MARCH 3, 2011 CARIBBEAN OZONE OFFICERS REGIONAL OFFICE FOR LATIN AMERICA AND THE CARIBBEAN (ROLAC) U.S ODS Licensing System & Illegal Imports – Recent Case Studies

Agenda 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 2

U.S. ODS Licensing System to Ensure Compliance Licenses (“allowances”) needed to produce or import bulk ODS Licenses (“allowances”) needed to produce or import bulk ODS “Allowances” allocated to individual companies through rule writing/regulation “Allowances” allocated to individual companies through rule writing/regulation Allocation based on historical activity of each company – mimics market shares Allocation based on historical activity of each company – mimics market shares Each company given baseline allowances Each company given baseline allowances Current approach: Baseline allowances reduced by percentages in regulation to meet Protocol schedule Current approach: Baseline allowances reduced by percentages in regulation to meet Protocol schedule 3

U.S. Licensing System to Ensure Compliance (con’t) & Reporting 1 allowance = 1 kg of each chemical 1 allowance = 1 kg of each chemical Allowances are tradable between companies and between chemicals; some limitations apply Allowances are tradable between companies and between chemicals; some limitations apply EPA notified of trade and must process request within 3 days, or it happens automatically EPA notified of trade and must process request within 3 days, or it happens automatically Quarterly and annual reporting requirements for companies Quarterly and annual reporting requirements for companies Database tracking system used to manage compliance data and report to UNEP Database tracking system used to manage compliance data and report to UNEP 4

Issuance of Allowances to Control Production and Consumption Allowances needed to Produce (except if feedstock or destroyed – these amounts are reported to EPA and tracked in database) Allowances needed to Produce (except if feedstock or destroyed – these amounts are reported to EPA and tracked in database) Allowances needed to Import (except if feedstock or destroyed – these amounts are reported to EPA and tracked in database) Allowances needed to Import (except if feedstock or destroyed – these amounts are reported to EPA and tracked in database) Violation of Allowance limit carries a penalty of $37,500 per kilogram (for civil penalties only) Violation of Allowance limit carries a penalty of $37,500 per kilogram (for civil penalties only) Reporting requirements Reporting requirements  Regulations include reporting and recordkeeping requirements for producers, importers, and exporters of class I and class II substances 5

ODS Tracking & Reporting (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 6

Imports Virgin ODSUsed 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 7

Importing Used ODS – Petition 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 8

Importing Virgin ODS CFCs Customs stops import of virgin CFCs  Call EPA on a case-by-case basis  Such imports are rare  Transformation, destruction, lab use 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 HCFC-22 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/or criminal divisions 9

Customs/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 ban EPA calls Customs to clear shipment for import 10

Sharing 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) 11

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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 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 Trade 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, 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 14

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. 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 15

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