It is human nature. If the demand is high enough then the market will provide. It doesn’t matter if the product is illegal or not. If there are people willing to pay for it than others will provide the product, even if there is great risk involved. When most people hear the terms ‘black market’ they think of various drugs and or weapons. These items are sold under the radar of government agencies and often times at great profit.
While the above items are mostly illegal there is another kind of black market that can occur when a product is strictly regulated, refrigerant for example. By now, we all know the amount of regulations, rules, and restrictions that are in place on various refrigerants across the globe. To complicate things more these regulations can change from country to country and now state to state. Due to these regulations the price of refrigerant has risen significantly in certain parts of the world. Eventually, there was a breaking point where the increased price meant substantial profits to those who were willing to bypass the law.
The large majority of illegal refrigerants are being found within the European Union. The Cooling Post has done a fantastic job about reporting every one of these instances.
In this section we’re going to focus on why and what kind of illegal trade is occurring. The biggest violation in Europe is under the ‘F-Gas’ quota system. Just like here in the United States, the EU has a quota on how much a specific refrigerant can be produced or imported into the EU. The difference here is that Europe has begun phasing down HFC refrigerants such as R-134a, R-404A, and R-410A. The phase down came with a very aggressive import/production quota similar to what we have on R-22. This aggressive phase down caused the prices on HFC refrigerants in Europe to go up hundreds of percent. I recall reading that at one point a cylinder of R-404A was going for over seven-hundred dollars.
That crazy price point was a prime target for illegal trade. Companies from outside of the European Union saw a window of opportunity for a hefty profit. Let’s think about it for a moment. A cylinder of R-404A from China could cost around fifty dollars. If you could smuggle multiple pallets of 404A into Europe and sell it for a hundred bucks less than the going rate then the reward would be huge. For argument’s sake let’s say five pallets at forty cylinders each. So, two –hundred cylinders selling at five-hundred dollars a cylinder equals out to one-hundred thousand dollars in sales. Take out your ten-thousand dollars of cost for the Chinese product and you’re looking at ninety-thousand profit. (Minus transport fees.)
I have read from a few reports that the amount of illegal refrigerants flowing into Europe equals nearly twenty percent of the yearly F-Gas quota. So, best case Europe is looking at one-hundred and twenty percent of their HFC quota. This number could be even higher as there is no good way to measure all illegal imports. It is easy to see why Europe is having such an illegal refrigerant problem. Something has to be done to shrink these smuggler’s profit margins. Only then will we begin to see the number of illegal shipments shrink.
Other EU Struggles
Another struggle that the EU is facing is on non-refillable disposable cylinders. These types of refrigerant containers have been banned in the EU since 2007. They were banned due to there always being a slight remainder of refrigerant gas leftover in the disposable cylinder. In some cases this leftover refrigerant can be as high as five percent. When disposed of this cylinder can leak out which in turn can harm the environment. The smugglers however see these disposable cylinders as another cost cutting point so that they can make even more profit on their illegal sales.
The last struggle that I have seen in Europe is online refrigerant sales. There are refrigerants being sold on sites like Amazon, Ebay, and other EU specific sites. This wouldn’t be a problem if the buyer was certified and licensed to handle refrigerant, but in many cases the sellers on these websites do not ask for any certification details. In most cases they are willing to sell to anyone who wants it. This again, bypasses EU law. There is also no way to tell if these online sales are compliant with the F-Gas quota.
The United States has not seen the scale of illegal refrigerants that Europe has. This is mostly due to the US still hanging onto HFC refrigerants. As I write this article, in April of 2019, there is still not formal HFC phase down plan for the US. Heck, we still haven’t even ratified the Kigali Amendment. Because of these factors the prices on HFCs have been relatively low. In fact, this year I am seeing some of the lowest prices on HFCs that I have seen in ten years.
That doesn’t mean that everything is perfect in the United States though. We have our problems as well. The first one I mentioned already in the European section, but I’ll mention it again here. In January 1st, of 2018 there was a new regulation that added HFC refrigerants to the refrigerant sales restriction. Before this rule, you could purchase a variety of HFCs on websites like Amazon.com or Ebay.com. Shortly after the rule went into place there were a few stragglers on Amazon.com but after some more time the refrigerant listings on Amazon began to dissipate. The same story cannot be said for Ebay. I can pull up the website today and find numerous listings for R-22, R-134a, R-410A, R-404A, and more. Now, in Ebay’s defense most of these listings ask for an EPA certification number before purchasing… but there is no way to know if they all do. I am one-hundred percent certain that sales are done without collecting the proper information.
Another problem in the United States is non-compliant refrigerant cans. The Department of Transportation has four main groups of pressure ratings for aerosol cans. This includes your typical household products like furniture polish, hairspray, tire shine, etc. What determines the correct rating is the pressure of the product being filled at one-hundred and thirty degrees Fahrenheit. The required ratings are below.
- <140 psig = 2N (Non-Spec)
- 140-160 psig = 2P
- 160-180 psig = 2Q
- >180 psig = Special Permit
R-134a at one-hundred and thirty degrees Fahrenheit is rated at 199 psig. As you can see, this puts 134a well outside the range of the 2Q can type. Products like refrigerants that are routinely higher than 180 psig have to be packaged in either a cylinder or in an aerosol can with a special permit. There are companies who specialize in manufacturing and obtaining special permit cans. One example is ITW Sexton. As you can imagine, a specialized can costs more than a standard 2Q can.
In another example of companies cutting corners there have been R-134a cans imported into the United States in a 2Q can. This is not only against government regulation but it can also be quite dangerous. There is a reason for this regulation. If refrigerant is packaged in an improperly rated can then there is risk of explosion.
Now, I am not going to name company names here for legal reasons and also not to publically shame. It is distasteful to do so. Instead, I wanted to educate you , the reader, that if you are working with or purchasing refrigerants cans please ensure that the refrigerant is stored in the correct can type. Sure, you might save some money with a 2Q can but you’re in violation of DOT regulations and you are also risking safety of yourself and others.
In both cases, in the European Union and the United States, the majority of this illegal product is sourced from China. In the case of Europe the product is being sneaked in through Turkey or through Russia. There are many instances where trucks are stopped and searched in Belarus or Bulgaria for illegal refrigerants.
While the world knows about these illegal refrigerants the biggest struggle is enforcing the laws on the books. Many governments are failing to impose penalties on companies who are in violation. This applies both within the United States and Europe. As an example, in the US government agencies are aware of companies importing non-compliant cans, but so far, nothing has been done about it. (At least that I am aware of, if I am incorrect please let me know.)
Over in Europe, if the government does find an illegal shipment they will often charge the truck driver and fail to follow the source of the shipment and the company behind the shipment. The driver is the pawn and without tackling the source of the problems the illegal shipments will continue. There will be a new driver right away that is willing to take the risk.
The refrigerant black market is only going to flourish unless governments decide to crack down. While it can never be truly stopped we can at least make a dent in the amount of illegal refrigerants by strictly enforcing the laws on the books and punishing those who are defying said laws.