Buying, selling black market CFCs: It's really not worth the risk

July 18, 2000
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Many contractors assume that the CFC refrigerant they buy is legal; many don’t question whether it’s legal or not.

However, according to some industry insiders, this hot black market item is coming in through several channels, and could easily wind up in the stock of the unwary.

It’s up to the buyer to determine the validity of the CFC refrigerant s/he purchases.

Criminal activity to date includes 67 cases indicted, 87 defendants convicted with total incarcerations of 48 years and total fines of $38 million.

There have been 662 seizures of illegal imports, 133 resulting in criminal cases. Two million pounds of CFCs have been seized from smuggling activity.

This article offers some perspective on how black market CFCs such as R-12 became such a hot commodity — and what the penalties are for getting caught buying and/or selling it.

How it all came about

CFCs, once widely used in a variety of industries, including mechanical refrigeration, air conditioning, and automotive a/c, have been linked with the destruction of the earth’s atmospheric ozone layer.

In 1990, Congress enacted amendments to the Clean Air Act mandating the phaseout and eventual ban of CFCs from importation and use in the United States, as part of a global treaty known as the Montreal Protocol.

Since this production phaseout, the national supply of CFC-12 has been derived from:

  • The refrigerant contained in stockpiles;

  • The quantity of CFC-12 reclaimed from existing acr equipment; and

  • Illegal imports.

Hot stuff

“The increasing scarcity of CFCs, coupled with the continued demand, has spawned a lucrative black market, with the refrigerant gas commanding prices of up to $30/lb,” according to Robert Johnson, president of Environmental Support Solutions, Mesa, AZ.

The total inventory of R-12 in the U.S. at the beginning of this year was estimated to range between 24 million and 48 million pounds, Johnson said.

This refrigerant is held by chemical manufacturers, chemical packagers and reclaimers, oem’s, automotive part chains and distributors, do-it-yourselfers, stationary and commercial air conditioning and refrigeration distributors, and wholesale clubs.

“Smuggling CFCs into our country threatens human health and the environment,” said Lois J. Schiffer, Assistant Attorney General for Environment and Natural Resources, Washington.

“Those who attempt to profit from this black market will be prosecuted and punished. We will not let people endanger our ecosystem and our children for a few dollars.”

How to protect your company

“Before you buy CFCs,” said Johnson, “ask the seller for documents of prior ownership of the product.

“Investigating the source of the material and the chain of ownership is your responsibility,” he said. “You should know where the specific brand was produced and the name of the manufacturer.

“Also, making sure you have legal material that meets the industry purity standard is good business practice.”

If the material was imported, you should know when, where, and from whom it was imported, said Johnson.

In addition, ensure that the packaging for the material is appropriate. “Illegally imported refrigerant is sometimes packaged in wrong-size containers or fixed with improper values,” Johnson explained.

IRS excise taxes

In order to discourage the use of CFC-12, the U.S. government has imposed an excise tax on new CFCs. Ensure that the products you buy have been properly taxed.

If possible, purchase domestic recycled and reclaimed CFCs (no tax), or convert customers’ equipment to use non-CFC refrigerants.

“Some importers have neglected to pay the tax on imports of CFC refrigerants,” said Johnson. “Illegal importers have devised schemes to import newly produced CFCs by labeling them as recycled — or to divert exports.

“Sometimes new CFCs have been illegally labeled as other material,” he continued. “These activities, designed to avoid the federal excise tax, violate many government laws and regulations.”

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