Smugglers beware!

OUR PLANET 9.2 - Ozone

Smugglers beware!


describes the campaign against a black market in ozone-depleting substances


Between 10,000 and 20,000 tonnes of chlorofluorocarbons (CFCs) are estimated to be imported illegally into the United States every year. This unlawful trade makes the ozone-depleting compounds more available, reduces the incentive for users to shift to alternatives and penalizes legitimate companies who are complying with the law. For the last three years, the Alliance for Responsible Atmospheric Policy - an industry coalition of users and producers of CFCs and their alternatives - has worked with the United States Government to curtail the illegal trade.

International treaty and federal law prohibit the production and import of new CFCs in the United States, though small amounts may be produced for essential uses approved under the Montreal Protocol, and for export to developing countries to fulfill their needs during the transitional period it allows them. Used CFCs can only be imported with approval from the Environmental Protection Agency (EPA), and are subject to an excise tax of $5.80 per pound ($12.80 per kilogram).

However, some importers have neglected to pay the tax on imports of recycled, reclaimed and contaminated CFC refrigerants, mistakenly believing that it only applied to new CFCs. Illegal importers have devised schemes to import newly produced CFCs by labelling them as recycled - or to divert exports. Sometimes new CFCs have been illegally labelled as other material. These activities, designed to avoid the federal excise tax, violate many Government laws and regulations.

The Internal Revenue Service (IRS) has confirmed that the excise tax on ozone-depleting compounds applies to all CFCs. There should now be absolutely no confusion that all imported CFCs are taxed equally, whether they are new, used, recycled or reclaimed. Buyers should reject any offer to buy new or imported CFCs at prices which do not include the excise tax. The IRS and Customs Service have the authority to confiscate any illegally purchased CFCs, even if they have passed through the market place, and may prosecute anyone who buys refrigerant knowing that the tax has not been paid.

customs patchConsumers should also be wary since some of the imported material has been found to be of extremely poor quality, far below industry's specification for quality refrigerant. One sample was found to be 50 per cent too high in moisture and contained ten times the acceptable level of non-absorbable gases. Distributing or using poor quality refrigerants may cause major system problems and damage a company's reputation.

Violations of IRS regulations can result in civil fines and penalties, and/or criminal prosecution resulting in substantial prison terms, in addition to confiscation of the product. The civil penalty for violating EPA regulations can be up to $25,000 per kilogram of wrongfully imported material. Criminal penalties include up to five years in prison for a first offence and up to ten years for repeat offences.

Fred McGreevy, Program Officer for United States Customs, says: 'Customs has committed resources to identify this illegal activity and is serious about enforcing the law.' Meanwhile, Ron Linden, Program Coordinator for the IRS, says: 'The IRS is committed to taking the actions necessary to increase voluntary compliance with the federal excise tax due on the sale or use of taxable ozone-depleting chemicals.'

The Government has set up an investigative group, announced in October 1994, composed of the EPA, IRS, United States Customs Service, Commerce Department
and Justice Department. The Alliance for Responsible Atmospheric Policy has donated six refrigerant identifiers to Customs to help detect illegal imports.

Much has already been accomplished:

- Some 25 people have been convicted of smuggling or diverting CFCs into the United States, or for evading federal excise taxes on them. About 20 have been sentenced to penalties ranging from fines to nearly five years in jail. Illegal imports of CFCs accounted for the first-ever conviction for a violation of the Clean Air Act.

- Some half a million kilograms of illegally imported CFCs have been impounded by Customs. Comprehensive seminars are held to train its agents to detect and be aware of the illegal material. Customs has also refined its data gathering to track trends of illegal activity, and is regularly sharing information with other Government agencies.

- The IRS has reviewed over 3,000 CFC excise tax-related returns and has assessed over $100 million in unpaid taxes and penalties. It estimates that there may be an additional $50 million in uncollected CFC excise taxes.

- The EPA has adopted a petition process requiring imports of used CFCs to be approved prior to shipment into the United States - and will soon finalize a rule requiring such approval for trans-shipments through
the country.

- The Alliance's Refrigerant Import Committee has generated much publicity on this issue, which has clarified legal and illegal activities. It has also informed CFC users that legally imported material is subject to the tax, and that illegally imported material can be of questionable quality and may be confiscated.

- The public has been urged to purchase legal CFCs and pay tax on them.

- The illegal import issue has been brought to the attention of Parties to the Montreal Protocol, and they have adopted beneficial decisions requiring Parties to implement controls to address the problem.

The Alliance has commended the Government for the attention it has given to the issue and looks forward to further investigations, convictions and severe penalties for persons involved in this illegal activity. The Government's aggressive position and the publicity the enforcement has received should deter importers and other purchasers from acting illegally, and should curtail the further development of any CFC black market.

Dave Stirpe is Executive Director of the Alliance for Responsible Atmospheric Policy.

Complementary articles in other issues:
Susan Hazen: Environmental democracy (Chemicals) 1997
John Whitelaw: Implementing the plan (Chemicals) 1997

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