Enfoques y Métodos de Valuación

This section focuses on individual countries with large chemical manufacturing or trading industries that have significant trade with drug-producing regions and those with significant chemical commerce susceptible to diversion domestically for smuggling into neighboring drug- producing countries. Designation as a major chemical source country does not indicate a lack of adequate chemical control legislation or the ability to enforce it. Rather, it recognizes that the volume of chemical trade with drug-producing regions, or proximity to them, makes these countries the sources of the greatest quantities of chemicals liable to diversion. The United States, with its large chemical industry and extensive trade with drug-producing regions, is included on the list.

Many other countries manufacture and trade in chemicals, but not on the same scale, or with the broad range of precursor chemicals, as the countries in this section. These two sections are broken down by region.

Egypt

In 2012 Egypt was the world’s fourth largest importer of pseudoephedrine with a total of 42,290 kilograms. Egypt is not a major producer, supplier, or consumer of precursor chemicals, but does import and export finished pharmaceutical products. Imports into Egypt of ephedrine and pseudoephedrine medical preparations that can be used as precursor chemicals to produce methamphetamine increased sharply in 2010 and 2011 as Egypt became a regional producer of cold and flu medicine. There are no reports indicating widespread diversion of these chemicals, and Egyptian authorities have not made any seizures of these chemicals.

Egypt has reported licit requirements to the UN’s International Narcotics Control Board (INCB) for several years.

INCSR 2014 Volume 1

Chemical Controls

Argentina

Argentina is one of South America‘s largest producers of precursor chemicals and Argentina’s anti-drug agency SEDRONAR is the country’s lead agency for registering and tracking precursor chemicals. Argentina has in place a legislative and regulatory framework for the registration and monitoring of precursor chemicals, covering local production as well as imports and exports. Additionally, Argentina has taken measures to prepare a voluntary code of conduct for the chemical industry and now implements a federal inspection plan for entities working with controlled substances with an emphasis on precursors used to produce cocaine.

The Argentine government has not designated precursor control as a priority in its

counternarcotics efforts. Ephedrine tends to enter the country from abroad, often originating in India. Precursors for the processing of coca leaf and cocaine are often diverted locally from Argentina’s sizeable chemicals industry.

Several large-scale seizures of precursors were reported in the media in 2013, though there were no public reports of seizures of either potassium permanganate or acetic anhydride. The

Argentine government did not release aggregate statistics regarding precursor seizures. Argentina complies with UN Commission on Narcotic Drugs Resolution 49/3 by submitting estimates of the size of Argentina’s licit domestic market for ephedrine and related substances to the International Narcotics Control Board (INCB), and reports shipments using the INCB’s PENS system.

Brazil

Brazil is one of the world’s 10 largest chemical producing countries. Brazil licenses, controls and inspects essential and precursor chemical products, including potassium permanganate and acetic anhydride. Currently, the controls on both allow for either product to be commercialized without restriction for quantities of up to one kilogram for potassium permanganate and one liter of acetic anhydride.

The Brazilian Federal Police (DPF) Chemical Division controls and monitors 146 chemical products in conjunction with 27 DPF regional divisions and 97 resident offices. The Chemical Division is comprised of two units; the Chemical Control Division, subordinate to the DPF Executive Directorate, and the Criminal Diversion Investigations unit which reports to the Organized Crime Division. However, both divisions routinely coordinate and share information when conducting administrative inspections and criminal investigations.

Regulatory guidelines require all chemical handlers to be registered and licensed for conducting activities such as manufacturing, importing, exporting, storing, transporting, commercializing and distributing chemicals. The DPF uses a National Computerized System of Chemical Control to monitor all chemical movements in the country, including imports/exports, and licensing. This system requires all companies to use an on-line system for registration and to report all

INCSR 2014 Volume 1

Chemical Controls

The Government of Brazil adheres to the UN Commission on Narcotic Drugs - Resolution 49/3 on strengthening systems for the control of precursor chemicals used in the manufacturing of synthetic drugs. Brazil reports its annual estimates of legitimate requirements for ephedrine and pseudoephedrine for quantities above 10 grams, and phenyl-2-propanone (P2P) in any amount. This is done through the UN automated Pre-Export Notification System (PEN Online). The DPF routinely uses PEN Online in cases of international trade and in coordination with member states to alert importing countries with details of an export transaction.

Canada

Controls on precursors commonly used in synthetic drug production are closely regulated in Canada, so diversion within Canada by manufacturers is difficult. Nonetheless, the large volume of chemical imports into Canada from Asia make precursor chemical control a

significant challenge. The RCMP initiated in 2009 the Synthetic Drug Initiative which aims to inhibit the diversion of precursor chemicals from foreign and domestic sources. The RCMP also participates in Project Prism, an international initiative coordinated by the International Narcotics Control Board targeting precursor chemicals.

Canada has effective measures to seize imported precursor chemicals. In 2003 Canada

implemented the new “Precursor Control Regulations” as per the country’s Controlled Drugs and Substances Act to respond directly to the increasing diversion of precursor chemicals to the clandestine manufacturing of illicit substances. The regulatory framework addresses the cross- border trafficking of precursor chemicals by requiring a license and a permit for all imports and exports of precursor chemicals listed as “Class A” in legislation.

The Canadian Border Services Agency made two important seizures in late 2012 and 2013, both of which originated in China. The first occurred in October 2012 when authorities seized 14 metric tons of precursor used to make drugs including methamphetamine, MDMA and gamma- butyrolactone. The second was in April 2013, when officers seized over 2,000 liters of precursor chemicals, notably hypophosphorous acid used to produce methamphetamine, falsely labeled as soy sauce.

Health Canada submits information to the INCB annually regarding the licit uses and needs for precursor chemicals (via Form D) that include estimates on potential uses for ephedrine,

pseudoephedrine, P2P and their preparations. Each year, these estimates may vary depending on the quantities imported and exported. Likewise, Form D includes information about illicit uses of precursor chemicals provided in the form of seizures and stopped shipments received from the RCMP and the Canada Border Services Agency, as well as a detailed list of objections issued by Health Canada regarding proposed imports and exports as needed.

Health Canada also uses the Pre-Export Notification System (PEN Online) to receive notifications (import into Canada), and sends notification (export from Canada) to foreign

countries on a daily basis. The PEN Online system serves to notify foreign competent authorities and transit/transshipment countries of proposed exports to their countries. Canada, like its

INCSR 2014 Volume 1

Chemical Controls

imports raw material for the production/manufacture of preparations containing ephedrine and pseudoephedrine.

Chile

Chile has a large petrochemical industry engaged in the manufacturing, importation and exportation of chemical products. Despite government efforts to control the diversion of chemicals, precursors continue to be diverted from legitimate market uses in Chile for use in coca processing in Peru and Bolivia. Additionally, Chile has been a source of ephedrine for methamphetamine processing in Mexico. The majority of chemicals imported into Chile originates in India and China, and are directed primarily to Bolivia, Peru and Mexico.

Chile is party to the 1988 UN Drug Convention and has in place, in accordance with Article 12 of the convention, a chemical control regime aimed at preventing diversion. Chile regularly submits information required by the convention. Chile has ratified the Convention on Psychotropic Substances of 1971.

Chile’s laws regulate potassium permanganate and acetic anhydride as well as ephedrine and pseudoephedrine. A specialized task force within the investigative police investigates diversion of potassium permanganate, acetic anhydride, ephedrine and pseudoephedrine. An entity within the Ministry of Interior’s Division of Studies, the Directorate of Controlled Chemical

Substances, is the lead agency on precursor chemical control matters. Chilean law enforcement entities have chemical diversion units and dedicated personnel tasked with investigating

chemical and pharmaceutical diversion cases. The Customs agency has a risk analysis unit which profiles suspicious imports and exports, including chemical precursors.

The Directorate of Controlled Chemical Substances within the Ministry of Interior maintains a Special Register of Controlled Chemical Handlers for the purpose of regulating chemicals. As of September 2013, 531 companies that import, export, or manufacture chemical precursors were registered. The registration system is not well-developed, making effective monitoring of diversion difficult. Other weaknesses in Chile’s efforts to prevent diversion include a cumbersome bureaucratic structure and a lack of personnel. Authorities are taking steps to strengthen the chemical controls regime.

Mexico

Methamphetamine production and importations of precursor chemicals continue to pose

problems in Mexico. Mexico does not control all chemicals listed in the 1988 UN Convention. Nonetheless, Mexican laws regulate the production and use of many of these substances, and the Mexican Office of the Attorney General (PGR) is responsible for enforcing chemical control laws. In 2008, Mexico outlawed imports of pseudoephedrine, except hospital use of liquid pseudoephedrine. Ephedrine imports are also banned.

INCSR 2014 Volume 1

Chemical Controls

chemicals are also limited by law to four of 19 Mexican ports of entry. Mexico does not,

however, regulate imports and exports of potassium permanganate or acetic anhydride which can potentially be used in the production of cocaine and heroin, respectively.

Mexico participates in international efforts to control precursors and has a strong bilateral working relationship with the United States. Mexico participates in the National

Methamphetamine and Pharmaceutical Initiative conference and signed a memorandum of cooperation with the United States in 2012 to address precursor chemicals and clandestine laboratories. The two governments also cooperate to share best practices with Central American countries affected by the trafficking of precursor chemicals.

Mexico has several major chemical manufacturing and trade industries that produce, import, or export most of the chemicals required for illicit drug production, including potassium

permanganate and acetic anhydride. Although Mexico-based transnational criminal

organizations are major producers of methamphetamine, no pseudoephedrine or ephedrine is produced legally within the country.

With respect to synthetic drugs, Mexican seizures of methamphetamines totaled 7.3 metric tons (MT) between December 2012 and July 2013, down 79 percent from the same time period a year before. Seizures of clandestine methamphetamine labs also dropped. Ninety-four seizures occurred between January 1 and August 22, a 31 percent decrease compared with a proportional number of labs seized in 2012. Seventy of these 94 labs were located in the states of Michoacán, Sinaloa, and Jalisco.

In contrast, Mexico reports an increase of pseudoephedrine seizures since the Peña Nieto administration took office, indicating that 7.2 MT of the substance were seized between December 2012 and July 2013. This figure was approximately 90 times the amount seized during the same time period the year before.

The United States

The United States manufactures and/or trades in all 23 chemicals listed in Tables I and II of the 1988 UN Convention to which it is a party; and it has laws and regulations meeting its chemical control provisions.

The basic U.S. chemical control law is the Chemical Diversion and Trafficking Act of 1988. This law and subsequent chemical control amendments were all designed as amendments to U.S. Controlled Substances Act of 1970, rather than stand-alone legislation. The Drug Enforcement Administration (DEA) is responsible for administering and enforcing them. The Department of Justice, primarily through its U.S. Attorneys Offices, handles criminal prosecutions and cases seeking civil penalties for regulatory violations. In addition to registration and record-keeping requirements, the legislation requires traders to file import/export declarations at least 15 days prior to shipment of regulated chemicals. DEA uses the 15-day period to determine if the consignee has a legitimate need for the chemical. However, the regulations allow that if a

INCSR 2014 Volume 1

Chemical Controls

investigators and special agents work closely with exporting and receiving country officials in this process. If legitimate end-use cannot be determined, the legislation gives DEA the authority to stop shipments. One of the main goals of DEA’s Diversion Control Program is to ensure that U.S. registrants’ (those companies registered with DEA to handle List I chemicals) products are not diverted for illicit drug manufacture.

U.S. legislation also requires chemical traders to report to DEA suspicious transactions such as those involving extraordinary quantities or unusual methods of payment. Close cooperation has developed between the U.S. chemical industry and DEA in the course of implementing the legislation. Criminal penalties for chemical diversion are strict; the penalties for some chemical trafficking offenses involving methamphetamine are tied to the quantities of drugs that could have been produced with the diverted chemicals. Persons and companies engaged in chemical diversion have been aggressively and routinely subjected to revocation of their registration. The United States has played a leading role in the design, promotion, and implementation of cooperative multilateral chemical control initiatives. The United States also actively works with other concerned nations, and with the UNODC and the INCB to develop information sharing procedures to better control precursor chemicals, including pseudoephedrine and ephedrine, the principal precursors in one method of methamphetamine production. U.S. officials participate in the combined task force for both Project Cohesion and Project Prism. The United States has established close operational cooperation with counterparts in major chemical manufacturing and trading countries. This cooperation includes information sharing in support of chemical control programs and in the investigation of diversion attempts.

The Combat Methamphetamine Epidemic Act of 2005 (CMEA) mandated that DEA establish total annual requirements for pseudoephedrine, ephedrine and phenylpropanolamine for the United States and provide individual import, manufacturing and procurement quotas to registered importers and manufactures that wish to conduct import and manufacturing activities with these chemicals. Since the implementation of quotas in 2008, the United States has seen significant decreases in the importation of some of these chemicals.