LATIN AMERICA AND THE CARIBBEAN Staci Gatica gaticastaciepagov US Licensing System amp Enforcement Activity 2 Presentation Topics Mechanics of US Licensing System and Phaseout Focus on Imports ID: 683356
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OCTOBER 5, 2011
MAIN MEETING OF OZONE ACTION NETWORKS FROM LATIN AMERICA AND THE CARIBBEANStaci Gatica gatica.staci@epa.gov
U.S Licensing System
&
Enforcement ActivitySlide2
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Presentation TopicsMechanics of U.S. Licensing System and PhaseoutFocus on Imports
Used vs. virgin ODS
Petition process
Collaboration to Identify Illegal Activity
Enforcement of Regulations
Recent Illegal Trade
Other Types of ViolationsSlide3
US EPA Stratospheric Ozone Program OfficeSlide4
U.S. Licensing System to Ensure Compliance
Licenses (“allowances”) needed to produce or import bulk HCFCs“Baselines” established for individual companies effective in 2003 (production & consumption)
Baselines based on historical consumption data of each company
Goal: Avoid disruption of existing market
Current phaseout approach: Baseline allowances reduced proportionately via regulation to implement and domestic regulations and Protocol goals
Also a “worst first” phaseout approach
“Exemptions” needed for CFCs, MeBr and other phased-out ODS
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HCFC Allowance ExpenditureProduction Allowances
Consumption
Allowances
Domestic Production =
1 consumption +
1 production allowance for
each kg produced in U.S.
Import =
1 consumption allowance for
each kg imported in the U.S.
1 allowance = 1 kg of chemicalSlide6
Trade of Allowances
Allowances are tradable between companies and between chemicals
Trades allow new entrants into the HCFC market
EPA must be notified of trade
EPA must process request within 3 days, or it happens automatically
EPA notification is very important
EPA should at ALL times know what companies have allowances to import ODS
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Total Projected R-22 Servicing Demand & EPA’s 2010-2014 Initially Developed Allocations of HCFC-22
Projected Unmet Need for R-22
Implementation of HCFC Phaseout
Next major milestone under Montreal Protocol: 90% HCFC reduction from 2003 baseline by 2015Slide8
ODS Tracking System (ODSTS)
Collect CBI data from about 80 companiesODSTS contains significant data from reports (i.e., 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)
E-Reporting
Templates
HARD COPY FORMS
Ozone Depleting Substance Tracking System (ODSTS)
Data Summary Reports
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Maintaining Tracking and Reporting Data Continuity
E-Reporting
Templates
Hard Copy Forms
ODS
Tracking System
Data Summary ReportsSlide10
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Recordkeeping & Reporting RequirementsFound in 40 CFR part 82.13 and 82.24Production, Import and Exports reported quarterlyA variety of other forms exist (i.e., destruction)
25+ reporting forms (
http://www.epa.gov/ozone/record)
Class I
Class II
Methyl Bromide
Reporting forms are always changing as regulations change due to phaseout
Guidance for reporting entities
Stakeholder input is helpful to form developmentSlide11
Focus on Imports
Virgin ODS
Used ODS
For Use
Consumption Allowances
Exemption Allowances
Trades of Allowances tracked by EPA
-Petition to EPA
Non-objection Letter
NOL must accompany shipment through customs
For Destruction or Transformation
No need for Allowances
No pre-notification
SPD typically receives voluntary notification for phased out ODS (i.e., CFC)
Petition to EPA for material being destroyed
NOL or Acknowledgement Letter
* N/A for Transformation
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Importing Used ODS –
Petition ProcessImport 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 will investigate source information
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
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Importing Virgin ODS
CFCsCustoms typically stops import of virgin CFCsCall EPA on a case-by-case basisSuch imports are rare
HCFCs
EPA 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.S
Customs is told to contact EPA to confirm import of HCFCs into the U.S.
EPA is available 24-hour via cell phone to work with Customs
EPA verifies against ODSTS
Any illegal activity is referred to Office of Enforcement and Compliance Assistance – civil and criminal divisions
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Customs/EPA Process to Combat
Illegal Trade
STOP!
Customs Inspector stops shipment because of HTS criteria hit
Customs Inspector calls EPA to check on clearance
EPA checks whether shipment is legal
EPA calls Customs to clear shipment for import or ask them to seize it
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Sharing Information & Intelligence
Network! Customs and Border Protection specific training and conferencesJoint EPA/Criminal Investigation Division and CBP “sting” operationEPA 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
?
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Enforcement of ODS RegulationTwo general types of enforcement actionsCivil and criminalCriminal – must show intent by defendant to break the law
Ultimate penalties vary – fines, community service, probation, imprisonment
The Stratospheric Protection Division (SPD)
“Program office” does not enforce regulations
EPA’s Office of Enforcement and Compliance Assistance (OECA) have enforcement authority over our regulations
Great coordination between SPD and OECA
Mindset – always aim to maintain that coordination
Try to prepare for rise in illegal activity
Details of investigation are maintained in OECA Intelligence gathered via research, tips, inspections and online reporting, international collaboration http://www.epa.gov/compliance/
(click on the badge in the corner)Slide18
Recent Case Studies on Illegal Trade
Lateral InvestmentsOn July 29, 2011, Brendan Clery was sentenced to 18 months in prison for illegally importing HCFC-22, contrary to the provisions of the Clean Air Act (CAA). In addition, he was ordered to pay a $40,000 criminal fine and forfeit illegal proceeds in the amount of $935,240. Between June and August 2007, Clery illegally smuggled into the United States approximately 278,256 kilograms, or 20,460 cylinders, of restricted HCFC-22, with a market value of $1,438,270. At no time did Clery or his company Lateral Investments hold unexpended consumption allowances that would have allowed them to legally import the refrigerant.
Facts about the case:
Cleary created import business in Florida with intent to import illegal refrigerant, among other items
The product came from China
This case of part of a larger criminal investigation known as “Operation Catch-22”
Investigation team: Environmental Protection Agency, U.S. Immigration and Customs Enforcement, and the Florida Department of Environmental Protection, Criminal Investigation Bureau, and prosecuted by special assistant U. S. Attorney Jodi A. Mazer
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Recent Case Studies on Illegal Trade
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
.
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
Investigation team: Environmental Protection Agency, U.S. Immigration and Customs Enforcement, and the Florida Department of Environmental Protection, Criminal Investigation Bureau, Miami-Dade Police Department and prosecuted by special assistant U. S. Attorney Jodi A. Mazer
This is the US’s first prosecution for false statements contained in a petition to import used ODS
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Recent Case Studies on Illegal Trade
Correa, Falcon, Nova, and UrenaOn 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 was scheduled for December 29, 2010. Results: 1-5 years of probation, storage and destruction fees.
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.
Investigation team: Environmental Protection Agency, U.S. Immigration and Customs Enforcement, and the Florida Department of Environmental Protection, Criminal Investigation Bureau, and prosecuted by special assistant U. S. Attorney Jodi A. Mazer
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Recent Case Studies on Illegal Trade
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
Multi-Agency team received a 2010 U.S. EPA Montreal Protocol Award
Team: EPA Region 4, Department of Homeland Security, Department of Justice
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Other Types of ViolationsIllegal trade (imports) is only one type of violationOther types include improper management of ODS:Venting Improper disposal techniquesServicing by a technician without certification from an approved certification program
Selling ODS to uncertified technician
Failure to repair leaks
Tax evasion (CFC tax)
http://www.epa.gov/ozone/enforce/Slide23
Questions
?
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Information on Alternatives
http://www.epa.gov/ozone/intpol/mpagreement.html
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