Air-Conditioning - Smugglers Reap Large Profits.

MIAMI - The chief executive of the century-old company from America's heartland shifted nervously on the witness stand as he tried to explain how a trusted senior vice president had been caught on a wiretap buying half a million dollars in smuggled merchandise, much of it from China.

But the contraband purchased by Marcone, a St Louis-based company that claims to be the United States largest authorized source for appliance parts, was not counterfeit handbags or fake medicines.  It was a colourless gas that provides the chill for air-conditioners from Miami to Mumbai, from Bogota to Beijing

Under an international treaty, the gas, HCFC-22, has been phased out of new equipment in the industrialized world because it damages the earth's ozone layer and contributes to global warming.  There are strict limits on how much can be imported or sold in any country in the world.

But the gas is still produced in enormous volumes and sold cheaply in China, India and Mexico, among other places in the developing world, making it a  profitable if unlikely commodity for international smugglers.

So, in 2009, Carlos Garcia, the Marcone vice president, generated big business for his company's growing air-conditioning operation by selling smuggled foreigh gas to repairmen at rock bottom prices in a promotion called Freaky Freon Fridays, drawing on a brand name that many use as a synonym for coolants.

Although it has been illegal to sell new air-conditioners containing HCFC-22 in the United States since 2010, and Europe since 2004, vast quantities of gas are still needed to service old machines.  Importing HCFC-22 without the needed approvals, as Marcone did, violates international treaties and United States law and regulations.

Yet for a long time, Mr Garcia was a hero to his company for the profits his Freaky Freon Friday campaign generated. On June 26, Mr Garcia was sentenced to 13 months in federal prison.

International efforts to curb the use of HCFC-22 are faltering for dozens of reasons, from loopholes in environmental treaties to the reluctance of manufacturers to step up development of more environmentally friendly machines.

But the underlying problem is that even as international treaties and United States law demand that companies renounce the use of the coolant, economics propels them to use ever more - even if it means breaking the law.

Although the Marcone case is the largest smuggling prosecution anywhere so far, investigators believe that smuggled gas is used by other companies around the world.  European customs officials have intercepted shipments of contraband gas arriving in Finland, Slovenia and Poland in the last two years.  This, they believe, is only the tip of the iceberg.

Much of the global air-conditioning industry relies on the gas the way the auto industry does on gasoline.  But while oil is getting harder to find and more expensive, HCFC-22 is becoming more abundant and remaining cheap on the global market. This unfortunately is inhibiting phaseout.

In the meantime, the price of legitimately obtained gas has been rising throughout the United States and Europe.  That is because governments of industrialised nations, to comply with the ozone treaty know as the Montreal Protocol, restrict the use of the environmentally damaging gas in various ways.  The dwindling supply on the legitimate market, has led to pronounced spikes in price.  By reducing the supply of the coolant and encouraging prices to rise, governments throughout the United States and Europe hoped to force manufacturers and consumers to scrap old machines and invest in more environmentally friendly, if more expensive, alternatives.  But it has not worked out that way, especially in recessionary times when people hang on to old appliances and search for cheap shortcuts.