder was cutopen, it revealed a hidden valvewith the bulk of the contents beingillegal CFCs.


As of September 1999, 662 seizuresof illegal ODS imports (involving1,000 tonnes) had been made inthe US, 133 resulting in criminalcases. 87 defendants had beenconvicted, leading to a totalimprisonment period of 48 yearsand total fines of US$38 million.


OzonAction Newsletter Special Supplement • Number 6 13

sophisticated customs classificationsystems, the problem of classifyingmixtures containing ODS has notyet been solved.

Moreover, some of the mixturescontaining ODS may be given acustoms code related to its use,rather than its composition. Thisloophole is sometimes also appliedto “pure” ODS. For example, someproducers add small amounts ofchloropicrin to pure methylbromide (an ODS) to change itsodour and then incorrectly give thecode for an insecticide or pesticideon customs forms – thus avoidingmonitoring and control.

Another important issue is thefact that while ODS and mixturescontaining ODS are controlledunder the Montreal Protocol, thereare no restrictions for trade inproducts containing ODS betweenParties to the Protocol. Thedistinction between ODS-containing mixtures and ODS-containing products is of crucialimportance for a customs officer orozone official. Though theMontreal Protocol providesguidelines for such differentiation,1

this does not help customs officers,

who must rely on customs codesto make a judgement. Even forODS specialists, differentiatingbetween the two may not be easy.

Once an ozone depletingsubstance is fully identified, theremay still be doubts as to whetherthe shipment is legal. Variousexemptions exist under theMontreal Protocol and smugglerscan take advantage of suchallowances. The trick mostfrequently used is to declare virginODS as “used,” and thus exemptfrom phase-out schedules. ODSused for laboratory and analyticalpurposes are also exempt –provided they are of specified purityand are traded in capacity-specificcontainers with special labels. It isquite difficult for customs officers tocheck whether these requirementshave been met. ODS produced orimported for use as “feedstock” in achemical process are not includedin the Protocol’s definition ofproduction or consumption andthus in some countries no permit isneeded. In this case, the customsofficer has only the importer/exporter’s declaration to rely on inmaking a judgement.

These problems must beaddressed by the internationalcommunity as soon as possible ifwe are to avoid furtherdevelopment of illegal trade. Keymeasures include introducing ODSlicensing/permit systems into theMontreal Protocol and organisingextensive training for customsofficers on both a regional andnational level – particularly indeveloping countries (see “Out onthe Front Line: Training CustomsOfficers”, page 20). However, eventhese measures will not solve theproblem of ODS identificationunless further action is taken toimprove the customs classificationof ODS-containing mixtures,develop a labelling/marker systemfor ODS and further clarify thedifference between ODS-containingmixture and ODS-containingproduct in customs codes. Thesesteps, along with the recentdecision taken at the 12th Meetingof the Parties in December 2000,will help to provide customsofficers and other officials with thetools they need to identify andprevent illegal trade.

Dr. Janusz Kozakiewicz is head ofthe Ozone Layer Protection Unit atthe Industrial Chemistry ResearchInstitute in Warsaw, [email protected]


1 Decision I/12A (items (c) and (d), respectively) states “if a substance or mixture must first be transferred from a bulk container to another container, vessel or piece of equipment inorder to realise its intended use, the first container is in fact utilised only for storage and/or transport and the substance or mixture so packaged is covered by Article 1, paragraph 4 ofthe Protocol (i.e,. it is a controlled substance)” and “if, on the other hand, the mere dispensing of the product from a container constitutes the intended use of the substance, then thatcontainer is itself part of a use system and the substance contained in it is therefore excluded from the definition (of a controlled substance).”

A portable Halon Identifier used to analyse

liquid samples to verify purity and identify

contaminants taken from storage cylinders.


A S M U G G L E R ’ S M E T H O D O L O G Y A S M U G G L E R ’ S M E T H O D O L O G Y A S M U G

14

Smugglers are very creative whenit comes to transportingcontraband ODS across borders.Citing several actual cases,investigator Julian Newmanoffers an analysis of their motivesand methods.

When officials from around theworld agreed to the MontrealProtocol in 1987, they could nothave imagined that within adecade chlorofluorocarbons(CFCs) would be second only tococaine as the most valuablecontraband smuggled through theUS port of Miami.

While those phrasing theprotocol and its initial amendmentswere rightly focused on phase-outschedules and funding, thepossibility of illegal trade did notcross the radar. Yet by the mid-1990s, around 20,000 tonnes ofODS were being smuggledannually and the black market was

providing 20 per cent of CFCs inglobal circulation.

With hindsight, the probability ofsubstantial trafficking in ODS wasassured as soon as differing phase-out schedules were agreed fordeveloping (Article 5) andindustrialised (non-Article 5)countries. The motive behind ODSsmuggling is pure economics: asproduction bans came into force inboth the European Union and theUnited States, domestic demandremained buoyant. At the sametime, some developing countries,notably China and India, wererapidly expanding production.This, coupled with Russia’s non-compliance, ensured abundantsupplies of cheap CFCs for theglobal market.

Rich rewards await those willingto break the rules to illegally divertthese cut-price CFCs into thelucrative US and EU markets. Forexample, Chinese CFC-12 can bebought for as little as US$1 perkilogram and can fetch at leastUS$16 on the UK market. Thepotential profit margin on astandard 20 tonne container canbe over a quarter of a million USdollars. Some of the largersmuggling rings have mademillions of dollars from theircriminal enterprises.

People involved in ODSsmuggling tend to be from thewhite-collar end of crime. Somemay have a legitimate backgroundin a sector associated with ODS,such as refrigeration or fire-

fighting equipment, while othersare classic middlemen or“arbitrageurs” dealing in a range ofdubious commodities. Occasionallylinks between ODS smuggling andother criminal activities surface. Anindividual involved in a plot toillegally import Chinese ODS intoGermany was also accused ofbreaking sanctions by supplyingmissile parts to Iraq. One of thefirst cases of illegal ODS imports inItaly was uncovered during aninvestigation into arms traffickingand some of the smugglers caughtcrossing the Mexico-US border hadpreviously worked as drug “mules”.

Opportunities for ODS smugglinghave been greatly enhanced bymajor loopholes in the Montreal

In the largest detected case of ODSsmuggling in the European Union,the German firm Taifun and anetwork of brokers imported over800 tonnes of Chinese CFCs andhalons between 1995 and 1997.The chemicals were falsely labelledas R-227, a legal HFC, to avoiddetection. The smuggled chemicalswere shipped to the UK, Belgium,France, Greece, Italy, Germany andthe US.


In 1996, CFCs were seen on sale inSpain clearly packaged indisposable cylinders intended forexport to Article 5 countries.Enquiries revealed that the CFCswere packaged in the UK forexport to Africa, but had beendiverted onto the European marketby a Spanish firm. Offshore islandsare often used for this smugglingmethod. In 1995 and 1996, theDutch Antilles suddenly beganimporting huge amounts of CFCs,far more than could possibly beneeded on the island. In 1998,customs officers on Reunion Islandin the Indian Ocean interceptedCFCs about to be illegally shippedback to France.


THE TRICKSOF ILLEGAL TRADE:How Criminals Smuggle ODS


Protocol, facilitating trade in usedor recycled material and permittingtranshipment of ODS forrepackaging. The recycling scamhas been particularly prevalent inthe US, where imports of usedCFCs and halons are stillpermitted. In just two months in1997, over 350 tonnes ofsupposedly recycled halon 1301were shipped from China to the US– yet at that time the most modernhalon reclamation plants in theworld could only process 70 tonnesin a year.

Repackaging fraud came to lightin the EU in the mid-1990s, whena number of brokers (particularlyfrom the UK) began bringing inbulk shipments of Russian CFCs,ostensibly to be repackaged and re-

exported to Article 5 countries. Infact, much of this material foundits way onto the black markets ofEurope and the US.

Like most illicit activities, ODStrafficking is fluid in nature; it isconstantly shifting to takeadvantage of changingcircumstances such as newloopholes, price differentials,market availability and to avoidlocations where enforcement hasbeen enhanced. A variety ofmethods are employed to avoiddetection (see “The Art ofSmuggling: What Customs OfficersNeed to Know”, page 16), rangingfrom sophisticated frauds involvingfalse paperwork and coveringseveral different countries, to anindividual simply loading up a car

with canisters and driving acrossthe border from Mexico to the US.

The first major cases beganappearing in the US around 1995,with Florida emerging as the majorhub for CFC trafficking. To counterthis threat, the US authoritieslaunched “Operation Cool Breeze,”an inter-agency task force that wassoon zealously tracking down thesmugglers, but not before over9,000 tonnes of CFCs were illegallyimported over a two-year period.

During this period a number ofoffshore islands, particularly in theCaribbean, emerged as key transitpoints in laundering CFCs anddisguising the true destination ofthe chemicals. In 1995, shippingrecords revealed imports of over2,000 tonnes of CFCs into the

15

G G L E R ’ S M E T H O D O L O G Y A S M U G G L E R ’ S M E T H O D O L O G Y A S M U G G L E R ’ S

Seized refrigerant containers with a hidden

compartment containing CFC-12. Access

valves were connected to a small

compartment containing HFC-134a.

continued on page 18


THE ART OF SMUGGLING: WHAT CUSTOMS OFFICERS NEED TO KNOWBY LARY COOK LARSON

Smuggling ODS is a very profitable and relatively low risk crime.

Assuming that appropriate controls are in place, customs officers are

the first line of defence. Customs officers must have a basic

understanding of the regulatory system in place, a working knowledge

of the required import/export documents and the ability to recognise

shipments of ODS. With this fundamental knowledge, they will be

better able to detect the common smuggling practices described below.

Diversion of ODS Shipments: ODS are shipped to an intermediary

country while in transit to their named destination (called

“transhipment”). During this interval, smugglers secretly switch the

ODS in the shipping containers with other materials and put the ODS

on the black market.

Indicators of illegal trade:

❑ Shipments routed through a transit country when they could have

been shipped directly

❑ Transhipments to countries that produce the same ODS

❑ Transhipments to countries which would not consume the volume

of ODS being shipped.

Detection: Customs officers can track container numbers and check

with shipping companies to make sure the ODS actually left the

country. They can also contact officials in the stated destination

country to make sure that the shipment actually arrived.

Mislabelling ODS: Shipments are mislabelled and imported as a

different product. There are many variations on this method.


❑ Country of origin and type of product raises suspicion. For

example, the country of origin has limited or no production

capacity for the legal chemical claimed in the customs documents.

Documents and Cylinders Switch: Illegal ODS are identified as a

legal substance in customs documents and shipped in cylinders used

for the legal substance. For example, Chinese CFC-12 has recently

been found shipped in cylinders painted and labelled as Genetron

134-a, a legal HFC.

Detection: Customs officers must open shipping containers and

sometimes arrange to test the cylinders’ contents.

Cylinder Within a Cylinder: Smugglers manufacture a special

cylinder that contains a small cylinder inside. The small cylinder holds

the legal substance and has exterior valves on top for inspection, while

the larger cylinder contains the illegal ODS and has hidden valves in a

secret compartment on the bottom. When the customs officer samples

the contents from the top valves, only the legal substance is detected.

Detection: Double cylinders have a different valve configuration (see

photos on previous page).

Changing Tank Pressure with Nitrogen: Smugglers add nitrogen

to change the cylinder pressure of Halon 1301 to that of HFC-227.

The legal refrigerant HFC-227 is then entered in the import record.

Detection: A full lab analysis is required. Simply checking the pressure

of the cylinder will not disclose its true contents.

Repainting and Relabelling: Less sophisticated smugglers repaint

and/or re-label the original cylinders containing controlled ODS to

look like containers of a different chemical.

Detection: Poorly repainted and relabelled cylinders often indicate

smuggled chemicals. Disposable cylinders (13.6 kg in particular) have

also been reused to smuggle controlled ODS. Old, scratched and

scarred paint is another good indicator of illegal activity.

Using Incorrect Customs Codes: This is a less sophisticated

variation on the method described above. Chemical imports are

generally described on customs forms variously by their trade

names, chemical names, UN numbers and harmonised tariff codes

(customs codes). This can create confusion for customs officers.

Trade names may not be sufficiently descriptive or may have

changed; chemical names can be very similar (compare

Dichlorodifluoromethane (CFC-12), banned in non-Article 5

(industrialised) nations, to Chlorodifluoromethane (HCFC-22) and

Dichlorotrifluoroethane (HCFC-123), legally traded under the

Protocol); different chemicals are assigned the same customs codes,

and not all ODS have been assigned UN numbers. Sometimes

general descriptions are given that are technically correct but do not

properly identify the chemical being imported. Smugglers take

advantage of the confusion and the customs officer’s lack of

knowledge to illegally import or export ODS.


❑ A general description or an incomplete, inadequate, inconsistent

identification of the product being imported or exported.

Detection: Careful examination and comparison of all papers

associated with the transaction, including invoices, packing lists, bills

of landing and official customs documents. The chemical name, UN

number, tariff codes and trade names on the various documents

should identify the same chemical. If they do not, the shipment

should be physically inspected.

Traditional Smuggling: Illegal ODS cylinders are hidden behind

legal merchandise in the part of a container or tractor-trailer that is

not visible from the doors. For example, banned CFC-12 has been

discovered in the centre of shrink wrapped pallets of HCFC-22 and

HFC-134a cylinders.


❑ Illegal ODS offered for sale in the domestic market at lower than

expected prices.

Detection: Cylinder manufacturers can provide information to track

smuggled ODS in the domestic market back to the source using

“Julian dates,” which identify the date and origin of manufacture, or

serial numbers.

Hiding ODS in Equipment: Compressors or other refrigeration

equipment are filled with ODS beyond their intended capacity. Once

the equipment is imported, the ODS is removed for sale on the black

market. One smuggling group repeatedly sent refrigeration

equipment with an oversized cylinder out of the country for “repair”

and then brought it back charged with illegal ODS.


16



❑ Importation of compressors and other refrigeration equipment by

companies not previously in that business, or by companies

associated with distributors of ODS.

❑ Repeated transactions in equipment for which there is no

apparent demand.

Detection: Visual inspection is required. Equipment with oversized

storage cylinders in the compressor unit are probably being used to

smuggle ODS.

Returned Merchandise: Product is referred to as “returned

merchandise,” thus concealing its actual nature.


❑ The return of “empty cylinders,” especially those being returned

from a country that would not consume a large volume of

refrigerant. The economic utility of shipping empty cylinders is

questionable, unless it is a large ISO tank.

Detection: Returned products and cylinders must be inspected.

Claiming Virgin ODS as Recycled: Some non-Article 5

countries, including the United States, permit the importation of

used ODS that has been recycled in the exporting country.

Smugglers provide false certificates indicating that the virgin

product is recycled. There is no chemical test available to

determine whether the substance is virgin or reclaimed and some

smugglers add contaminants to virgin product so that it does not

appear too pure.


❑ The country of origin and type of product often raises suspicion

that the material is virgin. For example, imports of CFCs and

Halons from Article 5 (developing) countries that are major

producers of virgin ODS and have limited capacity for recycling.

Detection: Because the importer collaborates with the exporter to

falsify documents, it is difficult to prosecute the crime unless

investigated by the authorities in the exporting country.

Lary Cook Larson is a trial attorney in the Environmental Crimes Section of

the US Department of Justice. [email protected]

BLACK MARKET

non-Article 5 country

Article 5 country

Article 5 countrytransit countryContainers

are switched

Legal ODS withArticle 5 destination

Empty containers

Disguised ODSis illegally imported

Shipment isdisguised

Legal ODS isexported

TRANS-SHIPMENT

TRIANGULATION

non-Article 5 country

ODS producer(Article 5 or non-Article 5 country)

17




18

small islands of the NetherlandsAntilles, a territory with amaximum authorised consumptionof around 90 tonnes per year.According to a District Attorney inFlorida, the shipments to the islandwere sufficient to “put a dome overit and cool it until the nextcentury”.

When the dust from OperationCool Breeze settled, theauthorities had secured a numberof prosecutions involvingsubstantial fines and even jailsentences. Irma Henneberg,manager of a Florida shippingcompany, received a 57-month jailsentence for filing false shippingmanifests and diverting around3,000 tonnes of CFCs onto the USmarket. Three company officialsfrom Refrigeration USA pleadedguilty to smuggling 4,000 tonnesof CFCs into the US and forfeitedproperty worth US $3 million.

An intriguing aspect of many ofthese cases was the convolutedroute used to ship the contrabandCFCs. A significant amount of thechemicals originated from Russiaand passed through Europe, inparticular a cluster of companiesbased in the Midlands region ofthe UK, before being diverted ontothe US market instead of the

declared destinations in Article 5countries. In one case, a containerof CFCs left Russia for the UK andwas then shipped on to Houston.The container then turned aroundand was shipped back to the UK,by which time it had mysteriouslybecome filled with HCFCs. Thecontainer cleared UK customs anddisappeared.

Despite the clear evidence of thecomplicity of European companiesin smuggling Russian material, foryears EU authorities refused toacknowledge the problem. Theextent of this complacency wasexposed in July 1997, when anillegal shipment of Chinese CFCswere seized in the Netherlands.Subsequent investigations revealeda conspiracy by a network ofbrokers to distribute illegalChinese CFCs and halons all overEurope, headed by the German

company Taifun and the UK firmNorthstream. Over a two-yearperiod, the fraudsters importedover 800 tonnes of Chinese CFCs,in many cases by simply labellingit as legal HFCs and selling it toclients in the UK, Italy, Belgium,Greece, France, Germany, Hungaryand the US.

In addition to proving theexistence of a thriving black marketin the EU, the Taifun case alsorevealed the emergence of China asa major supplier of illegal ODS. Togain an insight into the linksbetween Chinese suppliers andbrokers in the US and EU, theEnvironmental InvestigationAgency (EIA) launched an intensiveone-year investigation. Posing aschemical dealers, EIA established adummy company and set aboutcontacting ODS suppliers all overChina. The results were startling, as

Seized boat and containers from an illegal

CFC-12 smuggling attempt into the US on a

cigarette boat last year, Miami, Florida

U.S

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continued from page 15

19

a series of brazen offers were madeto supply ODS using recycling andfalse-labelling scams.

The company Sino-Resourcewrote: “Frankly speaking, we aresupplying R-12 overseas. Someclients ask us to reduce purityand make R-12 seem recycled forthe sake of an import licence.”This firm claimed to havesupplied clients in the US and Italyusing this method. MinMetals

made the following offer:“Regarding R-12, we can issue afull set of shipping documents inthe name of R-22, the legalcommodity.” Another companycalled Ningbo Material told how ithad supplied a European client byfilling a shipping container withillegal CFC-12 cylinders, except forone layer of legal HCFC-22cylinders next to the door in caseof inspection.

It appears now that ODSsmuggling in the US and EUpeaked during the thriving blackmarket of the mid- to late-90s andhas now subsided. This is partlydue to better enforcement, but alsoa testament to the sheer amount ofcheap material unscrupulousbrokers have been able to bring inundetected.

Once again illegal trade ismutating. Smuggling cases areemerging in developing countriesas the effects of the 1999 freeze onproduction of ODS are felt. InIndia, seizures of illegal ODS havetaken place in Jaipur, Mumbai,Cochin and Varanasi and policeraids have been carried out onpremises in Delhi, Mumbai andCalcutta (see “Diversion of IllegalTrade”, page 5). In Pakistan, acontainer labelled as holdingHCFC-22 was in fact packed withCFC-12. Counterfeit cylinders havebeen detected in Indonesia andMalaysia, while an estimated 80

per cent of CFC-12 imports intoVietnam are illegal.

The current dynamic ofsmuggling in developing countriesis bound to be different from thatexperienced in the past. Because ofthe 1999 freeze, the global supplyof ODS will gradually dry up asplants in China, Russia and Indiadecrease production and close.When this happens, the veryscarcity of ODS may drive theblack market price up.

In the meantime, theintroduction of licensing systemsshould prove a useful tool incombating smugglers, but only ifcountries include provisions tolicense exports as well as importsto avoid transhipment. Training ofcustoms officers and otherenforcement authorities is also auseful step. However, judging bypast experience, ODS smugglerscan be quite ingenious whennecessary and stamping out theillegal trade is a dauntingchallenge. As long as a market forODS persists, there will always besomeone willing to bend the rulesto supply it.

Julian Newman is a senior investigatorat the Environmental InvestigationAgency, an NGO that investigatesinternational illegal trade inendangered species, timber and ozone-depleting [email protected]



Storage room holding a shipment of illegal

CFC-12 in the South Asia region,

February/March 2001

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Contraband ODS continues to becarried across internationalborders, but increased vigilanceon the part of customs officersand co-operation between customsand environmental agencies canmake a difference. In April 2001,Mr Kitson Thompson of Toronto,Ontario was fined CN$5,000 plus30 hours of community service forillegally importing an undeclared,thirty pound cylinder ofchlorofluorocarbons (CFC's) on anAir Canada flight from Jamaica. Thecylinder, which was discoveredduring a customs baggageexamination, was missingprescribed safety marks. A jointinvestigation by EnvironmentCanada's Environmental ProtectionBranch and Canada CustomsInvestigations resulted inThompson being charged withmaking a false statement and thesubsequent penalties.

Source: Environment Canada News, April 24, 2001.


T H E G L O B A L R E S P O N S E T H E G L O B A L R E S P O N S E T H E G L O B A L R E S P O N S E

20

New measures are beingimplemented to stop illegal ODStrade with customs officers playinga crucial role in making sure thenew regulations live up to theirpotential. The following articledescribes what is being done byUNEP DTIE’s OzonAction to makesure that agents are ready to takeon this challenge.

Customs officers are often the firstline of defence in the battleagainst illegal activity, such asillegal ODS trade. Stationed atinternational borders and ports ofentry, these agents are in a primeposition to catch smugglers andconfiscate illegal ODS before itreaches the black market. For thisreason, customs officers are anobvious and essential componentin any country’s phase-outstrategy.

However, detecting illegal ODStrade is not easy for personnel indeveloping countries as they donot always have access to proper“know-how”, training orequipment. Additionally,smugglers have become veryclever at disguising ODS and

defrauding customsagents (see “A Masterof Disguise”, page 12and “The Tricks of IllegalTrade”, page 14).

The challenge is tooffer customs officerstraining that will helpthem both spot illegalactivity and effectivelyuse ODS monitoringand controlmechanisms. This is avital issue for Article 5countries, where thefreeze on CFCconsumption tookeffect in 1999 andfurther controlmeasures will soon beadded. In these countries – mostof which are not ODS producersand thus completely reliant onimports – CFCs are primarily usedin the refrigeration and air-conditioning servicing sector. Thisis why national phase-out plans inArticle 5 countries usually includeRefrigerant Management Plans(RMPs) with customs trainingbeing an essential component ofRMPs since 1997.

BUILDING A FRAMEWORKFollowing stakeholderconsultations, UNEP DTIE’sOzonAction designed an overallconcept for customs trainingwhich included the concept of a“Country Handbook on ODSLegislation and Import/ExportLicensing System.” The Handbook,developed before trainingcommences, is a compendium of

OUT ON THE FRONT LINE:Training Customs Officers

B y requiring importers and exporters to register and apply for

permits, customs officers and other officials have written records

that show where and when ODS shipments move and who did the

moving. Not only do these systems help countries collect data and

monitor the whereabouts of ODS, but they also make it easier to

control the ODS supply and thereby help countries meet their phase-

out schedules. Moreover, licensing systems are extremely useful to

customs officers, who ordinarily have to rely on customs codes that

can be problematic in the case of ODS.

The ability to track ODS movement in this fashion is a powerful

weapon in the fight against illegal trade. In recognition of this fact,

in 1997, at the Ninth Meeting of the Parties in Montreal, an

amendment was introduced requiring all Parties to create an import

and export licensing system for ODS (the Montreal Amendment).

The systems were to be introduced by January 1, 2000, or three

months after ratification of the Montreal Amendment, with some

delays allowed for methyl bromide and HCFCs.

The general concept was that all international transport of ODS

must be approved in advance. Before any ODS can be moved into

or out of a country, importers or exporters must apply for a permit

that specifies the quantity of ODS, the countries involved in the

transaction, what the chemicals will be used for and other

important information. This kind of transparency, coupled with

strong enforcement, will hopefully pre-empt smuggling attempts

and help prevent illegal trade.

LICENSING SYSTEMS: KEEPING TRACK OF ODS IMPORTS AND EXPORTS



country-specific regulations and isused as a complement to UNEPDTIE’s training manuals forcustoms officers. It has nowbecome an essential element ofcustoms training programmes.

Both officer training andlegislative enforcement are at theheart of UNEP’s customs trainingframework. Encompassing a widevariety of workshops and programswhich are designed to complimentand reinforce each other, the aim isto create a corps of informedofficers equipped to monitor andcontrol ODS trade.

At the regional level, UNEP’sworkshops help countries developlicensing systems and draftlegislation in accordance with theMontreal Protocol. Follow-upregional workshops are held incertain cases to see how newregulations are working and todevise any necessary correctivemeasures. Once a licensing systemis in place, training customs officers

becomes of paramount importanceand country-specific nationaltraining programs are set up.

At the national level, UNEP’straining programmes for customsofficers unfold in a multi-phasedprocess, which begins with a “train-the-trainer” phase to create a newresource for future customstraining (see “Customs OfficersTraining”, below). These nationalworkshops focus on a specificcountry and help officials workwith decision-makers and otherstakeholders to gain support forODS regulations.

To make sure that the newlegislation and licensing systemsare working in concert with thoseof neighbouring countries,additional regional workshops arethen held on the harmonization ofODS legislation to foster co-operation between customs andenforcement agencies withinregions or economic zones.

UNEP Training Framework

Montreal Protocol awareness training

Regional training on ODS import/exportlicensing systems

Establishment of licensing system

National customs training

Regional co-operation and harmonizationof efforts to prevent illegal trade in ODS

National Regional

Developmentof policies

andlegislation

Regionalfollow-up on

licensingsystems

RMP Training

PREPARATION OFPHASE I and PHASE II

(4 months)

MONITORING AND EVALUATION REPORTING OFPHASE I and PHASE II

(1 month)PHASE I Implementation(1 month)

PHASE II Implementation(12 months)

W hen it comes to tackling the problem of illegal ODS trade,

each country must devise a strategy that suits its particular

situation. In addition to its other customs training, UNEP has

designed national training programmes that focus on the needs of

specific nations. Seminar participants are involved in a vital give-and-

take, resulting in recommendations, observations and proposed

policy frameworks that address national issues and concerns.

National Training Programmes for Customs Officers offer basic

background information on ozone depletion issues, including an

overview of the Montreal Protocol and its amendments and national

phase-out strategies. They also provide in-depth enforcement

training on subjects such as legislation and licensing systems,

revised customs codes, monitoring and control systems for ODS

and ODS-containing products and their implications for customs

officers. Participants are also trained in the use of identification tools

for ODS refrigerants.

The training takes place in two phases. In Phase I, workshops are

held for customs trainers and other key stakeholders (such as

representatives from the ministries of justice or commerce) in order

to “train-the-trainers.” The trained customs trainers are expected to

train the other customs officials from the major ports of entry and

to prepare a Montreal Protocol related training module to be

included into the country’s on-going training curriculum for

customs officers. The training programme includes on-going

monitoring and evaluation.

To date, 68 customs training programs have been approved by

the Executive Committee of the Multilateral Fund, 48 of which will

be implemented by UNEP. Seven countries have now completed

Phase I of the training (Jamaica, Trinidad and Tobago, Guyana,

Syria, Fiji, Bahrain and the Gambia) with close to 150 customs

officers and stakeholders participating. 15 more Phase I training

programmes should be finished by the end of 2001. Some

countries, such as Jamaica, have moved on in the training and have

trained 118 customs officers in Phase II.

CUSTOMS OFFICERS TRAINING: A NATIONAL APPROACH

continued on next page



22

THE BASELCONVENTION AND

THE MONTREALPROTOCOL: Working TogetherThose who are attempting tocontrol hazardous waste transportand those who are trying to curbillegal ODS trade are, in manyways, fighting the same fight.Dr Sachiko Kuwabara-Yamamoto,Executive Secretary of the BaselConvention Secretariat, shows howco-operation between the BaselConvention and the MontrealProtocol will help both achievetheir goals.

In the last few decades, globalconcern over the state of the earth’senvironment has moved the nationsof the world to work together to tryto limit the consumption,production and transport ofmaterials that are harmful toenvironmental and human health.This international co-operation hasresulted in the creation of a numberof historic agreements, includingthe Montreal Protocol and the BaselConvention. The Montreal Protocol

was designed to phase outsubstances that deplete the ozonelayer. The Basel Convention, signedin 1989, addresses the movement ofhazardous waste acrossinternational borders and is nowexpanding to include acommitment to minimising thecreation of hazardous waste. Whileboth of these agreements have metwith success, they are alsothreatened by a common enemy:illegal trade.

The Basel Convention grew outof a response to uncontrolled trade.In the late 1980s, the tightening ofenvironmental regulations inindustrialised countries led to adramatic rise in the cost ofhazardous waste disposal.Searching for cheaper ways to getrid of such wastes, “toxic traders”began shipping hazardous waste todeveloping countries and to EasternEurope. When these schemes wereexposed, international outrage ledto the drafting and adoption of theBasel Convention. During its firstten years, a framework was put intoplace to control and monitor themovement of hazardous waste andcriteria was developed for environ-mentally sound management oftoxic materials. The next decadewill bring a new focus – reining inillegal traffic of hazardous waste.Illegal trade was, in fact, set out asone of the top priorities at the 1999Conference of the Parties.

Illegal traffic in hazardous wasteand illegal traffic in ODS overlap inmany ways. Not only is ODS a

WORKSHOPS AT WORKIt is too early to make long-termassessments of the programmes’success, but so far the results arepromising. Jamaica, for example,reports an increase in seizures ofODS equipment around Kingstonsince Phase II training wascompleted, as well as increasedcommitment on the part ofcustoms officers. At the regionalworkshop in Budapest on ODSlicensing systems for the Centraland Eastern European and BalticStates, participants proposed auniversal labelling system thatwould be drawn up in co-operationwith industry. In Thailand, at aregional workshop on ODS controland monitoring in South East Asiaand the Pacific (SEAP), the idea ofestablishing a framework for co-operation on a regional levelbetween SEAP countries wasdeveloped. These and numerousother recommendations have sincebeen passed along to the Meetingsof the Parties.

Customs training programmesare invaluable weapons in thebattle to stop illegal trade in ODS.These programmes can help ensurethat customs trainers and agentspossess a clear understanding oftheir country’s commitmentswithin the Montreal Protocol andtheir national phase-out strategy.Importantly, such training helpsestablish a solid framework totackle this issue by providing anopportunity to incorporate trainingin ODS licensing and controlmechanisms into an on-goingcustoms training curriculum andby creating a support systemthrough a community of informedgovernment officials.

UNEP DTIE's OzonAction is an enablingprogramme that assists developingcountries and CEITs to meet theirobligations under the Montreal Protocol.Resources for such activities are providedby the Multilateral Fund and the GlobalEnvironment Facility (GEF).

In Taiwan (a target for illegalimports of Chinese ODS),authorities estimated illegal tradeas reaching up to 2,000 tonnes peryear during the peak period (1994to 1996). No other significantillegal imports have been reportedfrom any developed Asian country,though it is possible that some istaking place. Japan, for example,had relatively high stockpiles ofCFCs at phase-out, so may be lessof a target for illegal traders.


continued from previous page



hazardous waste, but similarsmuggling schemes and routes areused by both kinds of toxic traders.Clearly, it will be to the mutualbenefit of both the MontrealProtocol and the Basel Conventionto work together to prevent illegaltrade. The framework is already inplace: both agreements havesecretariats administered by UNEPand both are also focusingsubstantial prevention efforts oncustoms control at borders andports of entry. Close co-operationamong the two secretariats, as wellas collaboration between customsand police officers, will beessential first steps toward curbingillegal trade and achieving ourcommon objectives.

The Training Seminar for the Port

Enforcement Officers, held in HongKong in December 2000, is anexample of such co-operation. Theseminar was organised jointly bythe Basel Convention Secretariat,the Ozone Secretariat, CITES,Interpol, the World CustomsOrganization, as well as offices ofthe Chinese government and anumber of other environmentalorganisations.

The seminar’s participants,including representatives from over12 Asian countries, workedtogether to find ways to deal withthe issue of toxic trade in HongKong. Each year, over 5 milliontonnes of wastes are imported orexported through the city’s port,one of the largest in the world.These wastes include large

quantities of CFCs and othersubstances controlled by theMontreal Protocol. In order to copewith these quantities and ensurethat transactions are legal, co-operation between customs,enforcement and regulatoryauthorities is critical. To this end,the participants offered severalrecommendations, includingfacilitating the flow of information,increasing communicationnetworks and further developingco-operation between governments,ozone and hazardous wasteregimes and other stakeholders.

The Basel Secretariat is planningfour more training seminars forport enforcement officers in LatinAmerica, Central and EasternEurope, Africa and the Middle East.In each seminar, the importance offull co-operation with the MontrealProtocol will be stressed, as it willbe in other activities aimed towardthe prevention and monitoring ofillegal traffic in hazardous wastes.By working in concert throughthese types of efforts, we will movecloser to achieving the sharedgoals of both the MontrealProtocol and the Basel Convention.

Dr Sachiko Kuwabara-Yamamoto isExecutive Secretary of the BaselConvention [email protected]

Sanctions, controls, illegal activities and enforcement activities involving ODS in the EU member statesCountry Penalty for illegal trade Use restriction Intensity of illegal activitiesAustria €365–29,200 yes low

Belgium – partially medium?

Denmark up to 1 year imprisonment and fine yes low

Finland up to 2 years imprisonment or fine yes low

France up to 3 years imprisonment and fine (up to 2 x the value of the good) – medium-high

Germany up to 2 years imprisonment and fine yes low

Greece – – medium-high

Ireland (planned) – low

Italy up to 2 years imprisonment and fine (up to 3 x the value of the good) partially medium-high

Luxembourg up to 6 months imprisonment and fine of up to €124,000 yes low

The Netherlands up to 2 years imprisonment or fine yes medium-high

Portugal – – low?

Spain fine of €6,010–1,202,024 yes medium-high

Sweden up to 2 years imprisonment and fine yes low

United Kingdom unlimited fine and/or up to 2 years imprisonment (7 years in case of exp.) – low

Members of the European Union share open borders and economic initiatives, but when

it comes to ODS enforcement many countries are going it alone. Communication

between enforcement agencies in different countries is often limited and policy co-ordination

is not always in synch. To improve this situation, the Chemical Legislation European

Enforcement Network (CLEEN) set up a European enforcement project, EurOzone, to

establish a common enforcement practice of EU ODS regulations. “To be really effective,

enforcement of the ODS Regulation must take place consistently in all Member States,”

states CLEEN’s website (www.cleen-europe.org). Last year’s EurOzone conference underlined

the need to establish a co-ordinated effort on important ozone issues such as the removal

and destruction of CFCs and curbing illegal ODS trade. Subsequently, guidance materials

have been prepared and inspections are being carried out throughout 2001.

For more information, contact Marc Proost: [email protected]

ENFORCEMENT IN EUROPE: EUROZONE


Joining forces to battleinternational problems has beenthe work of the Group of EightNations for the last 25 years. BrucePasfield explains how the G-8 isresponding to the challenge ofinternational environmental crime– and its commitment toupholding the goals of theMontreal Protocol.

Since 1975, the major industrialdemocracies of the world have beenmeeting annually to deal withimportant economic and politicalissues facing individual countriesand the international community asa whole. This group of countries(known as the Group of Eight, or G-8 Nations) now includes France,United States, Britain, Germany,Japan, Italy, Canada and Russia.

The G-8 Nations’ first formalefforts to address globalenvironmental crime dates back toa May 1997 summit meeting inMiami, Florida where the group’senvironmental ministersrecognised the need for acollective focus on controllingtrade that breaks internationalenvironmental laws, including“shipments originating in theircountries and those that haveadverse impacts on developingnations.” The ministers renewedtheir commitment and pledgedfurther co-operation at asubsequent meeting in April 1998at Leeds Castle, England.

Shortly after this meeting,members of the G-8 process begantrying to put the ministers’ wordsinto action. The United Kingdomproposed that the G-8 Nations’

Senior Experts Group onTransnational Organised Crime(the Lyon Group) conduct a surveyon environmental crimes. Thesurvey asked each membercountry to provide informationabout illegal traffic in ozonedepleting substances (ODS) underthe Montreal Protocol, inhazardous waste under the BaselConvention, and in protectedspecies under the Convention onIllegal Trade in EndangeredSpecies (CITES). The survey alsoasked each country to identifyorganisations and personnelresponsible for nationalenforcement of each of theseMultilateral EnvironmentalAgreements (MEAs). May 1998 thesurvey results confirmed what themember countries had alreadysuspected: environmental crimehad become a significantinternational problem, with illicitprofits totalling billions of dollarseach year.

In response to the survey results,the G-8 Nations agreed to create asubgroup of the Lyon Group thatwould focus on collective lawenforcement efforts to combattransnational environmental crime.In July 1999, the subgroup met forthe first time and took a two-tiered approach to theproblem. First, it focused onimmediate steps to addressillegal traffic that violatesMEAs. Regarding the MontrealProtocol, these steps included: ❑ Inviting the G-8 Nations to

participate in the NorthAmerican CFC EnforcementInitiative. Formed in 1995 in

response to an emerging ODSblack market in the United States,this initiative meets quarterly andshares information on commonODS smuggling routes andmethods. G-8 Nations’participation at these meetingshas led to several successfultransnational ODS traffickinginvestigations and greaterawareness of illegal tradeproblems among membercountries.

❑ Creating an internationaldatabase on suspected ODSsmuggling activity. Informationin this searchable database ismaintained by US EPA’s JointCenter for StrategicEnvironmental Enforcement. Anumber of G-8 Nations havecontributed to the database,which has already been used toidentify repeat offenders andprovide guidance aboutsmuggling problems throughoutthe world.

The second part of the strategywas to create a permanentstructure for addressing violationsof MEAs. At the subgroup meetingin February 2001, membercountries agreed to prepare areport that will both study the role

THE G-8 NATIONS’ CONTRIBUTIONto the Fight Against Illegal Trade


25

of organised crime in illegalenvironmental trade and providesuggestions on a lastingframework for international co-operation. The G-8 Nations plan topresent the completed report atthe Lyon Group plenary G-8meeting in the fall of 2001.

The subgroup meeting alsoresulted in some consensus aboutthe content of the report. Allagreed that the report shouldstress that international co-operation must extend beyond theG-8 Nations. This is particularlytrue in the case of the MontrealProtocol, since black market ODSin G-8 Nations often originates indeveloping countries. The reportshould also point out thatwhenever possible, this co-operative effort should beundertaken through existingumbrella organisations. Interpol,the World Customs Organization,the MEA Secretariats and otherenvironmental networks can allplay an important role in co-ordinating enforcement efforts.Furthermore, the report shouldprovide guidance on harmonisinginformation systems and securingcontacts with key players in MEAenforcement. Finally,recommendations will likely beincluded to address each MEA’sspecific enforcement needs.

The subgroup hopes that thereport will provide a blueprint forthe G-8 Nations and the rest of theworld on how best to work co-operatively to prevent internationalenvironmental crime. If the nationsof the world can work collectivelyon enforcement, they can make adifference in the fight to protectour planet’s environment fromthose who would choose todegrade it for profit.

Bruce Pasfield is the Assistant SectionChief in the Environmental CrimeSection of the US Department of Justice.He also serves as chair of the LyonGroup Sub-group on [email protected]


If illegal trade is not curbed, itsfirst victim could be the MontrealProtocol. Tom Land, Sue Stendebachand Lars Wilcut examine the threatand describe the steps that mustbe taken to eliminate it.

Illegal imports of ODS are a seriouschallenge to the continued successof the Montreal Protocol. TheProtocol’s design presumes that itscontrols will unleash economicforces that will push industries andenterprises away from the use ofODS. As the Protocol’s measuresreduce—and eventually phase-out—production and imports, the priceof ODS should rise accordingly.And when ODS become expensive,businesses see a financial benefitin switching to non-ODStechnologies.

However, a small minority istaking advantage of increasingprices and dwindling supplies tomake a profit in illegal trade ofODS. Illegal imports undermine themessage intended by the Protocol’seconomic signals and weakenincentives to switch to alternative

technologies. Furthermore, illegalimports make ODS readily availableat low prices, thus extending theiruse—and ultimately extending thedamage to the ozone layer.

To address this challenge, theParties to the Protocol took andshould continue to pursue thefollowing measures: ❑ closing and dismantling facilities

that produce ODS, consistentwith phase-out schedules;

❑ establishing enforceable importregulations in each country;

❑ developing administrativesystems for monitoringcompliance with importregulations;

❑ taking enforcement actionsagainst cases of illegal ODSimport; and

❑ establishing and continuingcooperation among ozoneofficers globally to ensuremutual compliance.

To ensure the long-term success ofthe Montreal Protocol, all facilitiesproducing ODS must eventually beclosed and dismantled, consistentwith phase-out schedules. Just oneremaining plant could supplyenough illegal material throughoutthe world to undermine the ozonelayer’s recovery. Thankfully, theefforts of the Executive Committeefor the Multilateral Fund for theImplementation of the MontrealProtocol and the Special Initiativein Russia (see “The MultilateralFund: Bringing Developing Nationsinto the Picture” and “SpecialInitiative in Russia,” pages 6 and10) have moved effectively todevelop agreements that will resultin the closure of numerousproduction facilities. With this kindof continued persistence and

SAFEGUARDINGTHE SUCCESS of the Montreal Protocol


Since 1996, evidence of illegaltrade in CFCs has been falling,whereas illegal trade in halons hasbeen increasing, particularly in theUS. Developing countries, however,who are now starting phase-out,are beginning to experience theillegal import of CFCs, with casesreported from South and SoutheastAsia, the Middle East, theCaribbean and Latin America. Thisillegal trade will almost certainlygrow in volume and impact.




26

cooperation, the eventual closureof all ODS producing plantsshould be achievable. Clearly,closing the tap on ODS is theultimate goal to ensure a healthyozone layer for future generations.Until that goal is reached, however,all Parties will need to takeinterim steps domestically tocombat illegal imports.

The widespread support for the1997 Montreal Amendment plainlyshows that the Parties believelicensing of ODS imports andexports is essential to theProtocol’s success. No matter howa licensing system is designed, itcan serve both to combat illegalimports and to ensure compliancewith a country’s phase-outobligations. Illegal ODS importsundermine other efforts toconvince industries to switch tonon-ODS technologies. Anenforceable regulation that limitsODS imports seems imperative toensure both an individual Party’scompliance and the overall successof the Protocol. While importantmeasures are currently being takento reduce the demand for ODS,ultimately it is the establishment ofenforceable regulations to limit thesupply of ODS that will be crucialto achieving success.

However, without a compliancesystem, the licensing regulation isjust another piece of paper. Acompliance system can ensure that

import regulations are beingproperly and effectivelyimplemented. One example of sucha system is the partnership createdbetween the US Customs Service(Customs) and the USEnvironmental Protection Agency(US EPA). Both agencies identifiedHarmonized Tariff Codes for eachODS. These codes were thenentered into the Customs database,so Customs inspectors can bealerted if there is a match with theinformation in an import entryform. If there is a match, thedatabase instructs the Customsinspector to call US EPA, theagency responsible for the importlicensing regulation andmaintaining specific informationabout who can import and howmuch can be imported. US EPAthen confirms whether or not theshipment can be imported. Since1995, there have been more than650 seizures of illegal ODSshipments in the United States.

In addition, enforcement actionsmust be taken against cases ofillegal ODS imports. Not only willlarge fines or prison terms drawattention to the problem, they willalso deter others from similarunscrupulous behaviour. To thisend, cooperation among domesticand international governmentagencies is often vital toinvestigations of potentialviolations. In the US, for example,

an inter-agency task force of theUS EPA, Customs, Internal RevenueService (taxing ministry) andDepartment of Justice wasestablished in 1995 to assistenforcement against illegal ODSimports. This task force, which hasgrown to include other US andCanadian agencies, meets quarterlyto share information regardingimport trends, changes inregulations and on-goinginvestigations.

Lastly, it is becoming increasinglyclear that cooperation among theParties’ ozone authorities isnecessary to identify attempts toillegally ship ODS across borders.Communication between theParties about ODS policies, as wellas sharing import and exportinformation will provide vital datafor determining the legitimacy ofimports. Through this type ofcollaboration, we can effectivelyblock imports from entities thatviolate an exporting country’sregulations and thereby increaseglobal compliance — which willultimately lead to achievement ofthe goals of the Montreal Protocol.

Sue Stendebach is Chief of theStratospheric Protection ImplementationBranch, Tom Land is manager of the U.S.phaseout program, Lars Wilcut is the U.S.contact for imports and exports of ODS. [email protected],[email protected], [email protected]

T here is a new ODS phase-out on the horizon – methyl bromide.

This pesticide is not only destructive to the earth’s ozone layer,

but highly toxic to human beings as well. According to the Montreal

Protocol, developing countries (Article 5) are required to freeze their

production and consumption of methyl bromide by 2002, reduce it

by 20 percent by 2005 and phase it out entirely by 2015.

Alternatives to methyl bromide are available for over 95 percent

of its non-quarantine and pre-shipment (QPS) uses. These include

the use of other synthetic pesticides and combinations of

environmentally-friendly techniques such as crop rotation,

composting, plant extracts and biological agents. In Benin for

example, farmers have successfully used 17 different methods

involving inorganic substances and wood ash to protect fields and

preserve food stocks and 72 other alternatives have been identified

that use of insecticidal plants. In the African region in general,

methyl bromide alternatives have been effective on pests for crops

such as tobacco, gourds, strawberries, tomatoes, peppers, bananas

and pineapples.

Barriers to methyl bromide phase-out in Article 5 countries

include importer countries’ requests for QPS uses, producers’ fear of

potential economic losses, lack of strategies and co-ordination

among governmental institutions and problems related to

technology development. Other issues that may impede the

development of phase-out strategies include poverty, debt service

and the globalisation of agriculture.

COMING ATTRACTIONS: METHYL BROMIDE


G L O S S A R Y G L O S S A R Y G L O S S A R Y G L O S S A R Y G L O S S A R Y G L O S S A R Y G L O

Article 5 country – A developing country that

is a Party to the Montreal Protocol and whose

annual consumption of ozone-depleting

substances from Annex A (the five main CFCs and

the halons) is less than 0.3 kg per capita. Such

countries are considered to operate under Article 5

of the Montreal Protocol. These countries are

given a 10-year grace period for most substances

as compared with the phase-out schedule for

developed countries.

Basic domestic needs – ODS consumption in

an Article 5 country which is used to cover the

needs of that country (does not include the use of

ODS to produce products for export).

CEITs – countries with economies in transition.

Eastern European countries of the former Soviet

Bloc whose economies are transitioning from a

communism to a free-market structure.

CFCs (chlorofluorocarbons) – A family of

chemicals that contain chlorine, fluorine and

carbon. CFCs are used as refrigerants, aerosol

propellants, cleaning solvents and in the

manufacture of foam. These chemicals have

potential to destroy ozone molecules and are one

of the main causes of ozone depletion.

Essential use – A use of a controlled ODS that is

allowed by a Meeting of the Parties to the

Montreal Protocol because it is necessary either for

health, safety, or the functioning of society and no

acceptable alternative is available. Essential use

exemptions must, in general, be specifically

applied for and justified, on an annual basis, by

the Party concerned.

Halons – Brominated chemicals related to CFCs

that are primarily used in fire fighting. Halons are

particularly destructive to the ozone layer.

HCFCs (hydrochlorofluorocarbons) – a

family of chemicals related to CFCs, which contain

hydrogen as well as chlorine, fluorine and carbon.

The hydrogen reduces their atmospheric lifetime,

making HCFCs less damaging than CFCs in the

long term.

HFCs – A family of chemicals related to CFCs,

which contain hydrogen, fluorine and carbon, but

no chlorine and therefore do not deplete the

ozone layer.

Illegal trade – Import or export of ODS in

violation of the Montreal Protocol.

Methyl Bromide – A chemical composed of

carbon, hydrogen and bromine, which is used

mainly as an agricultural pesticide and fumigant,

and has a significant ODP.

Montreal Protocol on Substances thatDeplete the Ozone Layer – The Protocol to

the Vienna Convention, signed in 1987, which

commits the signatories to take concrete measures

to protect the ozone layer by freezing, reducing or

ending production and consumption of controlled

substances.

Multilateral Fund – Part of the financial

mechanism under the Protocol. This fund supports

ODS phase-out policies, programmes and

investment projects in Article 5 countries.

Non-Article 5 country – All other Parties to

the Montreal Protocol which are not Article 5

countries (mainly developed countries).

ODS (ozone-depleting substance) – Any

chemical that can deplete the ozone layer. Most

ODS are controlled substances under the Montreal

Protocol.

ODP Tonne – ODP tonnes are calculated by

multiplying the relevant quantity in metric tonnes

by the “ozone-depleting potential” (ODP) of each

substance. ODP is a measure of a substance’s

ability to destroy stratospheric ozone, based on its

atmospheric lifetime, stability, reactivity and

content of elements that can attack ozone, such as

chlorine and bromine. All ODPs are based on the

reference measure of 1 for CFC-11.

Ozone depletion – The process by which

stratospheric ozone molecules are destroyed by

man-made chemicals, leading to a reduction in its

concentration.

Party – A country that has signed and ratified the

Montreal Protocol. A party which has ratified the

Montreal Protocol but not one or more of its

amendments is considered a “non-party” with

regard to the ODS which were controlled for the

first time by that or these amendments. For

instance, a country which has not ratified the

London Amendment is considered a “non-party”

with regard to carbon tetrachloride, 1,1,1-

trichloroethane and ‘other CFCs’ (and any

substance controlled by later amendments).

Phase-out – A gradual reduction of production

and consumption of a controlled substance which

ultimately leads to zero production and

consumption. In this context, consumption means

the national production plus imports and minus

exports.

Retrofitting – The procedure of replacing CFC

refrigerants in existing refrigeration, air-

conditioning and heat pump plants with non-ODS

refrigerants. This procedure usually requires

modifications such as change of lubricant and

replacement of expansion device or compressor.

Smuggling – The act of secretly or illegally

bringing something in or taking something out of

a country, in this case, ODS.

Stratosphere – A region of the upper

atmosphere between the troposphere and the

mesosphere, ranging from about 15 to 55 km

above the earth’s surface.

Ultraviolet radiation – Radiation from the sun

with wavelengths between visible light and x-rays.

UV-B (280–320 nm) is one of three bands of UV

radiation and increased exposure to UV-B radiation

can cause damage to human health and the

environment.

UNEP – The United Nations Environment

Programme. Through the UNEP DTIE OzonAction

Programme, UNEP is one of the Multilateral Fund’s

implementing agencies.

WEBSITESAmerican Society of Heating,Refrigeration and Air-conditioningEngineershttp://www.ashrae.org

Basel Conventionhttp://www.unep.ch/basel

Environmental Investigation Agencyhttp://www.eia-international.org

ODS Customs Codes Discussion Group http://www.unep.ch/ozone/ods-customs-codes

OzonAction Programme http://www.uneptie.org/ozonaction

Ozone Secretariathttp://www.unep.org/ozone

United States EnvironmentalProtection Agency’s Ozone DepletionHome Pagehttp://www.epa.gov/ozone/index.html

World Customs Organisationhttp://www.wcoomd.org

World Trade Organisationhttp://www.wto.org

PUBLICATIONS:Allied Signal, Quimobasicos and the FrioBanditos: A Case Study of the BlackMarket in CFCs, Ozone Action, Inc., 1996

A Crime Against Nature, the WorldwideIllegal Trade in Ozone DepletingSubstances, Julian Newman, Steve Trent,Environmental Investigation Agency,London, 1998

Customs Officer Training on SubstancesDepleting the Ozone Layer—TrainingManual, UNEP DTIE 2001

Handbook for the International Treatiesfor the Protection of the Ozone Layer,UNEP Ozone Secretariat, 2000

Handbook on Data Reporting under theMontreal Protocol, UNEP DTIE, 1999

International Trade and the MontrealProtocol, Duncan Brack, The RoyalInstitute of International Affairs, 1996.

Monitoring Imports of Ozone-DepletingSubstances: A Guidebook,UNEP DTIE/SEI/SIDA, 1996

Resource Module on ODS Import/ExportLicensing Systems—Policy Design andSetting Up of Legislation, UNEP DTIE/SEI,1998

For more information, contact:Mr. Rajendra Shende, ChiefEnergy and OzonAction Unit, UNEP DTIE39-43, quai André Citroën75739 Paris Cedex 15, FranceTel: (33.1) 44.37.14.59Fax: (33.1) 44.37.14.74E-mail: [email protected]: www.uneptie.org/ozonaction

United Nations Publication2001

UNEP