UNFINISHEDBUSINESS

www.eia-international.org

The Continued Illegal Trade in Ozone-Depleting

Substances and the Threat Posed to the

Montreal Protocol Phase-out

environmental investigation agency

Contents

Introduction 1

Ozone Layer Update 2

Impacts of Ozone Depletion 4

Enforcing the Phase-out 6

Conclusions and Recommendations 15

References 17

Acknowledgements

This report was written and edited byEzra Clark and Julian Newman.Additional research by Debbie Banksand Caroline von Post. Picture researchby Paul Redman and Ashley Misplon.

The support of the Rufford Foundationand the Body Shop Foundation for EIA’swork to protect the ozone layer isgratefully acknowledged.

Report Design by Full Stop, Londonclare.mellor@btinternet.com

Many thanks to Brian Emmerson andall at Emmerson Press for the printingof this report. Emmerson Press Tel: 01926 854400

Printed on 100% recycled paper

ODS phase-out at a glance Under the Montreal Protocol and its amendments, ozone-depleting substances (ODS) are to be reduced and eliminatedthrough the development of chemical substitutes and alternativemanufacturing processes – elimination is the final objective.

Front cover photo: David Ellison/Environmental Images. Back cover photo: Graham Burns/Environmental Images

Within the Montreal Protocol, the Montreal Amendment is crucialin the context of controlling illegal trade. The MontrealAmendment of 1997 introduced a licensing system for the importand export of new, used, recycled and reclaimed ODS. To datethis Amendment has been ratified by 63 countries.

Developing Countries (Article 5) Industrialised Countries

Baseline consumption Phase-out schedule Baseline consumption Phase-out schedule

07/1999: freeze 07/1989: freezeAverage of 1995-1997 2005: -50% 1986 1994: -75%

2007: -85% 1996: -100%2010: -100%

Montreal Protocol 1987

Developing Countries (Article 5) Industrialised Countries

Licensing system of Licensing system of 1/1/2000 import & export 1/1/1999 import & export

(new, used, recycled, (new, used, recycled,reclaimed) reclaimed)

Montreal Amendment 1997

Introduction

1

Introduction

The Montreal Protocol on Substances thatDeplete the Ozone Layer is generallyacknowledged as the most successfulinternational environmental treaty and anoutstanding model of international cooperation.It has successfully reduced much of the world’sreliance on ozone-depleting substances (ODS),and adherence to its phase-out schedule shouldeventually see the full recovery of the fragileozone layer.

Yet the present state of the ozone layergives cause for concern and has direimplications for ecosystems and human health.Every year the ozone hole over Antarcticagrows bigger, and a similar hole is predicted todevelop over the Northern Hemisphere duringthe next twenty years.

Initial predictions for full recovery by 2050 now seem optimistic, and the MontrealProtocol process continues to be undermined bythe illegal trade in ODS. The EnvironmentalInvestigation Agency (EIA) has been tracking theblack market in chlorofluorocarbons and halonssince the mid- 1990s and has presented detailedinformation on the main routes, smugglingmethods and companies involved to the Partiesto the Montreal Protocol and to enforcementagencies in many countries.

Despite the existence of a pervasive andcontinued illicit trade in ODS the response bythe Parties has been slow and ad-hoc. In themid-1990s the illegal trade was estimated at 20 000 tonnes a year, but it was not until 1997that a licensing system was introduced, and evennow only 63 parties have ratified the relevantamendment.

There have been notable successes in curbing illegal trade in both the US and EU. Theenforcement authorities in the US have led theworld in combating ODS traffickers, while theEU has introduced a ground-breaking sale anduse ban for CFCs and halons. Yet black marketoperations are quick to scent new opportunities,and now a worrying increase in ODS smugglingis emerging in ‘Article 5’ or developing countries.

EIA has conducted detailed fieldinvestigations to expose this illegal trade in onepart of the world – the India and Nepal border –yet this is just the tip of the iceberg. If smugglingactivities become entrenched in Article 5countries the Montreal Protocol phase-outschedule will be jeopardised.

EIA’s investigations have also revealed thekey role played by transit countries such as

Dubai in the United Arab Emirates in facilitatingODS smuggling, and the appearance of materialmanufactured by European chemical companieson the black markets of developing countries.

It is regrettable that while the new EUlegislation curbs recycling of ODS for export, itdoes not tackle continued production of virginODS. In some cases, the producers are laissezfaire when it comes to checking where the ODSend up. At one of the largest remaining CFCproduction plants in Europe, located in theNetherlands, around 80 per cent of CFCs aresold to local brokers, ostensibly for legitimateshipment to Article 5 countries, but in reality aredifficult to trace.

The new patterns of ODS smuggling demandcreative enforcement responses. The Parties arecurrently debating mechanisms to enhance thefight against ODS smugglers, principally throughtools such as better customs coding andinformation exchange.

EIA believes that an effective step would bethe creation of an Illegal Trade Prevention TaskForce within the Montreal Protocol regime, andthe creation of a full-time enforcementcoordination post within the Ozone Secretariat.Compared with other Multilateral EnvironmentAgreements the Montreal Protocol has laggedbehind in terms of enforcement. It is time toredress this imbalance and ensure the phase outschedule is adhered to over the next decade andnot undermined by illegal trade in ODS

Julian NewmanSenior Investigator, EIAOctober 2001

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TheMontrealProtocolprocesscontinues to beunderminedby theillegal tradein ODS

Ozone Layer Update

2

At this point in time, the ozone layer ismore depleted than ever before. Decades ofassault from man-made chemicals, notablychlorofluorocarbons (CFCs), halons and methylbromide, have caused substantial thinning ofthe ozone layer, leading to an increase in theamount of UV reaching the Earth’s surface. Theozone hole over Antarctica grows bigger everyyear, and in September 2000 extended over acity for the first time. The portents are for asimilar hole to appear over the NorthernHemisphere during the next 20 years.

While the Montreal Protocol hasdramatically reduced the use of ozone-depletingsubstances, the original projections for fullrecovery of the ozone layer by 2050 appearincreasingly optimistic, due to interactions withclimate change, non compliance with theProtocol and the illegal trade in ODS.

AntarcticaAlthough systematic measurements ofstratospheric ozone began in the 1950s3, it wasonly with the discovery of the ozone holemeasured over Antarctica in 1985 by the BritishAntarctic Survey 4,5 that the effects of ozonedepletion were generally recognised. Followingthe discovery of this hole, satellitemeasurements confirmed that the ozone losshas reappeared in the austral spring for allsuccessive years since 1985, and generally theAntarctic ozone hole grows bigger and lasts forlonger each year.

By mid-September 2001 this hole coveredan area of 24 million km2 and significantdepletion extended round the Southern Ocean6.The largest and most severe Antarctic ozonedepletion event to date occurred in the australspring of 2000. The US National Aeronauticaland Space Administration (NASA) measured itsmaximum size at 28.4 million km2 on the 10thSeptember 2000 7,8. In early October 2000minimum ozone values were amongst thelowest on record; some 40 per cent of normalvalues8. In mid- to late October 2000, theozone hole drifted over areas of Argentina,Chile and the Falkland Islands, including thecities of Punta Arenas and Ushaia, where ozonelevels were reduced by up to 70 per cent9. Forthe first time the reality of living under anozone hole became clear as the public wereadvised to stay indoors during the peak hoursof 11 am and 3 pm to avoid exposure to theharmful UV rays.

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Ozone Layer Update

Life on Earth depends on the ozone layer toscreen harmful ultraviolet solar radiation (UV).This stratospheric ozone forms a layerextending from 20 to 50 km above the earth’ssurface and removes some 99 per cent of theUV1. Depletion of the ozone layer has occurreddue to human activities which have introducedartificially high quantities of chlorine, bromineand other ozone depleting substances into thestratosphere, causing higher quantities ofultraviolet radiation to reach the Earth’ssurface. A decrease of one per cent in the ozonelayer causes a 1.5 – 2 per cent increase in UV-B transmission2.

Below: Antarcticozone depletion is becomingprogressively worseeach year

Bottom: The 2000ozone hole overAntarctica was thelargest everrecorded, reaching a maximum size of28.4 million km2

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Ozone Layer Update

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Northern HemisphereOzone losses over the Arctic were smallercompared with the Antarctic in the 1980s andearly 1990s. Yet in recent years significantozone depletion events have occurred over theArctic region. Alarming reductions in ozonelevels over mid-latitudes as well as polarlatitudes of the Northern Hemisphere havebeen observed in the winter/spring seasons ofthe majority of years over the last decade.These reductions in ozone generally reached 20-30 per cent of pre-1976 averages10. Recentlysignificant depletion of the ozone layer over theArctic, Europe and North America hasoccurred, reaching 60 per cent in some areas11.

Considerable losses of stratospheric ozonewere observed in the Arctic in 1999, and thehighest ever local ozone loss observed at anyaltitude was observed in this region, with lossesrecorded at greater than 70 per cent12. InNovember 1999, in addition to depleted ozonelevels over the entire Arctic, there was evidenceof significant ozone layer thinning over theUnited Kingdom, northern Germany, theNetherlands, southern Sweden, Denmark andthe Baltic States13. Although stratospheric ozonedepletion in the last few years in the NorthernHemisphere has not been as high as levelsreached in some years in the 1990s14,15, thisweaker than usual ozone depletion reflectsnatural variations that affect seasonal losses.This is due to atmospheric conditions in thestratosphere, principally warmer temperatures,rather than a decrease in the concentration ofozone-depleting substances in the atmosphere.

Antarctic ozone loss is predicted to increaseover the next 5-20 years, with recovery takingseveral more decades16. It is also predicted that Arctic ozone losses will persist into the2050-2070 period17, before starting to recover,

Interactions of Global Climate Change and Ozone DepletionIn the past, ozone depletion and climate change were considered to bedistinct and separate phenomena. Recently it has been recognised thatthere are linkages and interconnections between the processes causingozone layer thinning and global warming16,20,21. For more than a century,anthropogenic activities have altered the composition of theatmosphere, by releasing new chemicals and changing the abundanceof naturally occurring gases. Changes in anthropogenic inputs to theatmosphere are interconnected and create feedbacks that effect theatmospheric chemistry and dynamics responsible for ozone depletion and global climate change22. These interactions can be direct, such astemperature affecting the rate at which ozone depletion occurs, or can be through the interaction of different and often complex processes23.

Ozone depletion and global climate change are likely to be the most serious crises ever to threaten ecosystems. The interrelationshipbetween them indicates the pressing need for new strategies tounderstand and address both processes simultaneously. Unless theeffects of the linkages and interactive nature of these phenomena aretaken into account in appraisals of pressures on ecosystems as well as on human health, their effects may be significantly underestimated.

although it is thought full recovery may takemany more decades. The depletion ofatmospheric ozone over the Arctic in 1999 wasof a similar level to that seen at the time of theonset of the Antarctic ozone hole in the mid-1980s18. It is predicted that Arctic ozonedepletion will become more severe in the nearfuture, with an ozone hole occurring over theArctic of similar magnitude to that whichcurrently develops over the Antarctic within the next 20 years19. Such a development hasprofound implications for the more denselypopulated regions of the Northern Hemisphere.

Left: Predictedextent of areaaffected byNorthernHemisphere ozone hole by 2020. Alsoshowing the areapotentially affectedby the currentozone hole.

The Impacts of Ozone Depletion

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The Impacts of OzoneDepletion

Ultraviolet radiation, particularly the shorterwavelength UV-B (280-315 nm) and UV-C(below 280nm nm), is known to detrimentallyaffect biological and chemical processes ofliving organisms1,2. Exposure to elevated levelsof ultraviolet radiation can cause adverseeffects on growth, photosynthesis, protein andpigment control, reproduction and can causedamage to DNA3. In humans, exposure toultraviolet radiation can manifest itself in thedevelopment of skin cancer, cataracts andweakening of the immune system.

EcologyMarine foodwebs, based primarily onphytoplankton, are sensitive to alterations in its biomass, and so impacts on phytoplanktonwill have corresponding repercussions inecosystems. More than 50 per cent of theEarth’s primary productivity derives fromaquatic ecosystems 4, so UV-B inducedinhibition of the organisms responsible for thisproductivity – phytoplankton – has potentially

devastating consequences. Scientists have constructed models to

predict how ecosystems will respond toelevated UV-B radiation. One such modelpredicts that following a 17 per cent decreasein primary production due to elevated UV-Bradiation, a 27 per cent decrease in fish andinvertebrates would result. Losses could beeven greater as damage to early stages ofjuvenile fish, which are more sensitive to UV-Bexposure, are not considered in this model5,6 .

As a consequence of ozone layer thinning,spawning fish and other marine fauna sufferdamage similar to sunburn as well as impaireddevelopment and other abnormalities. Inspringtime, when ozone depletion is greatestand UV-B levels are at their maximum, manyfish species are also spawning. At this stagerespiration is through their skin as their gillsare not developed. The UV-B rays blister theskin of these young fish causing it to thicken.This slows down the uptake of oxygen,stunting growth and leaving them vulnerableto predators 7. UV-B induced dermal sundamage and melanomas are reported in avariety of fish species8, 9,10. Recent research hasalso revealed that UV-B radiation can interactwith hydrocarbon pollutants in the sea,making them up to 10 000 times more toxic11.

Skin Cells

Brain

Skin Cells

Skull

BlisterBrain

A BRight: Sectionthrough the head of sole larvae.(A) healthy fish: note single layer ofskin cells.(B) sunburned skin:note increased layersof skin cells and gap(blister) between skinand the skull

As aconsequenceof ozonelayerthinning,spawningfish andother marinefauna sufferdamage

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The Impacts of Ozone Depletion

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Human HealthExposure to ultraviolet radiation also directlyimpacts human health. These negative healtheffects include photoaging of the skin, skincancer, cataracts, and incidence of ocularmelonoma and squamous cell carcinoma of theeye. Although it is clear that exposure to UV-Bradiation in humans is dependent on a varietyof conditions – primarily climatic andbehavioural effects – the US EnvironmentProtection Agency developed a modelincorporating the ozone depletion scenariosdeveloped by the Scientific Assessment Panel ofthe Montreal Protocol 12. This predicted that,even with full compliance with the variousamendments and adjustments to the MontrealProtocol, more than 25 million additional cases

of cataracts are expected worldwide by 2050.This model was based on US data and it ispossible that under-nourished populations maybe at greater risk13.

A similar model provides estimates of theadditional cancer risks in populations annually,based on estimated changes in UV-B overtime14,15. Assuming full worldwide compliancewith the Montreal Protocol and amendments itis predicted that by 2060 there will beapproximately 90 million additional cases ofskin cancer13.

Elevated exposure to UV-B can also haveadverse effects on the immune system,depressing resistance to certain tumours andinfectious diseases, impairing of vaccinationresponses and possibly increasing the severity ofsome auto-immune and allergenic responses13.

Above: More than 25 millionadditional cases of eye cataracts are expected by 2050

Left: Malignantmelanoma.90 millionadditional cases of skin cancer are predicted by 2060

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activities of the multi-agency ‘US Task Forceon ODS Smuggling’ have deterred many ofthose involved in the illicit trade, while the EUhas implemented a sale and use ban for CFCsand halons, making illicit market activityeasier to spot.

Yet the US remains a lucrative market forODS smugglers, with Europe continuing to beused as a trans-shipment point for blackmarket CFCs. A recent case involved themovement of CFCs from the Far East throughtwo European ports, with the declared finaldestination being a Caribbean island, althoughmarkings on the packaging indicate that the USwas the ultimate destination3. Last year aseizure of CFCs in Florida took place, with thecontraband carrying the HARP brand nameused by the British company HRPRefrigerants4. There are also indications thatdespite the EU sales ban there is still an activemarket for these chemicals in many memberstates5. EIA has received reports of refrigerationcompanies in Denmark discovering cylinders ofCFC-12 (Dichlorodifluoromethane) falselylabelled as HCFC-22 which are smuggled infrom Lithuania, Poland and Russia6.

An additional tool in the fight against theillegal trade has been the introduction oflicensing systems for movement of ODS,

Enforcing the Phase-out

Illegal trade in ODS first came to light in themid-90s, and caught enforcement agencies offguard, especially in Europe, where action againstthis activity has lagged behind the moreconcerted efforts seen in the US. The possibilityof a black market was certainly not foreseen bythe legislators who framed the MontrealProtocol and its early amendments. Withhindsight, licensing systems should have beenimplemented at a much earlier stage, rather thanwaiting until 1997, by which time smuggling hadbecome entrenched and around 20 000 tonnes ofODS were being traded illegally worldwide everyyear. This is equivalent to over 12 per cent ofglobal ODS production at that time, althoughother estimates state that around 20 per cent ofall ODS traded in the mid-1990s came fromillegal sources1.

In the late 1990s, EIA uncoveredsophisticated networks supplying illegal ODSmainly from Russia and China to the marketsof the US and EU1,2. Recently there have beenencouraging signs that the smuggling of ODSinto the markets of the US and EU hasdeclined. In the US the procedures forimporting ODS have been tightened, and the

Right: Consignmentof 90 cylinders ofCFCs, concealedaboard a boat fromthe Bahamas,seized in Florida,September 2000

Estimatesstate thataround 20per cent ofall ODStraded in themid-1990scame fromillegalsources

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introduced under the Montreal Amendment of1997. Despite this, EIA has observed new trendsin the patterns of ODS smuggling since the late1990s, with Article 5 (developing) countriesexperiencing an upsurge in contraband ODSmovement.

The 1999 freeze, dictated by the MontrealProtocol phase-out schedule, required that fromJuly of that year Article 5 countries have had tofreeze their CFC consumption at a base-level setby average consumption between 1995 and1997. Although it is only two years since theJuly 1999 freeze, smuggling cases areincreasingly emerging in many Article 5countries. The fear is that if this freeze canprompt ODS smuggling, it is inevitable thatillegal trade will continue to proliferate asArticle 5 countries progressively phase-out theirconsumption, particularly since a 50 per centcut is required by 2005. As the phase-outschedule progresses, legitimate supplies willdecrease and market prices will go up, offeringincentives to ODS smugglers.

Case Study: Smuggling alongthe India and Nepal Border India is both a major producer and consumer ofCFCs. In several instances in the mid-1990s illicitmaterial from India was seized in the US andIndian-based brokers attempted to supply illegalODS to the EU, even acting as brokers for

Chinese-produced material. Yet India is nowexperiencing a growth in black market CFCimports. Between early 1999 and March 2000around 880 tonnes of ODS were smuggled intoIndia, which is approximately 12 per cent ofnational consumption.

The role of the neighbouring countries ofNepal and Bangladesh is key to understandingthe mechanics of India’s growth in illegalimports. In February 2000, EIA travelled to theIndia-Nepal border to probe the burgeoningsmuggling of ODS in the region and to exposethe methods and operators involved.

Nepal’s Inflated ImportsAs a mountainous land-locked country Nepalhas a customs arrangement with India to enableit to import goods via India, called the‘Customs Transit Declaration’. Cargo is landedat Indian ports such as Calcutta and is sealedby Indian customs. The containers are thentransported by road under seal to one of theauthorised India-Nepal border points, forclearance by Indian customs. If the seals areintact, the goods are transported over theborder to Nepal where the seals are opened andthe goods inspected.

CFCs are imported into Nepal by thismethod effectively unhindered by the lack ofimport controls and low level of import tax(approximately 5 per cent compared to India’s

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Map not to ScaleBorders not authenticated

Between early 1999and March2000 around880 tonnes of ODS wassmuggled into India

Enforcing the Phase-out

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A Licence to SmuggleNepal has recently introduced an ODS licensing system.From February 2001 the export of ODS is banned and alicence is required to import ODS. Yet a licensing system isonly as good as the effort put into enforcing it. Nepal hasnow laid down the permitted quantity of imports of ODSfrom 26 tonnes in 2001, scaling down to zero in 2010. Aletter of credit for import of ODS is also required from acommercial bank once the application has been approvedby the Ministry of Population and Environment.

Despite the official ceiling for imports, traders in Nepalcurrently possess letters of credit for the import of ODStotalling 368 tonnes for 2001. All of these letters of creditwere opened between 20th and 27th February (the former

date is when the Regulations were approved by the cabinet,the latter when these were made public). All of these lettersof credit were opened in contravention of the directives of theMinistry of Population and Environment. If this quantity of ODSis allowed to be imported, it will make a mockery of thelegislation, as it is considerably more than the entire quantityof CFCs permitted by all importers in Nepal over the next 10years – the period of Nepal’s proposed phase-out.

Unfortunately this process has already begun, andcompanies involved in the smuggling have moved more than300 tonnes of ODS to the Indian side of the border area andare applying to the Nepalese government to issue a one-offpermit to import these. In a four week period in 2001 around60 tonnes were cleared and moved to the border townsready to be smuggled back into India.

rate of 54 per cent for CFCs). The material isthen delivered to various locations in Nepal,where a small percentage is used for domesticconsumption, the rest is turned-around andsmuggled back into India. The prevalence of thisfraud is vividly illustrated by the import figuresfor Nepal; between January 1999 and June 2000Nepal imported more than 422 tonnes of ODS,although the country’s annual consumption isonly approximately 50 tonnes.

Study of Customs Transit Declaration andCustoms Clearance Documents reveal that alarge quantity of the CFCs imported into Nepaland then smuggled into India were produced inEurope. A name which continually cropped-upas a manufacturer of the CFCs was ElfAtochem (Atofina). This French company

exports large quantities of CFCs, manufacturedand frequently shipped from Spain but trans-shipped via Dubai or Singapore. Manycompanies in Singapore are involved in theshipment of CFCs to Nepal including; A&P AirConditioning Engineering Works, Elf Atochem(Atofina) and Kaltech Engineering &Refrigeration Pte Ltd. Other companies thatexported significant quantities of CFCs includedNaser Al Sayer & Co. and ASHAI General inDubai, and Shanghai High Pressure ContainerCompany Ltd in China.

PO Box 5149 PO Box 4210

Nepsino Trading Company

Divine International

Pioneer Marketing

New Elite Enterprises

Mr Kamal Todi Mr Ashok Agarwal

Mr Shanker Todi

Below: ShankerTodi’s web ofcompanies involvedin illegal CFC trade in Birganj

Below right: CustomsTransit Declarationdetailing import ofCFCs by DivineInternational – one ofShanker Todi’s manycompanies

Enforcing the Phase-out

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Smuggling OperationsOne of the first indicators of widespreadsmuggling of CFCs into India was theemergence on the market of 13.6kg disposablecylinders, which are widely used on theinternational market but banned in India.

Through scrutiny of seizures made by theIndian authorities and conversations with industrysources EIA traced the route followed by thecontraband material to Nepal, and the bordertown of Birganj – the base of operations for asmuggling network headed by Shanker Todi.

EIA’s on-the-ground investigations reveal thatTodi is the main broker for the illicit trade inODS passing through Nepal. He is linked tomost of the Nepalese companies importing ODS,

(see chart opposite) and works through anassociate called Ashok Agarwal to move thematerial back into India, mainly through theBirganj border crossing.

Consignments of CFCs in 13.6kg cylinders,which are enclosed in cardboard cartons, aretaken to storage facilities in Birganj town. EIAobserved cylinders of CFCs being moved betweendifferent storage areas before being packed insacks. The disguised cylinders are then taken tothe village of Inarwa on the Indian border. Underthe cover of night these are smuggled into India insmall batches. Alternatively smugglers movegreater quantities of CFCs by night, in tractorsand trailers, by more remote and dangerousroutes via Biswaha or Sikta.

A second smuggling route exists at the border

Above left: Illegaldisposablecylinders of CFC-12photographed inKaniska Motors,Delhi

Above: CFCs stored in Birganj, destinedto be smuggled into India

EIA’s on-the-groundinvestigationsreveal thatTodi is themain brokerfor the illicittrade in ODSpassingthrough Nepal

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town of Biratnagar. Here smugglers decant CFCsfrom the easily-recognisable 13.6kg disposablecylinders into larger 105kg cylinders widely usedon the Indian market. This method emerged as aresponse to the seizure of disposable cylindersmade by the Indian authorities.

A company called Hilltake, whose principalbusiness is the manufacture of water storagetanks, a process which does not require CFCs, isalso involved in smuggling. It imports largequantities of CFCs in disposable cylinders throughthe Customs Transit Declaration system viaCalcutta. In the Hilltake plant on the outskirts of

Biratnagar, the CFCs are decanted into largercylinders. Frequent deliveries of ice are arrangedby Hilltake to aid the decanting process. Untilrecently Hilltake moved considerable quantities ofthese cylinders across the Indo-Nepal border,declaring them as empty. Acting on a tip-off,Indian Customs officials at Patna intercepted andseized 79 full cylinders in April 2000.

Since this seizure Hilltake has altered itsmethod, and has been using rickshaws to moveone or two cylinders at a time to the bordercrossing at Jogbani where they cross unchecked.The cylinders are stored overnight at the Jogbani

Left: CFCs are decanted into 105kg cylinders at theHilltake plant in Biratnagar and smuggled over the Indian border.

Right: Hiltake’s main businessmanufacturing watertanks does notinvolve CFCs, yet it imports largequantities

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bus stand and loaded the next morning on topublic buses bound for Patna. Surveillance of thisnew smuggling method has allowed customs toseize a further six cylinders on the 5th February2001 and six cylinders on 9th February. Displayingthe adaptability of this illegal trade, EIA is nowaware of a new route used by the smugglers to theeast of Biratnagar and Jogbani.

Fighting the TideWhen EIA met with government officials in Indiaand discussed the smuggling problem it was clearthat although some officials refused to admit thata problem exists with illegal ODS trade, otherswere dedicated and were having significant, butisolated successes, often in very difficultconditions. One senior customs officer in the townof Motihari has been responsible for theconfiscation of 676 cylinders in nine differentseizures in a year, while another official in Patnaorganised the seizure of cylinders smuggled viaHilltake in April 2000. These two individualshave combined their expertise and recently seizedover 12 tonnes of illegal CFCs.

Despite the brave efforts of some dedicatedofficials, they are fighting a losing battle given themagnitude of the smuggling operations and lengthof the India/Nepal border; it is simple enough tocircumvent the official crossing points unchecked.It is evident that the officials are only able tocapture a small proportion of the material thatcrosses the border every day. Additional staff,extra vigilance and training could have significantpositive effects, but the solution to this illegaltrade must lie in restricting the source – theexcessive import of CFCs into Nepal.

Other Smuggling MethodsCFCs are also smuggled into India by mis-declaration through various ports and ‘InlandContainer Depots’ (ICDs). EIA obtainedinformation about the efforts of customsofficials at the Varanasi ICD who made amassive seizure of CFC-12 in 13.6kgdisposable cylinders on the 3rd April 1999.This seizure of 1100 cylinders came from asingle consignment, the value of which wasunderdeclared, and the importer, whopromptly disappeared, did not hold an import licence.

Similar seizures have been made all overIndia by customs officials at ICDs such asMumbai, Jaipur and Indore, whereconsignments of CFCs have been seized which were illegally imported through mis-declaration and under-invoicing.

EIA has also received reports of CFCsbeing illegally imported into India in anoperation involving ship breaking and gas-charging of operational ships7.

Above: One of themany seizures ofmaterial importedinto India fromBiratnagar

Right: Consignment of 1100 cylinders of CFC-12,seized at Varanasi InlandContainer Depot

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Officialsrefused toadmit that a problemexists withillegal ODStrade

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An Overview of ODS Smugglingin Article 5 Countries

BangladeshSmuggling activities into India are notconfined to its border with Nepal – concertedefforts are also being made by Bangladeshifirms to move contraband ODS onto theIndian market. Customs officers in the Indiancity of Calcutta recently seized 281 illegaldisposable cylinders of CFCs and HCFCs

shipped via Bangladesh. The gas cylinders are generally packed in

sacks, and moved over the border in smallquantities. They are concealed and transportedin vans, cycle rickshaws, and other vehicles.EIA recently became aware of CFCs decantedinto oxygen cylinders and carried in headloadsfrom Bangladesh to India. The material is thencollected together and transported in largerquantities around India.

Since 1995, there has been a surge in theamount of ODS imported into Bangladesh. In1994 only 181 ODP tonnes were imported,but by 1997 imports reached 832 ODPtonnes. This has resulted in a considerableincrease in the baseline on which Bangladesh’sphase-out schedule is calculated (from theaverage of the 1995-1997 ‘consumption’).This elevation of the baseline allowsBangladesh to import significantly more ODSthan required for its domestic needs over thephase-out period, creating a surplus bound forthe black market.

PakistanThe smuggling of CFCs into Pakistan has risenover the last couple of years, fuelled by adomestic quota that is small when comparedwith demand and abetted by corrupt officials.Pakistan’s Ministry of Commerce has in thelast few years been issuing import

Right: Part of theseizure, made byCalcutta customs, of281 cylinders of CFCsand HCFCs smuggledfrom Bangladesh

Below: Bangladesh’simports of ODSdramaticallyincreased over theyears on which their baselineconsumption wascalculated

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authorisation to companies who are notinvolved in the refrigeration business, andhave never before imported refrigerants. Acommon smuggling method into Pakistan ismisdeclaration of the goods – CFCs are notlisted under customs Chapter 29, which coversODS, but are instead listed as personal effectsand so evade customs checks.

In September 2000, several 20 footcontainers of CFC-12 and CFC-11 wereillegally imported into Pakistan through theMultan City Dry Port. The CFCs were falselydeclared as HCFC-22, with the smugglersplacing a single layer of HCFC-22 cylindersnext to the door of each container to disguisethe contraband8. This method has been widelyused in the past by Chinese brokers sendingillicit ODS to Europe.

Another method by which smugglers moveillegal material into Pakistan is bymisdeclaring the quantity of the import.Pakistan receives bulk isotanks of CFC-12from Greece, Italy and Spain8. EIA hasreceived information that three importersdeclare the tankers as being partially filled,although they are in fact full, and are so ableto increase their import quotas by up to 60per cent and avoid tax and duty. Pakistan alsoreceives considerable quantities of smuggledCFCs through its land borders with India9.

South-East Asia A new form of smuggling recently came tolight in Malaysia. Cylinders labelled andpackaged as containing HFC-134a werediscovered to actually contain CFC-1210.According to the labelling the gas originatedfrom a firm in the UK called HRPRefrigerants, although the cardboardpackaging was manufactured in Portugal.Although using the false label of HFCs todisguise CFCs is not new, in this case the gaswas actually sold as HFC-134a, so the buyersbelieved they were getting a legal substitute toCFCs. As a 13.6kg cylinder of HFC-134a sellsfor $90, compared with $40 for CFC-12, theprofit motive is clear. In tests on 20 cylinderslabelled as HFC-134a, only two actuallycontained the chemical.

In a more traditional smuggling case theMalaysian authorities seized four containerscontaining 4600 cylinders of CFC-12 inFebruary 2000. These products were found tobe counterfeits manufactured in China. Allied Signal’s label and Genetron name were used on these cylinders. These were

identified as counterfeit from the valves,manufacturers numbers and minor spellingmistakes on the labels11.

Elsewhere in South-East Asia smuggling isalso on the rise. In the Philippines there havebeen instances of vehicle air-conditioningsystems being converted from HFC-134a backto CFC-12, to take advantage of an illegaltrade estimated at 75 per cent of legitimateconsumption (of around 2000 tonnes)12.Around 80 per cent of CFC-12 imports intoVietnam are illegal12.

Above: Cylindervalves; (A) valveused on AlliedSignal product (B) valve used onChinese-producedcounterfeitcylinders

Left: Falsepackaging, claimingto be HFC-134amanufactured byHRP Refrigerants.The cylindersactually containedCFC-12

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Enforcing the Phase-out

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countries before reaching the black market ofthe destination country. Two transit countriesthat continue to crop up in the illegal trade ofODS are Singapore and Dubai in the UnitedArab Emirates.

Much of the illegal material seized in Indiahas transited through Dubai and Singapore.More than 60 per cent of the CFCs importedinto Dubai are re-exported both legally andillegally to Africa, south Asia and othermarkets, effectively by-passing MontrealProtocol licensing systems. Industry sourcesindicate that the Dubai Export Free Zone servesas a conduit for illegal ODS passing intoPakistan and India. One method involves theTransfer of Residence fraud, where migrantworkers returning from the Middle East areaccompanied by a 40-foot container filled withCFC cylinders. Many people fill the containersthemselves and declared these as ‘personaleffects’. The dealers involved frequently acceptonly cash and require that the containers arefilled and shipped by the customer.

As recognised when investigating smuggling in Europe, a proliferation of brokersis often indicative of illegal trade dealing inODS. European brokers have recently beenrelocating to Dubai.

The Role of Transit CountriesA recurring feature in shipments of ODS is theuse of transit countries to move the ODS fromsource to end market which can confuse thetrail. Routes uncovered by EIA in the past haverevealed ODS moving through three or more

Left: KaltechEngineering &Refrigeration Pte Ltd,a Singapore-basedfirm which exportslarge quantities ofCFCs to Nepal.

Left: Packing list forconsignment of CFCs,shipped from Naser AlSayer & Co, Dubai. Thismaterial was seized bycustoms at Varanasi

Much of the illegalmaterialseized inIndia hastransitedthroughDubai andSingapore

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Conclusions

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Conclusions

The Montreal Protocol mechanism has madegreat strides forward in curbing the use ofODS, without which the future for the ozonelayer would be far more perilous, yet it hasfailed to react in a coherent manner to theproblem of enforcement and the continuedthreat of illegal trade in ODS. While large scalesmuggling activities into the US and EU havelargely been curbed, through enhancedenforcement and new legislation respectively, adisturbing rise in smuggling in Article 5countries is now emerging. Informationgathered and investigations that EIA has beencarrying-out indicate that this illegal trade isalready of a serious magnitude, is growing, andis prevalent in many developing countriesthroughout the world. This is occurring at atime when the ozone layer is more depletedthan ever before, posing threats to ecosystemsand human health.

The challenge to curb smuggling in Article5 countries is not an easy one. Customs andenforcement authorities in developingcountries are often under-resourced. Yetinaction will exacerbate the problem. It is indeveloping countries, where the bulk of ODSproduction and consumption now occurs thatthe biggest remaining challenges to thescheduled phase-out of ODS under theMontreal Protocol are found. If smuggling isallowed to flourish, the ability of Article 5countries to meet their phase-outcommitments will be undermined. The onlycommitment to date has been the 1999 freeze,yet this has already prompted a growth insmuggling. The existence of an active blackmarket in ODS in many Article 5 countriesundermines the market for alternatives, andthreatens to encourage illicit production. Itwill make the 50 per cent cut in consumptionrequired by 2005 harder to achieve.

In light of these challenges, innovativesolutions to improve enforcement are needed.Since the late 1990s, increasing attention hasbeen focused on the issue of improving theenforcement of Multilateral EnvironmentalAgreements (MEAs). Discussions have beenheld by a range of relevant bodies, notablyUNEP, the World Customs Organisation(WCO), Interpol and the G8 Group of nations,to enhance co-operation between differentMEAs. The issue of enforcement is also centralto the United Nations on-going review ofinternational environmental governance during

the run-up to the World Summit on SustainableDevelopment, scheduled for late 2002.

In this respect, it is evident that theMontreal Protocol is lagging behind MEAssuch as the Convention on International Tradein Endangered Species (CITES), which containsa specialised Enforcement Assistance Unit,containing personnel with frontlineenforcement experience.

At a UNEP Workshop on ‘Enforcement ofand Compliance with MEAs’, held in Geneva inJuly 1999, the Ozone Secretariat of theMontreal Protocol was urged to take measuresto address the illegal trade in ODS. Specificrecommendations from the workshop includedthe reporting of seizure and illegal trafficinformation to the Secretariat, the signing offormal Memorandums of Understanding (MoU)with Interpol and the WCO, and theappointment by the Secretariat of aninternational liaison officer from theenforcement community. Two years later andthese recommendations have not been acted on.

Greater effort is also needed to trainenforcement officers in developing countries andto encourage cross-border cooperation in regionswhere smuggling has become entrenched, such asIndia, Nepal and Bangladesh.

Left: All developingcountries mustphase out the useof CFCs by 2010

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Recommendations

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Recommendations

Address illegal trade

• Follow the lead and recommendations ofother Multilateral EnvironmentalAgreements regarding enforcement

• Create an Illegal Trade Prevention TaskForce within the Montreal Protocol

• Appoint a full-time enforcement officer at theOzone Secretariat

Facilitate pro-active cooperation

• To curb illegal trade it is essential thattraining initiatives, which encourage sharingof information on illegal ODS trade, arecontinued and enhanced. Intelligence isimportant, especially from contacts inindustry who are in a good position to noticeunusual sales or purchases of ODS.

• Customs training workshops such as theUNEP-organised ‘control and monitoring ofODS consumption workshops’ areconsidered a very important element inachieving this goal.

• The Executive Committee and MultilateralFund of the Montreal Protocol shouldconsider giving greater financial support tosuch regional training initiatives and, whereappropriate, public information campaigns.

Ratify Amendments and enhance and enforcenational regulations

• Parties are urged to ratify the Amendmentsto the Montreal Protocol. In the context ofillegal ODS trade, ratification of theMontreal Amendment is of primeimportance, as this relates, inter alia, to theimplementation of a licensing system. The latest report of the Ozone Secretariatreveals that, as of August 29, 2001, theMontreal Amendment has only been ratifiedby 63 parties.

• By incorporating an export licensing system in their country’s legislation, as well as developing, enhancing andimplementing national regulations, Partieswould facilitate the detection and control of illegal ODS trade. It is vital that nationallicensing systems incorporate exports ofODS to prevent countries being used astransit points.

Right: CFCs on themove near theNepal/India border

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Enforcing the Phase-out1 Environmental Investigation Agency (EIA).

1997. Chilling Facts About A BurningIssue; CFC Smuggling in the EuropeanUnion. EIA, London.

2 Environmental Investigation Agency (EIA).1998. A Crime Against Nature; theWorldwide Illegal Trade In OzoneDepleting Substances. EIA, London.

3 Confidential personal communication toEIA, 2001

4 Miami Herald, 16 September 2000. Freonsmuggler gets 6-month prison sentence.

5 Unpublished EIA internal report, 20016 Confidential personal communication to

EIA, 20017 Confidential personal communication to

EIA, 20018 Confidential personal communication to

EIA, 20009 Confidential personal communication to

EIA, 200110 New Straits Times, 6 February 200011 Confidential personal communication to

EIA, 200012 UNEP-SEI Regional Workshop on Monit-

oring and Control of ODS Consumption,Pattaya, Thailand, 22 – 26 May 2000

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