International Product Support Company Senior VP Pleads Guilty to the Illegal Purchase and Sale of Smuggled R-22

Wifredo A. Ferrer, United States Attorney for the Southern District of Florida, Maureen O’Mara, Special Agent in Charge, U.S. Environmental Protection Agency (EPA), Criminal Investigation Division, Atlanta Area Office, and Alysa D. Erichs, Special Agent in Charge, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI), announce that defendant Carlos A. Garcia, 52, pled guilty today in connection with the illegal receipt, purchase, and sale of ozone-depleting refrigerant gas that had been smuggled into the United States contrary to the Clean Air Act, in violation of Title 18, United States Code, Section 545.Sentencing has been scheduled before U.S. District Judge Cecilia Altonaga for June 26, 2012. Garcia faces a statutory maximum sentence of twenty years in prison.

Garcia pled guilty to Count 4 of the Superseding Indictment, which charged him with knowingly receiving, buying, selling and facilitating the transportation, concealment, and sale of approximately 13,600 kilograms of the ozone-depleting substance hydrochlorofluorocarbon-22 (HCFC-22). HCFC-22 is a widely used refrigerant for residential heat pump and air-conditioning systems. Garcia’s employer, Mar-Cone Appliance Parts Co. (Marcone), was previously convicted and sentenced for related conduct and ordered to pay a $500,000 criminal fine, a $400,000 community service payment, and was ordered to forfeit to the United States $190,534.70 in illegal proceeds.

Federal law prohibits dealing in merchandise that is imported contrary to law. The Federal Clean Air Act regulates air pollutants including ozone depleting substances such as HCFC-22. The Clean Air Act and its implementing regulations established a schedule to phase out the production and importation of ozone-depleting substances beginning in 2002, with a complete ban starting in 2030. To meet its obligations under an international treaty to reduce its consumption of ozone-depleting substances, the United States issued baseline allowances for the production and importation of HCFC-22 to individuals and companies. In order to legally import HCFC-22, one must hold an unexpended consumption allowance.
United States Attorney Wifredo A. Ferrer stated, “Our commitment to help protect the ozone layer from harmful chemicals is a long-term effort that requires the cooperation of businesses and individuals around the world. At home, we will continue to aggressively enforce federal laws that seek to protect our environment.”

EPA SAC Maureen O’Mara said, “It is undisputed that HCFC’s deplete the stratospheric ozone layer, which is critical to life on earth and protecting people from the harmful effects of ultraviolet radiation, including cancer. EPA is committed to working with ICE and other agencies to combat such criminal conduct, preventing these dangerous smuggling and distribution operations. Operation Catch-22 continues to be a great example of EPA’s successful efforts to investigate and pursue the just prosecution of blatant illegal conduct that jeopardizes public safety.”

“The smuggling of goods contrary to law poses a significant threat to national security and public safety. And in this particular case, the illegal importation posed a global hazard to our environment,” said Alysa Erichs, Special Agent in Charge of HSI in Miami. “This case is another example of HSI’s commitment to combating illicit trade along with our federal partners”

According to court records and proceedings, Garcia was the Senior Vice-President of Marcone’s Heating and Cooling Division responsible for executing legal purchases and sales of refrigerant gas. Instead Garcia engaged in a pattern of conduct to purchase and sell black market HCFC-22. The investigation revealed that the defendant would routinely seek out and arrange the purchase of HCFC-22 from various importers who did not hold the required unexpended consumption allowances, totaling approximately 55,488 kilograms of restricted HCFC-22, with a fair market value of approximately $639,458. The refrigerant gas was distributed by Marcone throughout the United States.

This matter and others involving the smuggling and distribution of ozone-depleting substances are being investigated through a multi-agency initiative known as Operation Catch-22. Operation Catch-22 has, to date, included the successful conviction of nearly a dozen individuals and corporations at every level of the refrigerant gas smuggling and distribution chain. Mr. Ferrer commended the investigative efforts of the EPA, ICE-HSI, the Florida Department of Environmental Protection, Criminal Investigation Bureau, and the Miami-Dade Police Department. The case was prosecuted by Assistant U.S. Attorney Thomas A. Watts-FitzGerald and Special Assistant U.S. Attorney Jodi A. Mazer.

SOURCE: The United States Attorney's Office Southern District of Florida, Press Release, 11 April 2012,

HARDI Western Distributor Update

California Refrigerant Reporting Deadline Looms
HARDI Western Regional
Thermostat Recycling Mandates Persist

California Refrigerant Reporting Deadline Looms

UPDATE: The California Air Resources Board has extended the deadline to April 1.

For distributors with branches and locations within the state of California, tomorrow (March 1) marks the deadline for reporting 2011 refrigerant sales and transfers to the California Air Resources Board. Distributors are required to register each branch within the state, but reporting should be done on a company-wide basis. If you are having difficulty reporting, the Air Resources Board has made a training video which is accessible from the ARB website.

Reporting requirements also apply to reclaimers and facilities with systems carrying a refrigerant charge of 2,000 lbs or more.

HARDI Western Regional
Space still remains available for the HARDI Western Regional Meeting in Phoenix, AZ (March 11-13). Please, contact Stephanie Lingofelter to register for the event and to learn of limited remaining sponsorship opportunities. Among the topics being discussed:

• The Future of Incentives for HVACR Products and Systems.
• A Dozen Things You Can Do in HR that Will Save You a Million Dollars.
• HARDI Benchmarking: Regional & National Trends.
• R-22 Reductions? Dry-Ship Issues? Regional Standards? Navigate 2012's bumpy road of policy proposals and get a head start on Election 2012.

Thermostat Recycling Mandates Persist
All distributors with physical locations in California must act as a collection point for waste mercury thermostats and it has come to HARDI's attention the California Department of Toxic Substance Control is conducting pre-enforcement visits to HVACR wholesalers.

Failure to act as a collection point may lead to civil penalties of $25,000 per day, per violation. To avoid penalties, your branches must actively collect waste mercury thermostats. This includes having a recycling container, posting signage promoting the availability of the program at the location and ensuring staff is aware of the program is asked.

For recycling containers or promotional materials, please contact the Thermostat Recycling Corporation.

R-22 Update

There has been much recent discussion regarding the market for HCFC-22 in 2012, as the EPA works to finalize its allocation and production rights for 2012-2014. Here are some basic facts HARDI wanted to communicate to our membership.

1.) There is an ongoing EPA rulemaking concerning the allocation of refrigerants, including R-22 for 2012-2014. The EPA has suggested a reduction of allocation rights of R-22 between 11% and 47% in each year (2012-2014). EPA’s proposed reduction was not unexpected.

2.) While the rulemaking process is underway, it is illegal for a company to produce or import refrigerant into the United States. The EPA therefore must send out a “non-enforcement” letter, which allows companies to legally produce or import refrigerant. This letter was expected by many companies to arrive the first week of January; however it was delayed until Friday, January 20. Thereby 15 work days had passed where no refrigeration production or importation occurred.

3.) The EPA's "non-enforcement" letter called for a 17% reduction from the original R-22 baseline, or a 45% reduction off of the 2011 allocation. In 2011 the total R-22 allocation was approximately 100 million pounds. Currently manufacturers and producers are operating under guidance that only 55 million pounds will be approved in 2012. If the finalized rule calls for less than a 45% reduction, a manufacturer/producer could produce and import up to their allocated amount.

4.) From 2005-2010 (2011 data is not yet available), only 77% of Consumption Allowances for HCFC-22 were used. These figures along with comment from stakeholders to the EPA, regarding the oversupply of R-22 in the marketplace, have led EPA to consider a more aggressive phasedown.

5.) In 2011, EPA sought comment from the Alliance for Responsible Atmospheric Policy, of which HARDI and all major refrigerant producers are members, regarding a suggestion for a more aggressive reduction in R-22. The Alliance formally submitted a suggestion for a 20% reduction in Consumption Allowances.

The Not-So-Hidden Cost of Regulation

Debate after political debate, candidates and other politicians love to throw around trinkets of relief to the business community, most notably promises of "less regulation" and "government intrusion".  Despite all the rhetoric, I needed to spend several hours yesterday with Jon Melchi, our Director of Government Affairs, simply to plan and prioritize other projects, and shift resource allocations so HARDI could be sure to meet six regulatory comment filing deadlines all landing BETWEEN NOW AND FEBRUARY 20!  Not only am I concerned that Jon may not like or perform optimally with 3 hours of sleep per night, how many other HARDI priorities must be delayed or shelved altogether simply so we can perform our essential function of representing our members' interests in this seemingly endless flood of regulatory activity?

Further, as our recent court action challenging a DOE ruling proves, all of this effort throughout these various regulatory proceedings hardly guarantees fair consideration of our concerns these days.  That means these six filings have better than a 50/50 chance of requiring much more staff time and resources in the future.  This is vitally important work for HARDI, our members', and our organization's strategic objectives, however make no mistake that we, and I would assume other organizations like HARDI, would be able to do so much more for our members if we did not have to continually swim upstream in these increasingly rushing regulatory rapids.  Message to today's Presidential candidates and our current President:  cut the rhetoric about reducing "burdensome regulation on business" and actually start doing it today!  Rhetoric will not earn Jon an extra hour or two of sleep.

DOT issues new Trucking rules

DOT Sets New Safety Rule for Drivers
The Department of Transportation has announced that January 3, 2012 will be the effective date for a new regulation, which bans the use of hand-held cell phone's for interstate commercial vehicle drivers. The ban only applies to intrastate drivers if they are carrying hazardous material, but states are likely to adopt the federal standard in the near future. Companies that allow their drivers to use cell phones face fines of up to $11,000 per incident.

Specifically, this rule prohibits drivers from using a hand-held cell phone while driving, reaching for a mobile phone in a distracted manner or dialing a number by pressing more than one number. The use of hands free phones, two-way radios and CB's will still be permitted.

DOT finalizes Hours of Service Rule

The Department of Transportation finalized a rule which, while substantial, falls short of the drastic initial proposal, which would have greatly reduced trucking productivity. The DOT has issued these requirements:

• A 30-minute break by all drivers at least once during an eight hour shift.(Takes effect July 1, 2013)
• The 34-hour restart period must include at least two 1am-5am periods. (Takes effect July 1, 2013)
• A 34-hour restart period may only be used once per week. (Takes effect July 1, 2013)
• The definition of "on-duty" time is changed to exclude: (1) Up to two hours in the passenger seat of a CMV if that 2-hour period precedes or follows an 8-hour period in a sleeper berth; and (2) all time resting in a parked CMV. (Takes effect Feb. 27, 2012)
  

2012 HSA Contribution Limits

As we prepare to turn the calendar, thought it might be helpful to have handy the 2012 tax-free contribution limits for Health Savings Accounts (HSAs).  The limit increased $50 for individuals to $3,100 and $100 for families to $6,250.  In short, this means you can contribute to these limits before taxes are deducted, and can use your HSA balance for qualified medical expenses tax free as long as you have the account tied to a high deductible medical insurance plan. 

The "catch-up provision" limit remained unchanged at $1,000 for individuals age 55+.  This is extremely important for those positioning for retirement or late entries into an HSA program.

While we're at it, just another reminder too that in 2011 over the counter medications were deemed INELIGIBLE for HSA reimbursements; a change from all previous years.

I hope you find this useful as you prepare for what we believe will be a prosperous and positive 2012!  Happy New Year!

California Distributor Update

DTSC to Continue Inspections

The California Department of Toxic Substances Control (DTSC) has completed an initial survey of HVACR Distributors to monitor compliance with state policy mandating the recycling of mercury thermostats and found that some distributors are falling short of full compliance to state law. Distributors in California are required by law to serve as a collection point for mercury thermostats and DTSC is planning on increased enforcement in 2012.

HARDI has a formal partnership with the Thermostat Recycling Corporation (TRC), who can provide your business with all of the resources necessary to make sure you are in compliance with California state law.

If you would like to know if your business was inspected by the DTSC, please contact Jon Melchi.

New CARB Requirements

The New Year brings new requirements from the California Air Resources Board. Below are the new reporting requirements for Refrigerant Distributors and Reclaimers.

Beginning Jan. 1, 2012

Refrigerant Distributors must:

• Report previous year’s refrigerant sales or transfers by March 1
• Cover all California facilities that bought or received refrigerant from the wholesaler or distributor
• Include the following:
• The total weight, in pounds, of each type of refrigerant sold or transferred in the previous year, including:
• Transactions for eventual resale or delivery
• Shipments to certified reclaimers

Refrigerant Reclaimers must:

o Report previous year’s refrigerant sales or transfers by March 1

o Cover all California facilities that delivered refrigerant to the reclaimer

o Include total weight, in pounds, of each type of refrigerant that was:

§ Reclaimed or destroyed in California

§ Shipped out of state for reclamation or destruction