MARCH 3, 2011CARIBBEAN OZONE OFFICERS

REGIONAL OFFICE FOR LATIN AMERICA AND THE CARIBBEAN (ROLAC)

U.S ODS Licensing System&

Illegal Imports – Recent Case Studies

AgendaAgenda

Introduction

ODS Licensing System Allowances Trades Reporting Requirements Tracking and Reporting

Imports Used/new imports Petition process Fines for illegal imports

Relationship with CBP/ICE/EPA Regions/other federal agencies Illegal imports and development of relationships with CBP/ICE/EPA Regions/other

federal agencies/stakeholder groups

Recent Case Studies Kroy Correa, Falcon, Nova and Urena Harp

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U.S. ODS Licensing System to Ensure U.S. ODS Licensing System to Ensure ComplianceComplianceLicenses (“allowances”) needed to produce or Licenses (“allowances”) needed to produce or

import bulk ODSimport bulk ODS““Allowances” allocated to individual Allowances” allocated to individual

companies through rule writing/regulationcompanies through rule writing/regulationAllocation based on historical activity of each Allocation based on historical activity of each

company – mimics market sharescompany – mimics market sharesEach company given baseline allowancesEach company given baseline allowancesCurrent approach: Baseline allowances Current approach: Baseline allowances

reduced by percentages in regulation to meet reduced by percentages in regulation to meet Protocol scheduleProtocol schedule

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U.S. Licensing System to Ensure U.S. Licensing System to Ensure Compliance (con’t) & ReportingCompliance (con’t) & Reporting

1 allowance = 1 kg of each chemical1 allowance = 1 kg of each chemicalAllowances are tradable between companies Allowances are tradable between companies

and between chemicals; some limitations and between chemicals; some limitations applyapply

EPA notified of trade and must process EPA notified of trade and must process request within 3 days, or it happens request within 3 days, or it happens automatically automatically

Quarterly and annual reporting Quarterly and annual reporting requirements for companiesrequirements for companies

Database tracking system used to manage Database tracking system used to manage compliance data and report to UNEPcompliance data and report to UNEP

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Issuance of Allowances to Control Issuance of Allowances to Control Production and ConsumptionProduction and Consumption

Allowances needed to Allowances needed to ProduceProduce (except if (except if feedstock or destroyed – these amounts are feedstock or destroyed – these amounts are reported to EPA and tracked in database)reported to EPA and tracked in database)

Allowances needed to Allowances needed to ImportImport (except if (except if feedstock or destroyed – these amounts are feedstock or destroyed – these amounts are reported to EPA and tracked in database)reported to EPA and tracked in database)

Violation of Allowance limit carries a penalty of Violation of Allowance limit carries a penalty of $37,500 $37,500 per kilogram per kilogram (for civil penalties only)(for civil penalties only)

Reporting requirementsReporting requirements Regulations include reporting and recordkeeping Regulations include reporting and recordkeeping

requirements for producers, importers, and requirements for producers, importers, and exporters of class I and class II substancesexporters of class I and class II substances

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ODS Tracking & Reporting ODS Tracking & Reporting (ODSTS)(ODSTS)

Collect CBI data from about 80 companies A variety of reports are used (producer, importer, exporter,

destruction, transformation, etc.) Electronic templates for major reports The ODSTS tracks allowances to ensure compliance under

Protocol Balance statements (per transaction) All trades contained in the system

ODSTS analyzes data and produces reports (i.e., Article 7 for UNEP)

HARD COPY FORMS

Ozone Depleting Substance Tracking System (ODSTS)

Produce Reports for UNEP

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ImportsImports

Virgin ODS Used ODS

For Use

-Baseline Allowances Needed-Exemption Allowances-Trades of Allowances tracked by EPA

-Petition to EPA- Non-objection Letter

For Destruction or

Transformation

-No need for Allowances-No pre-notification-SPD typically receives voluntary notification

-Petition to EPA for material being destroyed-Non-objection Letter* N/A for Transformation

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Importing Used ODS – Importing Used ODS – Petition ProcessPetition Process

•Import petition required for shipments over 5 pounds

Petition contains a number of informational elements Purpose: to help EPA determine that the material is in fact, used

•Petition must be submitted to EPA at least 40 before shipment is to leave port of export•EPA mails or faxes either an objection (non-approval) or non-objection (approval) letter to petitioner•Petition and non-objection letter must accompany shipment through U.S. Customs

Current process is good; Not a lot of interaction with U.S. Customs related to used material

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Importing Virgin ODSImporting Virgin ODSCFCsCustoms stops import of virgin CFCs

Call EPA on a case-by-case basis Such imports are rare Transformation, destruction, lab use

HCFCsEPA worked with Customs to put a criteria hit into their

Automated Commercial System (ACS) database- A comprehensive system that tracks, controls, and processes

commercial goods imported into the U.SCustoms is told to contact EPA to confirm import of

HCFC-22 into the U.S.EPA is available 24-hour via cell phone to work with

CustomsEPA verifies against ODSTSAny illegal activity is referred to Office of Enforcement

and Compliance Assistance – civil and/or criminal divisions 9

Customs/EPA ProcessCustoms/EPA Process

STOP!Customs Inspector stops shipment because of HTS

criteria match

Customs Inspector calls EPA to check on clearance

EPA checks whether shipment is an exception to banEPA calls Customs to

clear shipment for import10

Sharing Information & IntelligenceSharing Information & Intelligence Network!

Customs and Border Protection specific training and conferences

Joint EPA/Criminal Investigation Division and CBP “sting” operation

EPA bi-annual regional conference

Communicate! EPA holds monthly conference calls with our Regional EPA

contacts on enforcement issues Quarterly information exchange with stakeholders (i.e.,

Alliance) to get “tips” in illegal activity

Leverage Resources! Work with our Office of Enforcement and Compliance here at

EPA to get access to Customs and Border Protection import entry data to analyze against our ODSTS (ODS tracking system)

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Questions thus far?Questions thus far?

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Recent Case Studies on Illegal Recent Case Studies on Illegal TradeTrade

Kroy Corporation and James Garrido

On February 11, 2010 James Garrido and Kroy Corporation were each sentenced today by U.S. District Court Judge Patricia A. Seitz. Garrido was sentenced to 30 months’ imprisonment, to be followed by three years of supervised release. Kroy Corporation was sentenced to five years of probation. Additionally, Garrido and Kroy were sentenced, jointly and severally, to pay a criminal fine of $40,000, and were further ordered to forfeit $1,356,160 to the United States.

Facts about the case: The HCFC- was produced in China The HCFC-22 was sent to the Dominican Republic (DR) - we do not

know if the import into DR was legal or illegal The shipment was not defined as a transshipment

Press release has been shared with Artie

Multi-Agency team received a 2010 U.S. EPA Montreal Protocol Award Team: EPA Region 4, Department of Homeland Security, Department of Justice 13

Recent Case Studies on Illegal Recent Case Studies on Illegal TradeTrade

Correa, Falcon, Nova, and Urena

On October 20, 2010, John Correa, Abdiel Falcon, Charles Nova, and Blasdimir Urena each pled guilty to the felony charge of violating 18 USC 545 for importing merchandise (23,079 kg of HCFC-22 with a FMV of approximately $257,944) contrary to the CAA in that they did not hold unexpended consumption allowances. Sentencing for all 4 defendants is scheduled for December 29, 2010.

Facts about the case: The HCFC-22 was Chinese manufactured The HCFC-22 was sent to the DR - we do not know if the import was legal or

illegal. We do not know how it got to the DR. We know the defendants “learned the smuggle scheme” from someone; we do not

know who taught them.

U.S. is interested in working with DR and is working with the U.S. Department of Justice to investigate ways to work with the DR to combat the illegal import of R-22. A few options are being investigated. One option being considered is the Mutual Legal Assistance Treaty (MLAT)

An Agreement between two countries for the purpose of gathering and exchanging information in an effort to enforce public laws or criminal laws

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Recent Case Studies on Illegal Recent Case Studies on Illegal TradeTrade

Harp USA, Inc.

On February 11, 2011, Harp USA Inc. (Harp), a Florida corporation, pled guilty and was sentenced today in connection with false statements made in entry documents for the importation of used HCFC-22 refrigerant. Harp’s plea included admittance to importing approximately 1,874 cylinders (approx 25,000 kg) into the U.S. using false invoices and statements resulting in three years of probation and a $206,140 criminal fine. Harp was also ordered to perform community service by making a $25,000 payment to the Southern Environmental Enforcement Training Fund, a not-for-profit training organization. In addition, as a special condition of probation, Harp was ordered to implement and enforce an Environmental Compliance Plan and to reimburse the government for costs associated with the storage and handling of the merchandise. Finally, Harp was ordered to forfeit to the U.S. $206,140, which represents proceeds received as a result of the crime.

Facts about the case: The product came from the UK – claimed refrigerant was used The petition that was submitted to EPA was reviewed and a “non objection letter” provided Upon further review and before the shipment arrived, EPA realized the petition contained

false statements EPA regulations (82.24(c)(4)(vi) state that if new information is found after a non-objection

letter is provided that indicate false information, then EPA can take enforcment action

This is the US’s first prosecution for false statements contained in a petition to import used ODS

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Questions?Questions?

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