Illegal Trade

With the approach of the deadl ines to phase-out ODS, and because CFC production is also decreasing, legitimate supply of ODS has been going down, pushing market prices up and thus encouraging the smuggling of these substances into many countries. Illegal trade first came into light in the 1990s and has been growing alarmingly allover the world. In 1997, it is said that an estimated 20,000 tons of ODS, over 12 % of global ODS production at that time, were being illegally traded worldwide. Some estimates show that around 20% of all trade in ODS in the mid¬1990s was illegal. And the situation has grown worse since then.

Profit levels between 75 to 225 percent generated from ODS smuggling, especially smuggling of CFCs for refrigeration and air conditioning, has established it as a lucrative profession for smugglers. These traders illegally sell CFCs in industrialised countries in the guise of recycled CFCs or as exports to developing nations. Misdeclaration and mislabeling have also become common. Detailed investigations by the Environmental Investigation Agency (EIA) showed that smugglers use a number of transit countries, usually three or more, while shipping the ODS from the source to the end market to make it difficult for investigators to track them.

Following the freeze of CFCs consumption levels in Article 5 countries in 1999, illegal trade has been on the rise in these developing countries, especially in the Indian subcontinent, central, southern, and Southeast Asia, the Midd Ie-East, southern Africa, and the Caribbean. Some countries were found to be more recent conduits for illegally re-routing a OS to major consumers. Other countries in the region were also identified as newer and emerging markets for re-routing of CFCs. Illegal trade is especially common in the Indian subcontinent because of the free trade zone and the open borders between some countries.

In the 1990s the United States was a major market for illegally traded ODS, and Europe is continuously being used as a trans-shipment point. However, more stringent procedures for importing ODS, the active multi-agency US Task Force on ODS Smuggling, and its cooperation with Customs, Department of Justice, EPA, and FBI have greatly discouraged illegal trade in the US. Similarly, a ban on the use and sale of CFCs by EU has also helped.


The Montreal Protocol is succeeding, but there is still much work left to do before this environmental treaty can be said to have worked.


In South Asia, a recent attempt to address illegal trade was the 'Nepal Dialogue' among Nepal, China, and India in Kathmandu in September 2003 following the seizure of 74 metric tons of illegal shipment of CFC12. In the dialogue, which was facilitated by UNEP, the three participating countries agreed to share information regarding the importers with licenses in Nepal, the amount of ODS exported to them every year, the agreed upon quotas, the results of any investigations undertaken, and the labels used on traded ODS equipments. They also agreed to hold regular meetings between customs officers working at the borders between Nepal and India and between Nepal and China.

A more recent attempt was the Workshop on Preventing Illegal Trade: Public Private Partnership, organised in Hua Hin, Thailand in February 2004, which brought together industry and government representatives from China, India, the European Union, and Russia, the World Bank, the Environmental Investigation Agency (EIA) and the Stockholm Environmental Institute in a commitment to greater cooperation and transparency in sharing information and intelligence to combat illegal trade in the ODS.

Iran, Pakistan, and Afghanistan agreed to meet and discuss on a joint collaboration regarding controlling and preventing illegal trade of Ozone Depleting Substances. This two-day meeting launched by UNEP and hosted by Iran on 17-18 August 2004 in Tehran, provided the opportunity for exploring cooperation and coordination mechanism / framework to tackle illegal trade of ODSs. The Ministries of Commerce, Departments of Custom, and National Ozone Units of these three countries participated at the meeting to exchange their views, experiences, and expectations to enforce better controls on illegal trade of ODS as part of their efforts to combat environmental crimes.

The second initiative was the Mongolia Dialogue, held in Ulaanbaatar, in August 2003, bringing together ozone and customs officers from China and Mongolia. The outcome of these Dialogues resulted in agreements on information exchange between participating countries on registered importers and exporters, the establishment of the Mongolia-China Task Force, and other cooperation activities.

Illegal trade has proved to be the biggest obstacle to the achievement of the goals of the Montreal Protocol, and it is therefore very important for all countries to take measures to eliminate it. National licensing systems to better track imports and exports of ODS, improved national regulations, sharing of information, international cooperation, training initiatives, distribution of ODS identifiers at focal checkpoints, and network meetings could well be the most potent weapons to overcome this obstacle.

Customs regulations were initially targeted towards gradually decreasing the amount of ODS in use, thus facilitating thei r phase-out process. Today, these perform an additional, perhaps even more important, job of keeping a check on illegal trade. The Montreal Protocol started things by defining, in Article 4, restrictions in trade of ODS with countries that had not joined the Protocol. Building on this single restriction, member countries have today implemented various legislative measures to keep track of the amount of ODS being traded and consumed.

Most countries started by imposing heavy taxes on ODS and appliances using CFCs and CFC compressors, to discourage their use. Some countries also reduced or entirely eliminated customs duties and excise taxes on ozone-friendly equipment, for the same pu rpose. These steps were instrumental in closing the price-gap between ODS and their alternatives, thus making ozone friendly technologies competitive in the market.

Smugglers were imprisoned and fined heavily to discourage illegal trade. Today, the trade and use of most ODS in various applications have been banned in most of countries, and national licensing systems have been established to prevent unauthorised use of these substances. Member countries of the South Asia Network have also initiated such action.

In response to Meeting of the Parties Decision XIV/7, UNEP CAP is encouraging parties to exchange information and intensify joint efforts to improve means of identification of ODS and prevention of illegal ODS traffic, and also to make even greater use of the regional networks to increase cooperation on illegal trade issues and enforcement activities. The SIDA funded project on customs ozone coordination is an example of such efforts in the Asia and the Pacific region. UNEP will also continue to work with regional customs institutes like the National Academy of Customs, Excise and Narcotics (NACEN) in India to ensure that training on these subjects is integrated into ongoing curricula.




Where to Turn for Help

A National Ozone Unit is present in every country to help individuals with such initiatives to protect the ozone layer. The NOU can provide the latest and the most comprehensive information on matters such as ODS regulations, substitutes and technologies available for the replacement of a particular ODS-containing appliance, and national and regional activities currently under implementation. In addition, consulting with local suppliers or servicing technicians can often bring up very effective techniques for a replacement or retrofit process.