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U.S. Department of State

Diplomacy in Action

2011 INCSR: Chemical Controls


Bureau of International Narcotics and Law Enforcement Affairs
Report
March 3, 2011

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2010 Trends

Chemicals play two essential roles in the production of illegal drugs: as starting chemical inputs for the production of synthetic drugs such as methamphetamine and MDMA (3,4-methylenedioxmethamphetamine more commonly known under the name of ecstasy); and as refining agents and solvents for processing plant-based materials such as coca and opium poppy into drugs such as cocaine and heroin. Chemicals used in synthetic drug production are known as “precursor” chemicals because they become incorporated into the drug product and are less likely to be substituted by other chemicals. Chemicals used to refine and process plant-based drugs are referred to as “essential” chemicals and can be readily replaced by other chemicals with similar properties. Both sets of chemicals are often referred to as “precursor chemicals and for the sake of brevity, this term is used interchangeably for both categories throughout this report.

In 2010 the United States and other nations continued to focus on preventing diversion of precursor chemicals. International partners redoubled their efforts to target chemicals used in methamphetamine production as well as continued to target those used in in heroin and cocaine. Regional and multilateral cooperative efforts are critical in this regard. The result has been to force traffickers to use non-traditional routes and methods. These efforts built on a variety of bilateral, regional and multilateral mechanisms, such as the United Nations and the Organization of American States.

Methamphetamine. Global abuse of amphetamines increased in every region of the world with the exception of parts of Western Europe where authorities believe that it may have stabilized. For the first time in several years, methamphetamine use may have increased—although only slightly—in the United States. Moreover, production of methamphetamine continues to rise in this hemisphere as well as in Asia.

2010 saw progress in the development of a more complete and systematic reporting regime covering the international trade in synthetic drug precursors. This effort began in 2006, with a U.S.-sponsored CND resolution that provided a way to institutionalize the process for collecting information on synthetic drug precursor chemicals. The resolution also requests countries to permit the INCB to share such information with concerned law enforcement and regulatory agencies. The U.S. continues to work with the INCB and other international allies to urge countries to take steps towards implementation.

A prerequisite for implementing this is developing the considerable infrastructure of commercial information and regulation—not a simple task for many countries. However, at the end of 2010, the INCB reports that more than 123 countries and jurisdictions (up from 100 in 2008) are now cooperating and providing voluntary reporting on their licit requirements for the aforementioned chemicals. The INCB published the data collected in its annual report on precursor chemicals and updates the information regularly on its website. The data serves as a baseline for authorities in importing and exporting countries, facilitating verification of the chemicals and the quantities proposed in commercial transactions. Authorities can then determine whether importation is warranted – or, if no legitimate commercial use is apparent, whether pending shipments require additional law enforcement scrutiny.

The international community also took a number of significant steps in 2010 to stop traffickers from getting supplies of precursors to produce methamphetamine. Specifically, through the recommendations of the United Nations, Members of the UN Commission on Narcotic Drugs voted in favor of the tightening controls on phenylacetic acid, a methamphetamine precursor. A number of countries also changed their legislation and increased efforts to monitor imports and exports of ephedrine and pseudoephedrine—non-controlled precursor chemicals used to produce methamphetamine.

In 2010, the INCB continued to play a pivotal role in facilitating the exchange of information that led to coordinated law enforcement operations.

The most notable of these was the extension of activities targeting amphetamine-type stimulants under Project Prism with Governments exchanging information through the INCB on legitimate trade and trafficking trends. INCB-coordinated Operation PILA, a time-bound voluntary operation focusing on the trade of ephedrine and pseudoephedrine, including pharmaceutical preparations and ephedra, tracked shipments to the Americas, Africa, Oceania, and West Asia. This operation included regulatory and law enforcement officials and is designed in accordance with the CND resolution for a nine-month period to gather intelligence on diversion of amphetamine-type stimulants (ATS), precursors, clandestine laboratories and links to trafficking organizations. Pre-export notifications (PEN online) served as a primary source of information.

The operation revealed that many of the suspicious shipments were destined for Mexico, with the leading source country shifting from China to India. This shift may be a result of new legislative and administrative efforts in China. This year, analysis of data and seizures indicated that India was the source and Mexico the primary destination of ephedrine and pseudoephedrine. A special emphasis was put on pharmaceutical preparations and on the trade in phenylacetic acetic with fewer controls that can be substituted to produce methamphetamine and the amphetamine phenylpropanolamine, P-2. Building on information received from last year, the operation also focused on trafficking and diversion of amphetamine-type stimulants in Africa and West Asia.

This operation, global seizures and law enforcement reporting reveal that indicate that drug trafficking organizations are adapting smuggling routes and adopting new production methods to obtain chemicals. Specifically, traffickers are increasingly resorting pharmaceutical preparations to obtain methamphetamine precursors. Additionally, traffickers are turning to non-controlled or less controlled or reported chemicals, and are seeking new diversion routes.

The United States, through cooperation with Mexico and Central American nations, is targeting methamphetamine production in this hemisphere through both bilateral enforcement efforts, as well as multilateral cooperation, including through the United Nations—and through the Organization of American States drug coordinating body (known as CICAD). Efforts have included raising awareness of the issue to promote internal changes to target diversion and smuggling efforts, as well as coordination of information sharing to facilitate operations preventing or stopping diversion and/or smuggling—primarily through UN International Narcotics Control Board (INCB)-led task forces.

In 2010 Mexican authorities sought to implement legislative and administrative changes enacted during the previous two year to target ephedrine and pseudoephedrine.

In Asia, methamphetamine production, transit, and consumption remain significant problems. To help stem production, trafficking, and abuse in East and Southeast Asia, in 2010 the United States supported bilateral and multilateral initiatives that included UNODC’s project to promote regional cooperation for precursor chemical control in the South East Asian region. The U.S. Department of Defense through Joint Interagency Task Force (JIATF) West also continues to support Interagency Fusion Centers (IFCs) in various partner nations throughout Asia. IFCs contribute to developing host nation infrastructure and aid local law enforcement to fuse and share information to detect, disrupt and dismantle drug and drug-related national and transnational threats. The United States also has provided law enforcement training to a variety of countries, including training in basic drug investigations, chemical control, and clandestine laboratory identification (and clean-up) training. These relatively low-cost programs help encourage international cooperation with these countries in pursuing our common anti-drug and broader geopolitical objectives with the countries of the region, as well as undercut illegal drug producers that could eventually turn their sights on U.S. markets.

Heroin. In 2010, the US further engaged other Member States in targeting the chemicals used to produce heroin. International regulatory efforts to track the commercial flow of precursor chemicals were also given a boost. Specifically, in 2010, the United States increased efforts to focus on precursor chemical trafficking through and around the world’s largest supplier of opium, Afghanistan. In addition to promoting cooperation through several UN-led regional meetings and a special meeting of the Paris Pact hosted by France to target Acetic Anhydride, the United States continued to step up law enforcement pressure on traffickers seeking to obtain acetic anhydride, an essential chemical needed to produce heroin. Building on the success of INCB Project Cohesion Task Force-led Operation Dice(Data and Intelligence Collection and Exchange) and its follow-on operation DICE 2, the United States and other nations expanded last year’s efforts. The result was increased seizures, stopped shipments and identification of suspicious consignments involving over hundreds of tons of acetic anhydride.

In 2009, the United States joined with other nations to continue promoting the implementation of Security Council resolution 1817/2008 that focuses on Afghanistan, and highlights the need for countries to cooperate in targeting trafficking in acetic anhydride used to produce heroin. The Government of Afghanistan informed the INCB that there is no legitimate use for acetic anhydride in Afghanistan and seeks to block all imports of the substance to their country.

Despite international efforts, the United States is keenly aware that drug trafficking organizations are adapting by splintering and expanding their operations. A niche market has formed in some areas, and specialized middlemen now seek new routes and methods for precursor chemical smuggling and diversion methods.

Activities under the INCB-led Task Force Project Cohesion, Operation DICE-2 lasted nine months with the support of sixty countries , the INCB reviewed 860 international shipments of acetic anhydride and led to the seizure of over 26 tons. These cases involved large scale seizures of acetic anhydride destined for the illicit manufacture of heroin. Analysis of seizures in a range of countries in Europe, the Middle East and East Asia identified definite patterns of diversion and trafficking. Traffickers are increasingly using new smuggling routes for acetic anhydride, in Africa as well as seeking new distributors located in Africa, or Asia, to include Iran and Iraq, or exploiting small European non-chemical export companies to obtain acetic anhydride. It was also evident that heroin precursors are being smuggled as well as diverted from legitimate trade.

This INCB operation received further political support in coordination with several other efforts, including follow-up to a political effort to engage the UN Security Council and to support the adoption of a resolution that focused on the need to target heroin production in Afghanistan. Diversion of precursor chemicals from licit commerce, gray markets, and new smuggling routes are only a few ways drug trafficking organizations are adapting. Information from various operations indicates that Operation Ice international action to combat this threat in both bilateral and multilateral settings.

Cocaine. Potassium permanganate, the primary chemical used in producing cocaine, is an oxidizer that has many legitimate industrial uses. These include waste water treatment, disinfecting, and deodorizing. Its main illicit use is to remove the impurities from cocaine base. Potassium permanganate also can be combined with pseudoephedrine to produce methcathinone, a synthetic stimulant that is also a controlled substance.

In South America, the INCB-led Project Cohesion Task Force focuses on monitoring the imports of potassium permanganate to cocaine processing areas. Developing an effective multilateral effort focused on potassium permanganate has proved difficult, and the INCB and others are encouraging countries in South America to make this a priority in 2010. While reporting and seizures seemed to indicate that global trade in potassium permangane was down in 2009, in 2010 it appeared to be up to previous levels. In 2008-09 Project Cohesion Task Force participants expressed concern over the paucity of information pertaining to the trade of potassium permanganate in Latin America. Despite the lack of multilateral operations focusing on potassium permanganate, Colombia continues to report large numbers of seizures and note concern about illicitly manufactured potassium permanganate.

The Road Ahead

The U.S. will continue to urge other countries to implement the provisions of the 1988 UN Convention as well as monitor those substances on the special surveillance list. Development of effective chemical control regimes is critical to implementation. Against this backdrop, legislation to criminalize the diversion of precursors is critical. Additionally, it is important to develop the administrative and procedural tools to successfully identify suspicious transactions, as well as to make better use of watch lists and voluntary control mechanisms.

As a critical objective, and in conjunction with the INCB and other Member States, the United States will continue to promote efforts through the task forces of Project Cohesion and Project Prism to target precursor chemicals. The United States will promote implementation of the new mechanisms that have been enacted to foster the broader exchange of information and expertise pertinent to the control of methamphetamine and other synthetic drugs. The U.S. will also urge countries to avail themselves of the PEN system to actively provide and exchange information on legitimate commercial precursor chemical shipments and estimates on legitimate commercial needs to the INCB, and to provide the necessary support to enable the INCB to fulfill its expanding role.

In this hemisphere, the USG will continue to work through the Inter-American Drug Abuse Control Commission (CICAD), the counternarcotics arm of the Organization of American States (OAS) to further cooperation against diversion of precursor chemicals. OAS/CICAD receives considerable U.S. funding to counter the trafficking and abuse of illegal drugs, including methamphetamine. Guided at the policy level by the CICAD Commissioners (delegates from 34 Member States in the region), the Supply Reduction Unit of CICAD carries out a variety of initiatives in this important field, and is supported by its Experts Groups on Chemicals and Pharmaceuticals, which usually meet annually.

In 2010, OAS/CICAD held several specialized training seminars aimed at building member state capacity to control chemicals that may be used in the production of illicit drugs. These seminars also provided law enforcement officers, customs officers, chemists, and regulatory/administrative officials with the knowledge, skills, and resources to safely and effectively conduct their chemical control activities.

To promote the full implementation of the CND resolution and support ongoing INCB activities, including Project Prism, the Department of State contributed $700,000 each year from 2007-2010.

Precursors and Essential Chemicals

Plant-based drugs such as cocaine and heroin require precursor chemicals for processing, and cutting off supply of these chemicals is critical to U.S. drug control strategy. International efforts have a longer track record in targeting the illicit diversion of the most common precursors for cocaine and heroin—potassium permanganate and acetic anhydride, respectively. Less than 1 percent of worldwide licit commercial use of these chemicals is required to produce the world’s supply of cocaine and heroin, and curbing supplies is an enormous challenge.

International Regulatory Framework for Chemical Control

Preventing the diversion of precursor chemicals from legitimate trade is one of the key goals of the 1988 UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances. Specifically, state parties are required under article 12 of the 1988 Convention to monitor international trade in chemicals listed under Tables I and II of the Convention. These tables of chemicals have been regularly updated to account for evolutions in the manufacture of illicit drugs, and state parties are required to share information with one another and with the International Narcotics Control Board (INCB) on international transactions involving these chemicals. The Convention further encourages state parties to license all persons and enterprises involved in the manufacture and distribution of listed chemicals, and subsequent resolutions from the UN Commission on Narcotic Drugs (CND)—the UN’s primary narcotic drug policy-making organ—have provided additional guidance to states on how to implement these obligations according to specific best practices. The underlying strategy is to closely monitor the trade in drug precursors and prevent transactions to suspicious customers.

Special Monitoring List: In 1996, the U.S. supported a CND resolution that added a special monitoring list of chemicals that are not included in the Convention but for which substantial evidence exists of their use in illicit drug manufacture. Reporting on these non-listed chemicals is voluntary under international law, but widely implemented in practice under INCB supervision. As with officially controlled chemicals listed in the Table I and II of the 1988 Convention, this special surveillance list is regularly updated to account for evolutions in drug production trends. Still, it takes time to get new near analogues of existing precursors listed and organized criminals vigorously exploit delays and gaps in the listings.

The regulatory framework codified by the United Nations through its conventions and resolutions is the most universally accepted and carries the broadest reach internationally, but it does not exist in isolation. Regional international bodies also have worked to complement the UN’s regulatory regime and implement its goals. In February 2004, the European Union (EU) enacted binding legislation to regulate chemical control monitoring among all of its 27 member states. External trade between the European Union and international actors has been similarly covered since January 2005. This EU legislation has been subsequently enhanced by additional implementing legislation, as well as by less binding measures to promote voluntary cooperation with private industry to implement best-practices for preventing diversion. The United States and the EU have had an agreement in place to cooperate on chemical control issues since 1997, and policy coordination has taken place regularly through bilateral meetings alternating between Washington and Brussels. The EU also has actively collaborated with the U.S. on multilateral chemical control initiatives, including CND resolutions. The Organization of American States also is engaged on the issue of chemical control within the Western Hemisphere.

Diversion Methods

From the wide variety of chemicals that are needed for legitimate commercial and pharmaceutical purposes, a relatively small number also can be misused for the production of illegal drugs. Drug traffickers rarely produce these chemicals independently, as this would require advanced technical skills and a sophisticated infrastructure that would be difficult to conceal. Instead, criminals most often illegally divert the chemicals that they need from otherwise licit trade. Diversion from licit trade takes two main forms. The chemicals may be purchased from manufacturers or distributors. This can be done directly by traffickers or through unsuspecting or complicit third parties. Chemical producers also may be complicit in diversion schemes. This is less frequent. Instead, most diversion takes place due to the ability of criminals to exploit gaps in the regulatory frameworks in place to monitor the trade in drug precursors and identify suspicious transactions. The supply chains for chemicals can be very complex, with several intermediary “traders” located between a manufacturer and an end user. This complex supply chain makes it more difficult for governments to pick the right point to intervene with regulatory control regimes and licensing.

 Images shows Routes of Diversion: Domestic--Foreign Chemical Manufacturer or Foreign Product Manufacturer to U.S. Importer to Distributor to End Users or to Chemical Product Manufacturer

International trade in precursor chemicals can be exploited by traffickers through a variety of means. Chemicals can be imported legally into drug-producing countries with official import permits and subsequently diverted—sometimes smuggled into neighboring drug-producing countries. In parts of the developing world, traffickers often pick the path of least resistance and arrange for chemicals to be shipped to countries where no viable regulatory systems exist for their control.

Image shows Routes of Diversion: International--Bulk Chemical Manufacturer to Chemical Producer to Transit Country A to Transit Country B to Country C or Importer/Exporter to Re-Exportation

Criminals also employ stratagems to conceal their true identities and the controlled chemicals that they require. Often, traffickers conceal their identity by using front-companies or by misusing the names of well-known legitimate companies. They also obtain chemicals by bribing or blackmailing the employees of legitimate companies. In some cases they disguise the destination or nature of chemical shipments by mislabeling or re-packaging controlled chemicals as unregulated materials.

Traffickers also obtain precursors through theft, either from storage or during transit. Criminals have often employed violence to steal chemical supplies.

In the past year, transshipment or smuggling from third countries into drug producing countries has increased dramatically. This tactic is emerging as a key method in response to the increasing efforts of more countries to implement legislative and administrative controls to prevent diversion from legitimate commercial trade.

Since 2008 there has been a dramatic increase in criminal efforts to take greater advantage of finished pharmaceutical products. This includes extracting precursor chemical ingredients, particularly those containing pseudoephedrine, a key precursor for methamphetamine. Pharmaceutical preparations are not controlled by the 1988 UN Drug Control Convention, and can be traded internationally without being subject to the reporting requirements in place for raw or bulk chemicals.

Major Chemical Source Countries and Territories

The countries included in this section are those with large chemical manufacturing or trading industries that have significant trade with drug-producing regions, and those countries 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 country lacks adequate chemical control legislation and 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. The next section focuses on illicit drug manufacturing. Each of these two sections is broken down by region.

The Americas

Argentina is one of South America’s largest producers of precursor chemicals and remains a source of potassium permanganate. Argentina does not appear to be either a source or transit country for diverted acetic anhydride. The GOA has restricted any imports or exports of ephedrine. The Government of Argentina (GOA) has enhanced its precursor chemical regulatory framework as well as the effectiveness of its port and border controls and related criminal investigations in combating the traffic in precursor chemicals. Argentine and U.S. law enforcement officials continue to collaborate against attempts by drug traffickers to illicitly import or transship such chemicals.

Argentina is a party to the 1988 UN Drug Convention and has laws meeting the Convention's requirements for record keeping, import and export licensing, and the authority to suspend shipments. Presidential decrees have placed controls on precursor and essential chemicals, requiring that all manufacturers, importers or exporters, transporters, and distributors of these chemicals be registered with the Secretariat of Planning for the Prevention of Drug Addiction and Drug Trafficking (SEDRONAR). Argentine law prohibits the transport of nonregistered precursor chemicals.

SEDRONAR employs a three pillar precursor chemical control system. First, all commercial entities that utilize these chemicals must register them in a National Precursor Chemical Register. Second, all entities must submit quarterly reports regarding the status/movement of registered chemicals. Finally, all registered chemicals are subject to audits by SEDRONAR’s Precursor Chemical Diversion Control and Prosecution Unit. SEDRONAR performed 378 audits between January and November 2010, resulting in the imposition of 141 administrative sanctions and 16 criminal prosecutions.

Argentina restricted the importation and exportation of ephedrine, both as a raw material and as an elaborated product, in 2008 resulting in a substantial decrease in legal ephedrine imports in both 2009 and 2010. In addition, the GOA has taken steps to implement United Nations Commission on Narcotic Drugs Resolution 49/3. In August 2010, Argentina operationalized the International Narcotics Control Board’s online Pre-Export Notification (PEN) system. SEDRONAR is responsible for data input of both precursor chemicals and pharmaceutical preparations into the PEN system.

Brazil

Brazil is the largest producer of chemicals in South America, including many common precursor chemicals listed in Tables One and Two of the 1988 U.N. Drug Convention. Brazil also imports significant quantities of chemicals to meet its industrial needs. The Government of Brazil (GOB) created a chemical control law in 2001, establishing control and inspection norms for monitoring chemicals used in chemical products that potentially could be used to process narcotics. The GOB controls processing, storage, buying, selling, and transfer of 143 chemicals produced in Brazil, including potassium permanganate, acetic anhydride, ephedrine, and pseudoephedrine. The Brazilian Federal Police (DPF) registers 25,000 chemical handlers, who obtain a license and pay an annual fee. Brazil is implementing UNCND Resolution 49/3.

Since 2008, the National Computerized System of Chemical Control (SIPROQUIM) has monitored the chemicals most often used in cocaine processing. Brazil also participates in the U.S. Drug Enforcement Administration (DEA)-supported Operation Sin Fronteras, a regional chemical control initiative with eight other South American countries.

On April 29, 2010, the DPF, seized nine tons of sulfuric acid in Guaira, Parana, near the Bolivian border.

Canada

Canada continues to be a destination and transit country for the precursor chemicals used to produce synthetic drugs, particularly methamphetamine and MDMA (3, 4-methylenedioxymethamphetamine, or ecstasy). According to the 2010 annual report of the Criminal Intelligence Service of Canada (CISC), Canadian-sourced pseudoephedrine has been found in raids on some clandestine U.S. methamphetamine labs. Though domestic methamphetamine use in Canada has "stabilized," according to CISC, production has continued to increase to supply export markets. CISC asserts that criminals export "significant quantities" of methamphetamine to the U.S., while to a lesser extent also supplying Japan, Australia and New Zealand. Canadian officials find that smugglers illicitly bring MDMA precursor chemicals into Canada from China and India "on a regular basis." The shortage of MDMA precursor chemicals in Europe is "not currently affecting the illicit manufacture of ecstasy in Canada," assessed CISC.

The U.S. maintains a close partnership with Canada in countering the scourge of synthetic drugs. Canada takes seriously its responsibility to curb the diversion of precursor chemicals required for methamphetamine production for both domestic and U.S. markets. Canadian-U.S. joint law enforcement operations have been fruitful in disrupting drug and currency smuggling operations along both sides of the border. U.S.-Canadian law enforcement cooperation and Canada’s efforts to strengthen its chemical control laws and enforcement have helped significantly to reduce the amount of Canadian-sourced pseudoephedrine discovered in clandestine U.S. methamphetamine labs. Canadian officials confirm, however, that domestic production of methamphetamine and MDMA continues to increase. USG and Canadian officials continue to work closely with Canadian partners to identify and dismantle MDMA and methamphetamine laboratories.

Canada is a party to the 1988 UN Convention and complies with its record-keeping requirements. Canada participates in Project Prism, targeting synthetic drug chemicals, and is a member of the North American working group. While an active participant actively the Government of Canada supports Project Cohesion when possible.

Chile

Chile has a large petrochemical industry engaged in the manufacturing, importation, and exportation of thousands of chemical products, including many common precursor chemicals listed in Tables One and Two of the 1988 U.N. Drug Convention. Chile has no known seizures of potassium permanganate or acetic anhydride, but it has been a source of ephedrine for methamphetamine processing in Mexico. Chile is also a potential source of precursor chemicals used in coca processing in Peru and Bolivia.

Chile has chemical control laws; however, enforcement is difficult due to procedural requirements. For example, CONACE, Chile’s national drug control commission and a part of the Ministry of Interior, is the regulatory agency for chemicals often utilized to produce cocaine. However, CONACE does not have sufficient personnel to adequately review chemical purchases and movement. In addition, CONACE does not have police powers, and must coordinate with law enforcement agencies and prosecutors to effectively investigate, arrest, and prosecute cases. Law enforcement agencies are limited in their ability to conduct proactive investigative measures without coordinating with prosecutors and CONACE. That said, many Chilean law enforcement entities, such as the Carabineros, Policia de Investigaciones (PDI), and Customs, have specialized chemical diversion units and dedicated personnel assigned with the responsibility for investigating chemical and pharmaceutical diversion cases.

On April 28, 2010, the PDI Chemical Investigative Unit, with in coordination with DEA, seized approximately 15,000 kilograms of sodium bicarbonate, 1,500 liters of acetone, and 40 kilograms of sulfuric acid. This operation resulted in three arrests and is the largest seizure of chemicals by Chilean law enforcement to date. Chilean government sources indicate the seizure of illegal pharmaceuticals reached an all time high in 2010, increasing 793 percent over previously reported numbers, with respect to the number of pills seized.

Companies that import, export, or manufacture chemical precursors must register with CONACE, maintain customer records, and are subject to CONACE inspections. There is pending legislation in the Chilean Congress to expand the list of companies subject to inspection by government authorities. CONACE has also requested additional resources from DEA to hire more inspectors so it can provide stronger oversight and regulation of the petrochemical industry.

Chemical industry compliance investigators work with DEA officials to identify suspect chemicals (potassium permanganate, sulfuric acid, acetone, ether, calcium chloride, etc.) that are often diverted in the Southern Cone for the production of cocaine base and cocaine hydrochloride. The majority of chemicals come from India and China, and the diversion of such chemicals is primarily directed at Bolivia, Peru, and Mexico. Chemicals destined for Peru and Bolivia most often are transported by land, while chemicals sent to Mexico are transported via air cargo and maritime shipments.

The government of Chile continued to make ephedrine diversion a major priority for 2010. On November 3, 2010, the Ministry of Health sent a government decree to the Comptroller General with the objective of banning the sale of ephedrine and pseudoephedrine. It is expected that this decree will be signed by President Pinera. According to Chile’s most recent International Narcotics Control Board (INCB) statistics, as of October 19, 2010, Chile estimates the size of its licit domestic market for ephedrine to be 251 kilograms and pseudoephedrine to be 5,000 kilograms.

Mexico

Significant methamphetamine production continues in Mexico and importations of precursor chemicals into Mexico are on the rise. The GOM outlawed imports of pseudoephedrine (except for liquid pseudoephedrine for hospital use) in 2008. In November 2009, the GOM enhanced its regulatory laws pertaining to the import of precursor chemicals, which tightened the regulations for imports of phenyl acetic acid, its salts and derivatives, methylamine, hydriodic acid, and red phosphorous. In June of 2010, the GOM enhanced the category of the aforementioned chemicals in accordance with the November 2009 law, changing the category from essential chemicals to precursor chemicals. Potassium Permanganate and Acetic Anhydride are not regulated in Mexico.

However drug trafficking organizations sought new avenues to circumvent authorities in order to obtain and produce methamphetamine , after a ban was placed on pseudoephedrine and ephedrine, prohibiting their import and use, drug trafficking organization. They developed new trafficking routes through Central and South America, substituted new chemicals that have less controls, and sought ephedrine and pseudoephedrine in tablet or preparation vice bulk form. Operation PILA—an INCB led operation initiated in 2009 revealed that Mexico was the destination of many suspect ephedrine and pseudoephedrine shihpments.

During 2010, the quantity of chemicals seized as reported by the Government of Mexico (GOM) totaled over 818.6 metric tons (MT). This included: potassium phenyl acetate (288 MT), ethyl phenyl acetate (218 MT), ethyl phenyl alcohol (147.6 MT), esters of phenyl acetic acid (80 MT), tartaric acid (40 MT), acetic acid (32 MT), phenyl acetic acid (9 MT), piperonal (4 MT). All of these are considered U.S. List I chemicals.

Imports of both precursor and essential chemicals are limited by the GOM to specific ports of entry. Mexico has a total of 49 ports of entry, of which only 17 are authorized for importing essential chemicals. Among these 17 ports, only four are authorized for importing precursor chemicals - Nuevo Laredo (land port), Port of Veracruz (Veracruz), Port of Manzanillo (Colima), and the Mexico City Benito Juárez International Airport (AICM) Mexico City, Mexico.

While the importation of pseudoephedrine and ephedrine is banned in Mexico, traffickers continue to illicitly import these precursor chemicals. During 2010, approximately 298 kg of PSE and 5,970 kg of ephedrine were seized at the ports of Veracruz, Manzanillo, and AICM. However, based on the number of clandestine laboratories that were dismantled by the GOM (approximately 110) during 2010, phenyl-2-propanone (P-2-P) is the primary production method for methamphetamine.

The majority of ephedrine destined for Mexico is supplied by sources in China, the Czech Republic, Switzerland, Thailand, India, Bangladesh, and the United States. Drug traffickers in Mexico now substitute ephedrine and/or pseudoephedrine with phenyl acetic acid (PAA), which enters Mexico in large quantities from suppliers in the Netherlands, Bulgaria, and China. The PGR has also detected shipments entering Mexico from the United States. The import, export, and trade of PAA are regulated according to an agreement issued by Mexico’s Health Secretariat in 1998. In May 2010, officials seized 88 tons of the ethyl phenyl acetate precursor chemical used to make methamphetamines at the Port of Manzanillo, representing the largest single seizure of the chemical. The chemical was found in five shipping containers sent from China.

Acetic Anhydride has been identified at clandestine laboratories producing methamphetamine; however, the quantities are small, consisting of one or two barrels (200-liter capacity). Due to the lack of regulation of potassium permanganate by the GOM, any seizures of this product as an import chemical are not identified in statistics.

A strong bilateral working relationship between USG and GOM authorities continues involving information exchange and operational cooperation. The two governments also cooperate to convey best practices to Central American countries that have become affected by the trafficking of precursor chemicals. Mexico is a party to the 1988 UN Drug Convention and has laws and regulations that meet the Convention's chemical control requirements.

The United States

The United States manufactures and/or trades in all 23 chemicals listed in Tables I and II of the 1988 UN Drug Convention. It is a party to the Convention and 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 6 subsequent chemical control amendments were all designed as amendments to U.S. controlled substances laws, rather than stand-alone legislation. The Drug Enforcement Administration (DEA) is responsible for administering them. 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. Diversion 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.

U.S. legislation also requires chemical traders to report to DEA suspicious transactions such as those involving extraordinary quantities, unusual methods of payment, etc. 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 civil and criminal prosecution and revocation of DEA registration.

The U.S. has played a leading role in the design, promotion and implementation of cooperative multilateral chemical control initiatives. The USG also actively works with other concerned countries, the United Nations Office of Drugs and Crime (UNODC), and the International Narcotics Control Board (INCB) to develop information sharing procedures to better control pseudoephedrine and ephedrine, the principal precursors for methamphetamine production. USG officials participate in the task forces for both Project Cohesion and Project Prism. It also 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.

Asia

China

China has one of the world's largest chemical industries, producing large quantities of chemicals that can be used for illicit drug manufacture such as acetic anhydride, potassium permanganate, piperonylmethylketone (PMK) and pseudoephedrine and ephedrine. China remains a major producer of ephedrine and pseudoephedrine used in the manufacture of methamphetamine. Many international law enforcement agencies believe that large-scale methamphetamine producers in other Asian countries and Mexico use Chinese-produced ephedrine and pseudoephedrine as a precursor. Numerous examples from criminal investigations confirm this suspicion. Diverted Chinese precursor chemicals may sustain synthetic drug production in other countries as far away as Mexico, Belgium, Indonesia, and the Netherlands. Although China enacted more stringent precursor chemical control laws in November 2005 and is engaged in multilateral and bilateral efforts to stop diversion from its chemical production sector, it has not yet found a way to effectively prevent diversion of precursor chemicals in its large chemical industry.

There is a widespread consensus among law enforcement authorities in Asia that large-scale production of methamphetamine, most notably in super- and mega-labs in Asia and the Pacific Rim, use precursor chemicals produced in China. Production of illicit synthetic drugs for both the domestic and foreign markets primarily occurs in southeastern provinces such as Fujian, Zhejiang, and Guangdong.

The PRC produces and monitors all 23 of the chemicals on the tables included in the 1988 UN Drug Convention. China continues to closely cooperate with the United States and other concerned countries in implementing a system of pre-export notification for dual-use precursor chemicals. China strictly regulates the import and export of precursor chemicals.

In 2010, several significant steps were taken. The Chinese Supreme People’s Court, the Supreme People’s Procuratorate, and MPS issued a set of legal guidelines to target illicit drug manufacture and set of guidelines and regulations on precursor chemical administration. Similarly the State Food and Drug Administration issued a set of guidelines to increase monitoring of ephedrine and its preparations. In a separate effort the Chinese Government is also increasing restrictions on online transactions of drug precursor. Specifically, individuals are banned from selling precursor chemicals over the Internet. Only companies having a license to produce and sell these chemicals are allowed to publish sales information online. Operators of business websites are required to carry out strict checks of precursor chemical suppliers, submit photocopies of their licenses to Internet service providers, and publish the formal name of suppliers and their license numbers on the website.

In China, 137 cases were filed in 2009 related to a total of 649.1 tons of raw materials seized throughout the year. From 2006 to 2009, Chinese police cracked 1,554 cases of illegal trade in precursor chemicals and confiscated 3,814 tons of such chemicals. Between January and May 2010, Chinese People's Armed Police confiscated 243 tons of precursor chemicals.

Despite controls, regulatory loopholes are used to purchase precursor chemicals illegally to process drugs. In January 2010, health authorities urged healthcare professionals across the country to improve the clinical application and administration of narcotics and other specially controlled medicines. The specially controlled medicines include narcotics, psychotropic substances, toxic drugs for medical use and radioactive drugs, according to China's Pharmaceutical Administration Law revised in 2001.

China cooperates in international chemical control initiatives such as Project Cohesion, which targets the diversion of potassium permanganate and acetic anhydride, and Project Prism, which targets the precursor chemicals used in the illicit manufacture of amphetamine-type stimulants. With relation to Project Cohesion, China accounts for 70 percent of the worldwide seizures of potassium permanganate. China continued its participation in the ASEAN and China Cooperative Operations in Response to Dangerous Drugs (ACCORD).

India

India is the world's third-largest manufacturer of precursor chemicals and specifically, one of the top producers of ephedrine and pseudoephedrine. 2009 data from the Global Trade Atlas indicate that India is the top exporter of ephedrine (kilograms) and pseudoephedrine ( kilograms). India has implemented legislation and a system to prevent diversion of ephedrine and pseudoephedrine. However, information from Operation Ice Block indicates that traffickers are now targeting India as the key source of ephedrine and pseudoephedrine for methamphetamine processing. Further, follow-up reports in 2009 from seizures in South and Central America indicate traffickers are targeting India. India was the source of several large shipments of ephedrine and pseudoephedrine tablets ultimately destined for Mexico. In another series of law enforcement reports large shipments of tablets pseudoephedrine from India was formed into tablets in Bangladesh and sent to countries in Central America and the Caribbean.

India is a party to the 1988 UN Drug Convention, but it does not have controls on all the chemicals listed in the Convention. The Government of India (GOI) controls acetic anhydride, N-acetylanthranilic acid, anthranilic acid, ephedrine, pseudoephedrine, potassium permanganate, ergotamine, 3, 4-methylenedioxyphenyl-2-propanone, 1-phenyl-2propanone, piperonal, and methyl ethyl ketone, all chemicals listed in the convention. Indian law allows the government to place other chemicals under control. Violation of any order regulating controlled substance precursors is an offense under the Narcotics Drugs and Psychotropic Substances Act, the key law controlling trafficking, and is punishable with imprisonment of up to ten years. Intentional diversion of any substance, whether controlled or not, to illicit drug manufacture is also punishable under the Act.

The Narcotic Drug and Psychotropic Substances Act requires that every manufacturer, importer, exporter, seller and user of controlled substances maintain records and file returns with the Narcotics Control Bureau (NCB). Each loss or disappearance of a controlled substance must be reported to the Director General of the NCB. Exports of the precursors ephedrine and pseudoephedrine require a “No Objection” Certificate from the Narcotics Commissioner, who issues a Pre-Export Notification to the Competent Authority in the importing country as well as the International Narcotics Control Board (INCB). India has also been an active participant in operations like Project Prism, which targeted precursors to manufacture amphetamine-type stimulants (ATS). However, despite its vigorous efforts to control precursor chemicals, India has been identified in a number of cases as the source of diverted precursor chemicals for a range of narcotic drugs, including methamphetamine and heroin. It is likely that in many cases, India’s elaborate control regimes have been undermined by corruption at the officer level. Nevertheless, each case investigated and prosecuted provides helpful information to authorities which they apply going forward to reduce opportunities for diversion.

Singapore

In 2009, Singapore’s exports and imports of both ephedrine and pseudoephedrine increased. In 2009, Singapore was ranked the fourth largest (ranked fifth in 2008) importer of Ephedrine, a precursor for Methamphetamine, and moved up the ranks to become the third largest exporter of ephedrine (ranked fourth in 2008). For pseudoephedrine, another pre-cursor to Methamphetamine, Singapore was the number one importers in 2009 (ranked third in 2008) and moved to third from sixth place in 2008. The quantities not re-exported are used primarily by the domestic pharmaceutical industry and by the large number of regional pharmaceutical manufacturers located in Singapore. Singapore is one of the largest distributors of acetic anhydride in Asia. Used in film processing and the manufacture of plastics, pharmaceuticals, and industrial chemicals, acetic anhydride is also the primary acetylating agent for heroin.

Singapore participates in multilateral precursor chemical control programs, including Operation Cohesion, and Operation Prism, and is involved in law enforcement initiatives developed under these projects to halt worldwide diversion of precursors to illicit chemical trafficking and drug manufacturing organizations. The CNB works closely with the DEA office in Singapore to track the import of precursor chemicals for legitimate processing and use in Singapore. CNB's precursor unit monitors and investigates any suspected domestic diversion of precursors for illicit use.

Singapore controls precursor chemicals, including pseudoephedrine and ephedrine, in accordance with the 1988 UN Drug Convention provisions. It will not authorize imports of precursors until it has issued a "No Objection" letter in response to the exporting country’s pre-export notification. Pre-export notifications are issued on all exports; transshipment cases are treated as an import followed by an export. The GOS conducts rigorous site visits on companies dealing with controlled chemicals to ensure awareness of the requirements and overall compliance.

The Republic of Korea (ROK)

With one of the most developed commercial infrastructures in the region, the Republic of Korea (ROK) is an attractive location for criminals to obtain precursor chemicals. As of 2010, 25 precursor chemicals are controlled by Korean authorities. Both the Korean Customs Service (KCS) and the Korean Food and Drug Administration (KFDA) participate in Projects Cohesion and Prism. In addition, the KCS, KFDA, and other Korean law enforcement agencies, such as the Korean National Police, participate in sub-programs of those projects, such as Data and Intelligence Collection (DICE) and the Information Sharing System (ISS). KFDA closely monitors imports and exports of precursor chemicals, particularly acetic anhydride, and investigates shipments suspected of being diverted for illicit purposes. Permits must be obtained for such shipments and records of transactions are maintained for a minimum of two years. KFDA works with governments of several Southeast Asian nations to verify documents and confirm the existence of importing businesses and sends representatives to the region to investigate. A draft bill proposed in the National Assembly will require manufacturers and exporters of precursor chemicals to register with the government and will also provide education to Korean businesses to prevent them from unknowingly exporting such chemicals to bogus importers.

The South Korean authorities have jointly investigated numerous shipments, constituting multiple tons of acetic anhydride manufactured and imported from the U.S. that have been illegally diverted. Other precursor chemicals, including acetone, toluene, hydrochloric acid, and sulfuric acid, are produced in large quantities within South Korea for in-country use and for export. In a recent notable case from May 2010, Korean prosecutors and customs officials arrested an Afghan national, who allegedly smuggled large quantities of acetic anhydride from South Korea to Afghanistan through Pakistani agents. Korean authorities, working in conjunction with DEA and United Arab Emirates (UAE) authorities, successfully seized 420 liters of acetic anhydride allegedly connected to the arrested Afghan national from a sea container in UAE, according to a press release published by the Cheon An District Prosecutors' Office.

Taiwan

Taiwan's chemical industry has long been a driving force in boosting Taiwan’s economic development. Globally, Taiwan is the fourth largest exporter of ephedrine and third largest exporter of pseudoephedrine and second largest importer of ephedrine. Aided by both public and private sector investment, the industry has become competitive globally, exporting specialty industrial chemicals and resins for plastics production as well as importing solvents and cleaning materials for the high-tech electronics sector.

Taiwan law enforcement has long recognized that certain Taiwan-based chemical companies engage in the diversion of chemicals, which may be used to manufacture illicit substances in countries such as Cambodia, Thailand, Mexico, Honduras, and Belize. In order to combat the diversion of these chemicals, the Ministry of Economic Affairs, Industrial Development Bureau serves as the regulatory agency for chemicals such as acetic anhydride, piperonal, safrole, piperidine, hydrogen chloride, and potassium permanganate, among others. While licensing is not required for the importation or exportation of these substances, any company that imports, manufactures, sells, stores, or otherwise utilizes these chemicals must report to the Industrial Development Bureau. The Bureau may inspect the company’s records to ensure that there is no diversion activity.

Taiwan does not control the importation and exportation of ephedrine/pseudoephedrine combination over-the-counter pharmaceutical preparations; however, companies engaging in their import/export must register their transactions with the Department of Health, who may elect to examine relevant shipping records. Of the twenty-three chemical precursors listed in the 1988 UN Drug Convention, five chemicals to include ephedrine and pseudo-ephedrine fall under the scope of the Executive Yuan's (EY) Department of Health. The other seventeen precursor chemicals including acetic anhydride and potassium permanganate are considered industrial raw materials, and are controlled by the Ministry of Economic Affairs' (MOEA), Industrial Development Bureau.

Taiwanese law enforcement agencies worked with USG agencies and received training from USG agencies. On an international level, since Taiwan is not a member of the United Nations, Taiwan is unable to access the International Narcotics Control Board (INCB)'s on-line Pre-Export Notification (PEN) system to report import and export shipments of precursor chemicals and pharmaceutical preparations. However, Taiwan unilaterally adheres to the UN convention on controls of such material.

Thailand

Thailand is a transshipment point and a net importer of amphetamine-type stimulants (ATS) and was the fifth largest importer of pseudoephedrine in 2009. Methamphetamine is smuggled from Burma across Thailand's northern border for domestic consumption, as well as for export to regional and international markets. Additionally, traffickers move methamphetamine and some heroin from Burma through Laos and across the Mekong River into Thailand's northeastern border provinces.

Drug smugglers travel south through Laos into Cambodia where they enter Thailand across the Thai-Cambodian border. Drugs are also transported from Burma through Laos to Vietnam and Cambodia for regional export. Thailand is a party to the 1988 UN Drug Convention.

The emergence of crystal methamphetamine or "ice" production in the Shan State of Burma is a serious concern to the Thai authorities. MDMA (ecstasy) trafficking is more common in Thailand. Ecstasy typically is smuggled into Thailand via commercial air carriers from Europe; the drug also is smuggled overland from Malaysia. Most ketamine is believed to transit from neighboring countries, especially Malaysia and Singapore. It is also smuggled into Thailand across the Thai-Cambodian border.

Thailand's chemical control policy is established in the Emergency Decree on Controlling the use of Volatile Substances B.E. 2533 (1990).” Government agencies responsible for chemical controls are the Thai Office of Narcotics Control Board (ONCB) and the Food and Drug Administration, which closely monitor the importation of precursor chemicals. Regular inspections are conducted of companies that import such substances, and every chemical shipment into Thailand is subject to review and selective unloading and search. Thai law provides for a maximum three-year jail term for individuals not complying with required reporting and tracking processes. Thai authorities are vigilant in monitoring imports and the licit use of precursors, but despite strong efforts by the Royal Thai Government, limited quantities of certain chemicals--especially acetic anhydride, and ephedrine--transit Thailand to laboratories in Burma. Most precursor chemicals and substances that transit Thailand originate in Indonesia or Malaysia. Some of the chemicals, like acetic anhydride, are produced in Indonesia while others are brokered through Indonesian chemical houses and transported through Malaysia into Thailand and northward to Thai chemical houses in Chiang Mai or Chiang Rai. ONCB has the responsibility for detecting chemical and precursor diversion, interdicting illicit shipments and monitoring the activities of the chemical trading houses.

Europe

Chemical diversion control within the European Union (EU) is regulated by EU regulations binding on all member states. The regulations are updated regularly, most recently in 2005. The EU regulations meet the chemical control provisions of the 1988 UN Drug Convention, including provisions for record keeping on transactions in controlled chemicals, a system of permits or declarations for exports and imports of regulated chemicals, and authority for governments to suspend chemical shipments. The EU regulations are directly applicable in all 27 of its member States. Only a few aspects require further implementation through national legislation, such as law enforcement powers and sanctions.

The EU regulations govern the regulatory aspects of chemical diversion control and set up common risk management rules to counter diversion at the EU’s borders. Member states are responsible for the criminal aspects, investigating and prosecuting violators of the national laws and regulations necessary for implementing the EU regulations.

The U.S.-EU Chemical Control Agreement, signed May 28, 1997, is the formal basis for U.S. cooperation with the European Commission and EU Member States in chemical control through enhanced regulatory co-operation and mutual assistance. The agreement calls for annual meetings of a Joint Chemical Working Group to review implementation of the agreement and to coordinate positions in other areas. The annual meeting has been particularly useful in coordinating national or joint initiatives such as resolutions at the annual UN Commission on Narcotic Drugs, and the review of the ten year commitments made at the 1998 UNGA Special Session on narcotics issues.

Bilateral chemical control cooperation continues between the U.S. and EU member states, and many are participating in and actively supporting voluntary initiatives such as Project Cohesion and Project Prism. In 2007, the EU established guidelines for private sector operators involved in trading in precursor chemicals, with a view to offering practical guidance on the implementation of the main provisions of EU legislation on precursor chemicals, in particular the prevention of illegal diversion.

Germany and the Netherlands, with large chemical manufacturing or trading sectors and significant trade with drug-producing areas, are considered the major European source countries and points of departure for exported precursor chemicals. Other European countries have important chemical industries, but the level of chemical trade with drug-producing areas is not as large and broad-scale as these countries. Belgium and the United Kingdom are also included this year because of their large exports of ephedrine and pseudoephedrine.

Belgium

Belgium has a substantial pharmaceutical product sector. The country has limited manufacture of licit methamphetamine precursors and it is not a final destination for international shipments of these precursors. The illicit ephedrine diversion market is controlled by Mexican traffickers who purchase both legal (i.e., cold medicine and dietary supplements) and illegal ephedrine, and ship it to Mexico. It is then used to produce methamphetamine for distribution in the U.S. Increased regulations in the U.S. appear to have led to increased transshipments in Belgium and other Western European countries of ephedrine and other methamphetamine precursors through their countries. The Belgian authorities reported the seizure of 13,400,000 ephedrine pills in 2 incidents during 2008. Data for 2010 is unavailable. Belgian authorities cooperate with the US on international controlled deliveries (ICD) to the destinations, or by seizing the shipments.

Germany

Germany continues to be a leading manufacturer of pharmaceuticals, and in 2009 was ranked number two in exports of both ephedrine and pseudoephedrine in 2009. All types of precursor and essential chemicals are manufactured and/or sold by the vast German chemical and pharmaceutical industry. Germany is a large manufacturer of pseudoephedrine and ephedrine used in its large licit pharmaceutical industry and exported to other countries. The essential chemicals pseudoephedrine and ephedrine are regularly diverted to Mexico and Central America for use in the production of methamphetamine, which is then smuggled into the United States by the various Mexican drug cartels.

Another example of a highly diverted precursor chemical is Acetic Anhydride (AA) which is diverted to Afghanistan for the use in the production of heroin. In August 2010, German and US authorities have begun a cooperative effort to gain an in-depth understanding of the AA commercial trade industry as it relates to the European and global market in order to identify and target drug trafficking organizations (DTOs) diverting legitimate AA supplies.

Germany is a party to the 1988 United Nations Convention against Illicit Traffic in Narcotics Drugs and Psychotropic Substances and implements its chemicals control provisions. Germany’s chemical control laws are based on EU law and the Federal Precursor Control Act. Although Germany’s developed chemical sector makes the country susceptible to precursor chemical diversion, German legislation tightly controls the movement of chemicals throughout the country. Cooperation between chemical control officials and the chemical industry is a key element in Germany’s chemical control strategy.

The restructuring of the EU precursor control regime in 2005 led to required amendments to German law. The amendments, which became effective in 2008, supplement three EU directives by regulating the monitoring of the precursor market by the authorities. The Federal Center for Drugs and Medical Devices is responsible for authorizing the import, export or transit of all precursor chemicals in Germany. Germany works closely with the USG on chemical control issues, including exchanging information and cooperating both bilaterally and multilaterally, to promote transnational chemical control initiatives. Germany works closely with the UN’s International Narcotics Control Board (INCB), as an active participant of ongoing UN chemical control operations, such as Project Cohesion (targeting acetic anhydride) and is an active member of the United Nations Office on Drugs and Crime (UNODC) Paris Pact Initiative, an international working group formed to target Afghan heroin.

The Netherlands

The Netherlands has a large chemical industrial sector that makes it an attractive location for criminals to attempt to obtain chemicals for illicit drug manufacture. There are large chemical storage facilities and Rotterdam is a major chemical shipping port. The Netherlands is a party to the 1988 UN Drug Convention and 1990 European Union Regulations. Trade in precursor chemicals is governed by the 1995 Act to Prevent Abuse of Chemical Substances (WVMC). The law seeks to prevent the diversion of legal chemicals into the illegal sector. Violations of the law can lead to prison sentences (maximum of six years), fines (up to 50,000 Euros), or asset seizures. The Fiscal and Economic Information and Investigation Service (FIOD-ECD) at the Ministry of Finance oversees implementation of the law.

The National Crime Squad’s synthetic drug unit and the Public Prosecutor’s Office have strengthened cooperation with countries playing an important role in precursor chemicals used in the manufacture of MDMA. The Netherlands signed an MOU with China concerning chemical precursor investigations. The Netherlands is an active participant in the INCB/PRISM project’s taskforce. In November 2009, the Netherlands hosted the two-year Synthetic Drugs Enforcement Conference (Syndec). In 1994, the Netherlands established procedures to maintain records of transactions of an established list of precursor chemicals essential in the production of some illegal drugs. They also renewed their agreement to cooperate on interdiction of narcotics through third-country transit routes, by exchanging, on a police-to-police basis, information such as IP addresses, telephone numbers and, where appropriate, financial information on a regular basis. The Dutch continue to work closely with the United States on precursor chemical controls and investigations. This cooperation includes formal and informal agreements on the exchange of intelligence.

In April 2009, the National Crime Squad’s Expertise Center on Synthetic Drugs and Precursors (ESDP) established the Precursors Taskforce, which was assigned to gain insight into the most important trends in the market for precursors.

On the basis of the WVMC, trade and industry are committed to report suspect transactions with respect to registered chemicals to a special notification center (WVTC) of the FIOD, which is located with the ESDP. According to the 2009 annual report of the ESDP, the WVTC received 59 reports of suspect transactions in 2009, unchanged from 2008. Of the 59 reports, 33 came from Dutch companies and 26 from foreign companies/authorities. Of the 59 reported transactions, 37 cases were delivered, 13 were not, and nine are unknown.

According to the 2009 ESDP report, one of the most important trends in 2009 was the scarcity of PMK in Dutch criminal circles and, thus, the drop in MDMA production. In 2009, PMK was found on only one occasion, consisting of 40 liters. In 2009, there were four PMK seizures in the Netherlands totaling 207 liters. According to the ESDP, this is a relatively small quantity in view of the 1,946 kilos of amphetamine powder and 466 kilos of amphetamine paste seized in the same year. Pseudoephedrine seizures in 2009 totaled 587 kilos compared to 317 kilos in 2008. According to the ESDP, because there is relatively little methamphetamine production, the Netherlands appears to be a transit country rather than a destination country for pseudoephedrine. Statistics on GHB seizures are lacking since GHB is not listed on the WVMC list.

A second important trend noted by the ESDP in 2009 was the increase in “designer” drugs and other sorts of synthetic drugs. The ESDP was more frequently confronted with substances such as 2c-B, mCPP, methamphetamine, GHB and mephedrone, than in previous years.

The United Kingdom

The United Kingdom is one of world’s largest exporters of ephedrine according to Global Trade Atlas data. In 2009, the UK was again ranked the fifth largest exporter of ephedrine and the fourth largest largest exporter of this precursor that can be used for methamphetamine production.

The UK strictly enforces national precursor chemical legislation in compliance with EU regulations and is a party to the 1988 UN Drug Convention. Several small clandestine methamphetamine laboratories have been seized in the UK. DEA’s London Country Office (LCO) continues to exchange information and training initiatives with several UK law enforcement agencies regarding the threat from methamphetamine.

The Home Office Drug Licensing and Compliance Unit is the regulatory body for precursor chemical control in the UK. In 2008, the Controlled Drugs Regulations (Drug Precursors) (Intra and External Community Trade) were implemented, bringing UK law in line with preexisting EU regulations. Licensing and reporting obligations are incumbent upon those that engage in commerce of listed substances, and failure to comply with these obligations is a criminal offense.

SOCA and the police have the responsibility to inspect facilities where listed chemicals may be housed, to investigate suspicious licensing requests, and to pursue issues related to terrorism or possible terrorism offenses. Her Majesty’s Revenue and Customs deals with issues related to imports and exports of listed chemicals.

In 2006, the UK reclassified methamphetamine from a Class B to a Class A drug--the same category as cocaine and opiates. The change has lengthened penalties to seven years in prison or an unlimited fine for possession, and up to life in prison for dealing. Ecstasy consumed in the UK is believed to be manufactured in the Netherlands or Belgium; but some tablet making sites have been found in the north of England. Most illicit amphetamines were imported from continental Europe, but some were manufactured in the UK in limited amounts. While the UK government made the "date rape" drug GHB illegal in 2003, GBL, a close chemical equivalent of GHB, remained uncontrolled. In August 2009, UK Home Secretary Alan Johnson announced that the UK intended to classify both GBL and BZP (Benzodiazepine), another “party drug” as Class C soon. As part of this review the UK also intends to ban synthetic cannabionoids, which are chemicals that are sprayed on herbal smoking products. Often referred to by its street name, “SPICE” has become readily available in the UK. Synthetic drugs continued to originate from Western and Central Europe; amphetamines, Ecstasy, and LSD were again mainly traced to sources in Belgium, the Netherlands, and Poland, with some supplies originating in the UK. The makers rely heavily on precursor chemicals made in China. The UK intercepts the most amphetamine in Europe.

Significant Illicit Drug Manufacturing Countries

Asia

Afghanistan

Afghanistan produces most of the world’s opium. There are indications that the trend in processing heroin and morphine base by drug traffickers is increasing. However, there is no domestic chemical industry, or legitimate use for acetic anhydride, the primary precursor chemical used in heroin production. The principal sources are believed to be China, Europe, the Central Asian States and India, but traffickers skillfully hide the sources of their chemicals by re-packaging and false labeling. (Comment: Note that in 2008, Afghanistan informed the INCB that there were no legitimate uses for AA within the country, and GOA would therefore no longer issue permits for any import of AA.)

Large quantities of precursor chemicals used in heroin production are illicitly imported into Afghanistan. According to UNODC, markets and processing facilities are clustered in areas that border Iran, Pakistan and Tajikistan. UNODC has reported that trafficking routes for opiates (which are exported) and precursor chemicals (which are imported) are largely similar.

Afghanistan is a party to the 1988 UN Drug Convention. However, it lacks the administrative and regulatory infrastructure to comply with the Convention’s record keeping and other requirements.

Afghan law requires the tracking of precursor substances but the MCN has not created an active registry to record data. And this year, the Government of Afghanistan did not report statistics to the INCB in accordance with Article 12, so the Board was unable to confirm amounts seized.

Progress in this effort requires the establishment of new laws, a system for distinguishing between licit and potentially illicit uses of dual-use chemicals, and a specialized police unit to enforce the new system. UNODC has helped established a five-man unit at CNPA that is charged with tracking precursor chemicals. Limited police and administrative capacity hampered efforts to interdict precursor substances and processing equipment. Yet, recent cooperative international interdiction efforts under the INCB’s leadership have led to an increase in the number of identified diversion to Afghanistan, and large seizures have been reported there including 14,000 liters of acetic anhydride in 2008.

Burma

Despite Burma’s overall decline in poppy cultivation since 1998, a dramatic surge has taken place in the production and export of synthetic drugs. Burma does not have a significant chemical industry and does not manufacture ephedrine and pseudoephedrine used in synthetic drug manufacture, or acetic anhydride used in the remaining heroin manufacture. Burma is a significant player in the manufacture and regional trafficking of amphetamine-type stimulants (ats). Organized criminal syndicates produce significant quantities of heroin and ATS in Burma; most of this production occurred in Burma's border regions, particularly Shan State. Burma's own chemical industry is extremely limited and not sufficiently developed to support the chemical needs of illegal drug labs and refineries. Chemical precursors from China, India, and Thailand are smuggled into Burma. Burma's long, porous, and lightly policed border regions, many under the control of armed groups that operate outside the sphere of state authority, provided ample routes for incoming chemical shipments.

Burmese police seized unknown quantities of acetic anhydride, used in converting opium to heroin, but indications are that traffickers and refiners are able to get the chemicals they need to continue producing drugs. GOB statistics often do not differentiate among precursor chemicals. Seizures included 3320 liters of liquid chemicals, some of which was acetic anhydride, and 2202 kilograms of chemical powder.

January to October seizures related to ATS production included more than one million pseudo-ephedrine tablets and 312 kilograms of ephedrine powder, as well as 1159 kilograms of caffeine powder and almost six liters of liquid cough syrup.

Burma is a party to the 1988 UN Drug Convention, but it does not have laws and regulations to meet all its chemical control provisions. In 1998, Burma established a Precursor Chemical Control Committee responsible for monitoring, supervising and coordinating the sale, use, manufacture, and transportation of imported chemicals. In 2002, the Committee identified 25 substances as precursor chemicals, and prohibited their import, sale or use in Burma.

Indonesia

In 2009, Indonesia was the fifth largest importer of ephedrine and fourth largest importer of psuedoephedrine—precursors used in methamphetamine production. Diversion and unregulated importation of precursor chemicals remains a significant problem facing Indonesia’s counter drug efforts. However, Indonesia has demonstrated commitment to precursor control through national law and policy development and implementation. Indonesia has been an active participant all regional and international narcotics and precursor control initiatives, and has passed amended narcotics and precursor control laws. Indonesia’s latest precursor control amendment is the grouping of Schedule II Psychotropics into Schedule I Psychotropics--effectively criminalizing violations of all Schedule II Psychotropics. Violators of illegal methamphetamine possession now face a minimum five to fifteen year prison sentence and a maximum death penaltyBNN’s new role as inspector and law-enforcer in precursor production oversight will quite likely benefit precursor control on a national level.

Despite Indonesia’s successes in narcotics and precursor control, formidable challenges remain. Chief among these challenges is surge in illicit drug activity—including drug trafficking. Indonesia’s small and under-resourced border protection authority is juxtaposed against a massive and highly porous geography. While Indonesia can tout success and achievement in its oversight for precursors in small controlled environments such as pharmaceutical plants, it still does not possess adequate border protection resources to prevent smuggling of narcotics and precursors across its borders. Despite Indonesia’s efforts to combat corruption through legislation, anti-corruption programs, and the Corruption Eradication Commission, government corruption will likely affect Indonesian oversight and implementation of precursor control programs adversely.

In the recent past, Indonesian enforcement also destroyed large clandestine MDMA (Ecstasy) and methamphetamine “Super Laboratories.” In 2009, clandestine laboratory operations were much smaller, possibly in response to Indonesian law enforcement efforts. There are also indications that laboratories are being moved outside large metropolitan areas to rural areas where law enforcement is not as prevalent. Illicit methamphetamine production originates from diverted pseudoephedrine imported into Indonesia from China. Smaller-sized laboratories are becoming much more prevalent in Indonesia than the super labs. Laws to control the diversion of illicit drug precursors such as pseudoephedrine are still lax, but beginning in 2010, enforcement agencies will have more authority to regulate the importation of precursor chemicals. However, the diversion potential remains with the numerous legitimate large international pharmaceutical and chemical corporations that operate throughout Indonesia.

The scale of amphetamine type stimulant (ats) and Ecstasy manufacturing in Indonesia is already large, and the country may potentially displace Europe as the supply source for Ecstasy in the region.

Historically, MDMA has been smuggled into Indonesia from sources in the Netherlands or produced in China and smuggled to Indonesia by Chinese organized crime syndicates based in Hong Kong. However, in recent years, importation has been unnecessary as there has been large-scale MDMA and methamphetamine production in Indonesia itself. MDMA and methamphetamine produced in Indonesia is trafficked both domestically and internationally.

Laos

Laos is an important transit point for Southeast Asian heroin, amphetamine-type stimulants (ats), and precursor chemicals en route to other nations in the region. This transit drug trade includes criminal gangs with links in Africa, Latin America, Europe, and the United States, as well as in other parts of Asia. Laos is a party to the 1988 UN Drug Convention.

Laos Penal Code has several prohibitions against the import, production, and use and misuse of chemical substances which could be used for manufacturing illicit narcotics. In addition, the Ministry of Health and the Customs Department maintain lists of controlled and prohibited chemical substances. Laos has a very small and nascent industrial base and the use of industrial chemicals subject to misuse for narcotics manufacture is relatively small. It is expected that with the planned accession of Laos to the World Trade Organization in the next few years, the legal controls on the use and import of such controlled chemical substances will be strengthened with first line enforcement being performed by the Customs Department.

The new legal prohibitions on chemical precursors were notably enforced in a major chemical precursor’s seizure in August 2009, when some 4.665 tons of “CD-10” medication cold tablet packages were seized in northern Xieng Khouang Province (which borders Vietnam). This was the largest such “chemicals precursor” seizures reported.

Individuals or small-scale merchants undertake the majority of street-level methamphetamine sales. Criminal gangs involved in drug trafficking across border areas adjacent to Vietnam, China, Thailand and Burma, including ethnic minority groups operating on both sides of those borders, constitute a particular problem for Lao law enforcement

In December 2007, the Lao National Assembly passed a drug law (Law on Drugs and Article 46 of the Penal Law), signed by the Prime Minister in early 2008, that defines prohibited substances and pharmaceuticals for medical use. In March 2009, the Prime Minister’s Office issued a “Decree” to the revised drug law to clarify criminal liability that includes a list of chemical precursors which could be used for illicit purposes (32 including caffeine).

Malaysia

Malaysia continues as a regional production hub for crystal methamphetamine and Ecstasy (MDMA). Narcotics imported to Malaysia include heroin and marijuana from the Golden Triangle area (Thailand, Burma, Laos), and other drugs such as amphetamine type stimulants (ats). Small quantities of cocaine are smuggled into and through Malaysia from South America. Methamphetamine, ecstasy, and ketamine, mostly from India, are smuggled through Malaysia en route to consumers in Thailand, Japan, Indonesia, Singapore, China, and Australia. Ketamine from India continues to be an increasingly popular drug in Malaysia. Since 2006, Malaysia has also been a location where significant quantities of crystal methamphetamine are produced. This trend continued in 2009, with methamphetamine laboratories seized in Kuala Lumpur and in Southern Malaysia, and frequent police reports of ethnic Chinese traffickers setting up labs in Malaysia. Nigerian and Iranian drug trafficking organizations are also increasingly using Kuala Lumpur as a hub for their illegal activities.

Latin America

Bolivia

Because Bolivia does not have a large chemical industry, most of the chemicals required for illicit drug manufacture of cocaine come from abroad, either smuggled from neighboring countries or imported and diverted. Precursor chemicals are shipped to Bolivia from Chile, Peru, Brazil, and Argentina. The Bolivian Special Counternarcotics Police (FELCN) Chemical Control Group , Grupo de Investigaciones de Substancias Quimicas, works with the Vice Ministry of Social Defense and Controlled Substances to control access to precursor chemicals and investigate diversion for illicit purposes.

The Chemical Substances Investigation Team (GISUQ), a division of the Special Operations Force (FOE) of FELCN searches for chemicals used in the cocaine manufacturing process, such as sulfuric acid, kerosene, diesel oil and limestone. In 2010, GISUQ found traffickers using new chemicals, such as electrolytes and acetone, which are not controlled under Bolivian Law 1008.

In 2010, GISUQ seized 963.8 MT of solid substances and 2,400,271 liters of precursor chemicals, surpassing 2009 results by 11 percent and 52 percent, respectively.

The GOB does not have control regimes for ephedrine and pseudoephedrine. On June 6, 2010, 49 kilograms of cocaine and 445 kilograms of ephedrine concealed in wood furntiture from Santa Cruz, Bolivia, were seized in Manzanillo, Mexico. The ephedrine was likely smuggled into Bolivia by traffickers seeking a freight-forwarding area with less law enforcement scrutiny.

Colombia

Chemical trafficking is a serious problem in Colombia. Unlike illicit drugs, chemicals have a legitimate use. The burden of proof is on the police to prove that the chemicals are intended for illicit drug production.

Currently, there are approximately 4,500 chemical companies in Colombia authorized to handle precursor chemicals for legitimate use. Chemical companies must have governmental permission to import or export specific chemicals and drugs. Pre-notification to “Fondo Nacional de Estupefacientes” (National Dangerous Drug Fund, equivalent to the U.S. Food and Drug Administration) is required to export chemicals from Colombia. No companies in Colombia have governmental authorization to export ephedrine or pseudoephedrine, key precursors in the production of methamphetamines. However, Colombian companies can and do import these precursors, which are necessary for the production of cold medications and other legitimate products. The Government of Colombia (GOC) controls legal importation to correspond to legitimate national demand. The GOC cooperates fully with the International Narcotics Control Board (INCB) and other multilateral chemical control initiatives. It provides annual estimates of licit chemical use to the INCB in accordance with international obligations.

Controlled chemicals are camouflaged and clandestinely imported into Colombia and chemicals have also been diverted at large Colombian chemical companies, whose management has no knowledge of the illegal activities. Potassium permanganate, are also imported into Colombia. Chemical traffickers and clandestine laboratories also use non-controlled chemicals, such as N-propyl acetate, to replace controlled chemicals that are difficult to obtain. Since there are no restrictions on non-controlled chemicals, chemical traffickers also recycle chemicals in order to decrease their need to constantly divert precursor chemicals. Along with this practice, traffickers are recycling the chemical containers, making it difficult to trace their origin.

The Colombian National Police Chemical Sensitive Intelligence Unit (SIU) was formed in June of 1998. The unit’s primary mission was to confirm the existence of companies importing chemicals including those from the United States, and it was also charged with confirming the statutory legality of those operating. The primary mission of the group changed near the end of 2000 when the focus shifted to investigative work as opposed to solely regulatory inspections.

In 2007, the regulatory function of the SIU was transferred to one of its own internal units and the SIU maintained its investigative focus. The SIU unit is currently comprised of 40 members, while the Regulatory Unit is comprised of 20 members. The SIU has offices in four cities in Colombia (Bogota, Medellin, Villavicencio, and Cali), and the Regulatory Unit is based in Bogota but travels as needed to other cities within Colombia.

The primary mission of the SIU is to target and dismantle large-scale chemical trafficking organizations that provide chemicals to cocaine, heroin, and synthetic drug producing organizations within Colombia and Mexico. The SIU and Regulatory Unit are also responsible for spearheading the multi-national chemical targeting operation Six Frontiers (“Seis Fronteras”). The SIU coordinates all operations within Colombia in association with the Colombian Military, the Judicial Police, Colombian Prosecutors office, Colombian Customs, and various other agencies. SIU operations have resulted in large quantities chemical seizures by participating countries. In 2010, the SIU arrested 92 people and seized approximately 1.2 million gallons of liquid and 4.6 metric tons of solid precursor chemicals, including 3,882 kilograms (kg) of hydrochloric acid, 5,279 kg of calcium chloride, 50,092 kg of sulfuric acid, 842 kg of active carbon, 43 kg of potassium permanganate, 3,590 kg of sodium carbonate, 212.5 metric tons of cement, 3,289 gallons of methyl ethyl ketone (MEK), 3,422 kg of sodium metabisulfite, 720 gallons of diesel fuel, 16.5 metric tons of solvent #1A, 1,461 kg of isopropyl alcohol, 32,260 kg of thinner, 83.8 metric tons of lime, 29.8 metric tons of caustic soda, 6,485 gallons of N-propyl acetate, 12,304 gallons of acetone, and 154 kg of ephedrine. In 2010, no acetic anhydride, urea, or potassium chloride was seized.

Peru

Peru continues to be a major importer of precursor chemicals that can be used in cocaine production, such as acetone and sulfuric acid. Many tons of these chemicals are diverted from legitimate channels to cocaine production with a major concentration in the coca valleys. Peru also produces some precursor chemicals such as sulfuric acid and calcium oxide that can be used for processing coca base into cocaine base. Based on chemical seizures, multiple tons of precursor chemicals are diverted from legitimate channels to clandestine cocaine production laboratories located close to coca growing areas in the Apurimac and Ene River Valley (VRAE) and Upper Huallaga Valley (UHV).

Lima is the source of 90 percent of chemical precursors smuggled to cocaine production areas, where the chemicals are utilized in the cocaine manufacturing process. Drug traffickers transport precursor chemicals to cocaine labs using individuals, animals, and vehicles. Peruvian National Police (PNP) have identified the principal routes of precursor chemicals from Lima into the drug source areas. As drug traffickers seek alternate routes to move chemicals, the PNP has installed a number of checkpoints on roads leading out of Lima as part of the effort to control and prevent chemicals from reaching coca maceration pits and cocaine laboratories.

Consistent with the GOP’s Five-Year Drug Strategy, Peru’s counternarcotics police, DIRANDRO, continued Operation Chemical Choke, a bi-lateral chemical control program that targets acetone, hydrochloric, and sulfuric acid through a specialized enforcement/intelligence unit of PNP officers. In 2010, Operation Chemical Choke targeted those organizations that divert these chemicals to cocaine production laboratories located near coca growing areas in the VRAE and UHV, and resulted in the arrests of several chemical traffickers and the seizure of 9.5 metric tons (MT) of acetone, 21.8MT of hydrochloric acid, and 2.12MT of sulfuric acid.

Peru’s law enforcement has reported multi-hundred-ton seizures of hydrochloric acid and acetone collectively as well as calcium oxide, totaling 290 MT. In 2010, seizures of potassium permanganate totaled 516 kg, indicating a minimal presence. The PNP’s Control and Investigative Unit for Chemical Precursors (DICIQ) was directly responsible for the seizure of 75 MT of primary chemical precursors in 2010, as well as asset seizures valued at $6 million, and the arrest of 70 traffickers.

Peru’s law enforcement organizations conducted joint chemical enforcement operations with neighboring countries and participated in enforcement strategy conferences to address chemical diversion. Peru was a major participant in the Operation Sin Fronteras Phase I held in Buenos Aires, Argentina. In 2010, Peru’s efforts in Operation Sin Fronteras resulted in the seizure of 20 MT of sulfuric, acetone, and hydrochloric acid, as well as several arrests.

In 2009, to combat the diversion of kerosene for cocaine manufacture, the GOP issued regulations prohibiting the commercialization of kerosene and established a program to replace the use of domestic kerosene with liquid petroleum gas. The regulation prohibited the selling, packing, repacking, transport, storage, distribution, transformation, use, services, possession or other types of activity with kerosene. While the regulation initially applied only to the VRAE, it was later extended to apply throughout the entire country. As of September 30, 2010, the regulation was in full force throughout Peru and had resulted in the seizure of 218 MT of kerosene.

The GOP continues to work on developing a chemical user registry, which is needed to fully implement the Precursor Chemical Control law, aimed at controlling the domestic and international traffic of precursor chemicals. At the end of 2010, the registry project was still under evaluation at the Ministry of Economy and Finance. In the meantime, the Ministry of Production, responsible for its implementation, continues to work with an alternative control system. In November 2009, the GOP issued a new law integrating the terms of all precursor chemical control legislation issued after the original law was enacted, which enforces the control of, and stipulates penalties for, trafficking in chemical precursors. Funds for the implementation of the chemical precursor control booths are included in the CY 2011 national budget submitted to Congress for approval. The USG is supporting the creation of specialized mobile police units to expand the interdiction of precursor chemicals being trafficked all over the country.

Multilateral Efforts to Target Methamphetamine Chemicals

Efforts in reducing and preventing methamphetamine production through a global campaign to prevent diversion of precursor chemicals are forcing traffickers to seek new sources, trafficking routes, and production methods. The United States continues to work in close cooperation with two international entities that have played a critical role this regard: the United Nations (UN) Commission on Narcotic Drugs (CND) and the International Narcotics Control Board (INCB). The CND is the central policy-making body within the United Nations system dealing with drug-related matters. The INCB is an independent, quasi-judicial body that monitors the implementation of the three United Nations international drug control conventions. Efforts over the past several years have included:

  • In 2010, the CND voted unanimously to move phenylacetic acid—a methamphetamine precursor--from table II to Table I of the 1988 UN Convention. This action has increased surveillance, monitoring and control of this precursor chemical that can be used in the production of methamphetamine.
     
  • 2007-2010cooperation in several INCB-led operations that have revealed new trends including upswing in efforts by traffickers to seek precursors in the form of preparations as monitoring of bulk shipments increased.
     
  • the 2009 High-level meetings of the UN Commission on Narcotic Drugs and a special plenary meeting at the UN General Assembly the ATS issues received unparalleled support from all nations.
     
  • a U.S.-sponsored 2006 CND resolution that requested governments to provide an annual estimate of licit precursor requirements and to track the export and import of such precursors;
     
  • a resolution drafted by the United States and the European Union that strengthened controls on pseudoephedrine derivatives and other precursor alternatives.
     
  • the INCB Secretariat’s program to monitor licit shipments of precursor chemicals through its Pre-Export Notification (PEN) online system which was further strengthened this year by the availability of national licit estimates. (The INCB is using these estimates to help relevant countries evaluate whether a chemical shipment is suspicious. Countries can then take steps to block such shipments before they are diverted to methamphetamine production and to undertake other investigative and law enforcement action, as appropriate.)  

The UN Security Council also committed to greater action against the diversion of precursor chemicals used in production of heroin in Afghanistan—the world’s largest producer.

Combat Methamphetamine Epidemic Act (CMEA) Reporting

Section 722 of the CMEA amends Section 489(a) of the Foreign Assistance Act of 1961 (22 USC Section 2291h) by requiring the following information to be included in the annual International Narcotics Control Strategy Report (INCSR):

  • The identification of the five countries, not including the United States, that exported the largest amounts of pseudoephedrine, ephedrine and phenylpropanolamine (including the salts, optical isomers, or salts of optical isomers of such chemicals, and also including any products or substances containing such chemicals) during the preceding calendar year.
     
  • An identification of the five countries, not including the United States, that imported the largest amounts of these chemicals during the preceding calendar year and that have the highest rate of diversion for use in the illicit production of methamphetamine (either in that country or in another country). The identification is to be based on a comparison of legitimate demand for the chemicals--as compared to the actual or estimated amount imported into the country. It also should be based on the best available data and other information regarding the production of methamphetamine in the countries identified and the diversion of the chemicals for use in the production of methamphetamine.
     
  • An economic analysis of the total worldwide production of pseudoephedrine, ephedrine, and phenylpropanolamine as compared to legitimate worldwide demand for the chemicals.  

In addition, Section 722 of the CMEA amends Section 490 (a) of the Foreign Assistance Act of 1961 to require that the countries identified as the largest exporters and importers of these chemicals be certified by the President as fully cooperating with U.S law enforcement or meeting their responsibilities under international drug control treaties.

The Department of State, in consultation with the Department of Justice, is required to submit to Congress a comprehensive plan to address the chemical diversion within 180 days in the case of countries that are not certified.

Section 723 of the CMEA requires the Secretary of State, acting through the Assistant Secretary of the Bureau of International Narcotics and Law Enforcement, to take such actions as are necessary to prevent the smuggling of methamphetamine into the United States from Mexico. Section 723 requires annual reports to Congress on its implementation.

Major Exporters and Importers of Pseudoephedrine and Ephedrine (Section 722, CMEA)

This section of the INCSR is in response to the Section 722 requirement for reporting on the five major importing and exporting countries of the identified chemicals. In meeting these requirements, the Department of State and DEA considered the chemicals involved and the available data on their export, import, worldwide production, and the known legitimate demand for them.

Ephedrine and particularly pseudoephedrine are the preferred chemicals for methamphetamine production. Phenylpropanolamine, a third chemical listed in the CMEA, is not a methamphetamine precursor, although it can be used as an amphetamine precursor. In 2000, the FDA issued warnings concerning significant health risks associated with phenylpropanolamine, and as a result, manufacturers voluntarily removed the chemical from their over-the-counter medicines. A limited amount is imported for veterinary medicines, but there is little data available on its production and trade. Since phenylpropanolamine is not a methamphetamine precursor chemical, and in the absence of useful trade and production data, this section provides information only on pseudoephedrine and ephedrine.

The Global Trade Atlas (GTA), compiled by Global Trade Information Services, Inc. (www.gtis.com), provides export and import data on pseudoephedrine and ephedrine collected from major trading countries; however, 2009 is the most recent year with full-year data. It is important to note, however, that the data, including previous year data, is continually revised as countries review and revise their data in subsequent years. GTA data have been used in the following tables.

Obtaining data on legitimate demand remains problematic, but it is more complete for 2009 than in any previous year. It is still not fully sufficient to enable any accurate estimates of diversion percentages based on import data. There are significant numbers of countries which have yet to report their reasonable estimates about the trade in the end products that form a very legitimate domestic demand to the INCB on a regular basis. Also, some countries and regions do not report trade in ephedrine and pseudoephedrine when it is incorporated into a finished pharmaceutical product, such as a tablet or gel cap, due to concerns that this type of information infringes on commercially sensitive information. Further challenges include governments that may not be able to ascertain this data if, for example, they do not subject pharmaceutical preparations to national control, or if a different ministry with different or less stringent means of oversight regulates preparations versus bulk chemicals. These circumstances prohibit large share of legitimate worldwide demand for methamphetamine precursors.

Even in the case of the reporting on licit market requirements for ephedrine and pseudoephedrine, the governing UN resolutions are not mandatory, but rather urge countries to cooperate by making available information on domestic demand and trade in pharmaceutical products. The trend in this direction has been positive; since the passage of the 2006 CND resolution that the U.S. spearheaded, 123 countries and jurisdictions of the 183 signatories to the 1988 Convention have reported import requirements to the INCB for the bulk chemicals, ephedrine and pseudoephedrine. Before 2006, only a nominal number of countries did so, and these rare communications were scattered and not provided on any systematic basis.

A further challenge to analyzing the data is that most countries have not made any attempt to reconcile the trade data and their own reporting of licit requirements. For the first time, there are some signs of countries beginning to make efforts to reconcile the data. For instance, some countries that noted licit requirements had not reported into the Global Trade data exports or imports and have begun to do so.

Thus far the economic analyses required by CMEA, are not possible because of insufficient and constantly changing data. However, more data is available this year than in any previous year. The United States will continue to push in both diplomatic and operational forums – in both bilateral and multilateral settings – to urge countries to provide reporting on their licit domestic requirements for methamphetamine precursor chemicals to the INCB. We continue to work with the INCB and with authorities in the reporting countries themselves to secure explanations for any anomalies between reported imports and reported licit domestic requirements. We also will seek to support efforts to provide developing countries with the expertise and technical capacities necessary to develop such commercial estimates. Often the collection and reporting of such data requires a regulatory infrastructure that is beyond the means of some governments in question.

The USG continues to support the INCB’s efforts to assist countries in this regard. Moreover, efforts to support the implementation of prior resolutions and global commitments continue to be key objectives of the USG.

This report provides export and import figures for both 2008 and 2009 in ephedrine and pseudoephedrine to illustrate the wide annual shifts that can occur in some countries, reflecting such commercial factors as demand, pricing, and inventory buildup. GTA data on U.S. exports and imports have been included to indicate the importance of the United States in international pseudoephedrine and ephedrine trading. Complete data on the worldwide production of pseudoephedrine and ephedrine are not available, because the major producers will not release them publicly for commercial, proprietary reasons.

The following data are for 2005-2009 and provide an indication of the volatility of the trade in pseudoephedrine and ephedrine. We are using the 2009 data in this cycle of review to identify the major participants in the trade in ephedrine and pseudoephedrine.

Export Statistics
Ephedrine And Its Salts
Annual Series: 2005 - 2009

 

Reporting Country

Unit

Quantity

2005

2006

2007

2008

2009

Reporting Total

KG

       

141,121.00

India

KG

217,106.00

185,804.00

221,105.00

188,967.00

88,416.00

Germany

KG

51,100.00

33,200.00

31,100.00

22,700.00

13,100.00

Singapore

KG

16,350.00

14,550.00

12,426.00

14,010.00

11,800.00

Taiwan

KG

20.00

2,218.00

3,400.00

4,550.00

7,700.00

United Kingdom

KG

3,700.00

7,300.00

5,900.00

9,000.00

4,000.00

Total

           

United States

KG

5,542.00

596.00

5,821.00

1,120.00

12,711.00

Analysis of Export Data: According to the GTA data the top five exporters of ephedrine in 2009 include —India, Germany, Singapore, Taiwan, and the United Kingdom. In 2008 the aggregate amount of ephedrine exported by the top five countries declined from 275,031 kilograms in 2007 to 259,177 kilograms. This year the total declined even further to approximately 125,000 kilograms. The United States has moved up to the third largest.

The worldwide aggregate volume of ephedrine exports that was reported by the Global Trade Atlas increased from 303,059 kilograms in 2007 to 519,474 kilograms in 2008 and then dropped to 141,121,000 2009. It is unclear why the fluctuations increase included decreases by almost every exporter with the exception of the United States and Taiwan where there were significant increases. Exports of ephedrine from the United States increased from 596 in the 2006 level to 5,821 kilograms in 2007 and to 1,120 kilograms in 2008 and 12,711 kilograms in 2009.

Export Statistics
Pseudoephedrine And Its Salts
Annual Series: 2005 - 2009

Reporting Country

Unit

Quantity

2005

2006

2007

2008

2009

Reporting Total

KG

 

 

 

 

1071934

India

KG

270,600.00

301,068.00

360,718.00

462,761.00

533,838.00

Germany

KG

389,700.00

229,700.00

546,400.00

333,500.00

304,800.00

Taiwan

KG

31,546.00

45,830.00

43,785.00

66,180.00

75,525.00

Singapore

KG

-

-

43,750.00

46,501.00

47,250.00

Switzerland

KG

41,084.00

41,519.00

38,564.00

36,398.00

42,021.00

Total

 

732,930.00

618,117.00

1,033,217.00

945,340.00

1,003,434.00

United States

KG

28,895.00

36,715.00

14,714.00

26,499.00

25,881.00

Analysis of Export Data: For pseudoephedrine, the aggregate volume of worldwide exports rose slightly to 1,071,934 kilograms in 2009 from 1,032,207 kilograms in 2008 a drop from the previous year 2007 of 1,132,665 kilograms. The top five exporters of pseudoephedrine were India, Germany, Taiwan, and Singapore and Switzerland. While the first four have remained unchanged over the last four years, Switzerland edged out China for the first time for the fifth ranked slot. Germany and Taiwan showed decreases, but India, Singapore, and China all showed increases. Exports from the United States as the seventh largest exporter (same as last year) rose from 14,714 kilograms in 2007 to 26,499 kilograms in 2008 and then dropped slightly to 25,881.

Import Statistics
Ephedrine And Its Salts
Annual Series: 2005 - 2009

Reporting Country

Unit

Quantity

2005

2006

2007

2008

2009

Egypt

KG

 

 

 

7,258.00

64,763.00

Nigeria

KG

 

 

8,078.00

19,113.00

15,326.00

Singapore

KG

19,875.00

12,750.00

14,000.00

12,501.00

14,306.00

United Kingdom

KG

13,500.00

9,200.00

8,000.00

4,200.00

12,800.00

Indonesia

KG

16,177.00

15,407.00

11,407.00

12,893.00

12,679.00

United States

KG

178,657.00

89,624.00

166,886.00

81,432.00

17,722.00

Reporting Total

KG

 

 

 

 

179,614.00

Analysis of Import Data: The top five ephedrine importers in 2009 include Egypt, Nigeria, Singapore, the United Kingdom, and Indonesia. (2008 included Republic of Korea Argentina, Indonesia, Singapore and Denmark Republic of Korea and Singapore) Although overall imports are down significantly, Egypt and Nigeria—both listed in the top five for the first time--show significant increases without any corresponding explanations regarding the domestic markets. Indonesia continues to be on the list for the third year. U.S. imports of ephedrine rose from 89,624 kilograms to 166,886 kilograms in 2007 then showed a marked decline to 81,432 kilograms in 2008 and even more significant to 17,722 in 2009. The 2007 increase may have been due to companies attempting to obtain more of the chemical in advance of the quota system called for in the CMEA. The aggregate volume also fluctuated from 188,606 kilograms in 2006 to 314,419 kilograms in 2007 and to 208,738 kilograms in 2008 and down to 179,614 in 2009.

Import Statistics
Pseudoephedrine And Its Salts
Annual Series: 2005 – 2009

Reporting Country

Unit

Quantity

2005

2006

2007

2008

2009

Singapore

KG

37,830.00

45,400.00

50,950.00

50,014.00

58,309.00

Taiwan

KG

7,600.00

8,065.00

14,020.00

12,700.00

45,200.00

Switzerland

KG

67,800.00

38,891.00

56,399.00

54,952.00

41,927.00

Indonesia

KG

34,390.00

33,419.00

35,649.00

39,627.00

38,559.00

Thailand

KG

30,475.00

43,955.00

34,929.00

45,600.00

37,450.00

Total of 5 countries

 

178,095.00

169,730.00

191,947.00

202,893.00

221,445.00

United States

KG

319,998.00

171,195.00

312,209.00

148,468.00

186,099.00

Analysis of Export Data:

Shifts in trade of pseudoephedrine have also resulted in a change in the top five importers for 2009 that include Singapore, Taiwan, Switzerland, Indonesia, and Thailand. While these five countries have been in the top range of importers in the last several years, 2008’s top importer is not reporting any imports. Egypt the top importer of pseudoephedrine last year had a significant increase from 0 in 2007 to 60,973 in 2008 Egypt was the top importer of pseudoephedrine with 54,000 kilograms, but had not previously reported any imports of pseudoephedrine. In 2009 Egypt’s imports drop to 20,635 kilograms.

Mexico in the top five in 2006 shows 0 imports of pseudoephedrine in 2009 —down from 43,428 kilos in 2006 to 11, 502 in 2007 and 2,325 kilograms in 2008. As noted previously in this report, Mexico stopped issuing licenses for imports of ephedrine, pseudoephedrine, and products containing these chemicals in November 2007.

In contrast, however, the United States remains the top importer of pseudoephedrine with imports of 186,099.00 in 2009 up from 148,468 kilograms in 2008. However, this is still down from of 312,209 kilograms in 2007.

After a significant increase in 2007, the aggregate world imports drop again to 740,747 kilograms. These total figures remain far below the 2005 levels of 1,201,629 kilograms. We have no way of knowing if the current increase in volume is an anomaly due purely to vagaries of the commercial market. Another possibility is that this increase may have been due to companies attempting to obtain more of the chemical in advance of the quota system called for in the CMEA. Additional annual reporting will be required to determine whether this data points to an upswing in sales or represents a temporary statistical variance. US imports are expected to continue to decline next year.

The accuracy of this trade data also should be viewed with a great deal of caution; clearly, some countries have less sophisticated infrastructures and methodologies at their disposal than others for measuring the volume and commodities of legitimate trade. Furthermore, although this data can be useful for determining overall trends in legitimate trade, it cannot accurately identify trends in smuggling or diversion involving conscious subterfuge. In the case of Mexico, where the government has aggressively cracked down on precursor chemical diversion and limited the flow of trade in such chemicals, increased smuggling of chemical precursors through Central American countries and across Mexico’s southern border is already occurring.

Trade data also fails to reflect illicit smuggling that has been detected by law enforcement and other official reporting in Africa, the Middle East and other parts of Asia. INCB-led operations have been critical in providing information in this regard. For instance,

--in 2006-07 it was observed that China was the origin of shipments to African destinations and that India, to a lesser extent, was a source country either directly or via Europe to the Americas.

--in 2007-09 Operation Ice Block, a more time-bound operation agreed by the Project Prism Task Force, indicated several key shifts in methamphetamine production and trafficking including shift was detected towards India as the major source country with shipments to newly targeted countries in both Africa and Central America. Africa remains a major transit and diversion point for trafficking in diverted precursors and Europe emerged as a major transshipment point for precursor and pharmaceutical preparations destined to North and Central America.

--in July 2009 to March 2010 Operation Pila focused on global trade in ephedrine and pseudoephedrine, with special emphasis on pharmaceutical preparations and on trade in p-2-P and phenylacetic acid. This operation revealed the dramatic upswing in traffickers efforts to obtain methamphetamine precursors in the form of preparations vice in the bulk form of these substances. Close to 70 percent of all the cases under Operaton Pila were in the form of pharmaceutical preparations. For instance almost all of the attempted diversions and seizures of pseudoephedrine preparations destined for Guatemala continued to originate in Bangladesh. Forty suspicious shipments, including over 12.8 tons and 199 million tables of ephedrine and pseudoephedrine were suspended stopped or seized preventing the illicit manufacture of up to 111.5 tons of methamphetamine. In addition suspicious shipments of P-2-P were identified. Operation Pila also reconfirmed that Central American countries have become major destinations and transit points for precursors ultimately to be converted to methamphetamine.

Another key conclusion was that operations targeting ephedrine and pseudoephedrine resulted in efforts by traffickers to seek non-controlled substances such as l-phenylacetylcarbinol or less controlled phenylacetic acid to circumvent controls.

--2011 and beyond. Cooperation has continued in the wake of Operation Pila and as a result efforts to stop suspicious shipments, seizures and identified diversion attempts involving 66.5 tons reflect continuing commitments of Governments.

Available trade data is silent on legitimate commercial sales of commodities, including the substitutes. Similarly, in Burma, there is no available trade data to account for the massive scale of methamphetamine production that reportedly continues within that country.

Other sources of information from the United States, the United Nations and other governments have indicated that considerable quantities of chemicals are being smuggled across Middle Eastern and Southeast Asian borders without any corresponding record in official trade data. In past years, Iran and Syria for example, have reported licit national requirements for pseudoephedrine (55 metric tons and 50 metric tons, respectively) that would place them among the top five importers worldwide, but no trade data for pseudoephedrine is available for these countries that could be used to verify whether these volunteered estimates are accurate. Egypt and Nigeria provided no data for imports/exports of these substances, but are the top two importers of ephedrine. It is unclear why the import of these two substances is so high or the reason for the significant increase legitimate needs.

Based on the available data, it may be possible to speculate that the trade in ephedrine and pseudoephedrine appears to be diversifying, and is less concentrated along traditional routes in major trading countries. Traffickers are also clearly exploiting sources for preparations of these substances in high volumes. The estimates that are now being provided to the INCB regarding legitimate national requirements can provide a tool for governments to get a sense of imports and exports, and we will continue to watch these trends carefully. The United States will work closely with the INCB and with its international partners to further refine the methodologies used to determine these estimates and urge for additional voluntary reporting from States. Many countries, including the United States, have faced challenges in preparing these estimates. All nations, especially large importers and exporters such as the United States, should take steps to ensure that these estimates are as accurate and useful as possible.

INCB Tables on Licit Requirements  [PDF: 238 KBGet Adobe Acrobat Reader]



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