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International Narcotics Strategy Report, April 1993
US Department of State
Bureau of International Narcotics Matters

Department of State Publication 10047
Released April 1993

The Report is for sale by the Government Printing Office, 
Superindendent of Documents.  Stock No.:  044-000-02370-9

This segment of the report covers Chemcial Controls, and Financial 
Crimes and Money Laundering, Country Reports.

[EDITOR'S NOTE:  Charts referenced to in brackets [ ] are 
available only in hard copy of report.]

CHEMICAL CONTROLS
Executive Summary


CHEMICAL CONTROL

The procurement of chemicals necessary to manufacture drugs is one 
of the few points where clandestine, criminal drug trafficking 
intersects with legitimate commerce.  Regulation of legitimate 
commerce to deny traffickers the chemicals they need is one of our 
most valuable tools in the battle against drug criminals.

To be effective, however, regulation must be uniform and 
universal, it must not impose undue burdens on those involved in 
legitimate commerce, and it must produce results that justify the 
burdens it does impose.  Otherwise, traffickers can turn to 
unregulated sources of supply, and industry will resist the full 
cooperation required for effective regulation. 

In 1991, the US-chaired Chemical Action Task Force (CATF) 
developed and gained widespread acceptance of a set of measures to 
be incorporated into national chemical regulatory regimes.  These 
measures build on the chemical control provisions of Article 12 of 
the 1988 United Nations Convention Against Illicit Traffic in 
Narcotic Drugs and Psychotropic Substances, and their adoption 
would generally exceed the requirements of the chemical control 
provision of the Convention.  In 1992, a number of countries 
incorporated measures recommended by the CATF into their chemical 
control systems.  The European Community amended its chemical 
regulation to conform to them.  This became binding on Community 
members on January 1, 1993.  Japan, in mid-1992, adopted a 
chemical regulatory regime based on the CATF measures.  The Andean 
cocaine producing countries and many other Latin American 
countries have chemical regulatory regimes based on the CATF 
measures and the more comprehensive Organization of American 
States Model Chemical Regulations.  Asian heroin producers have 
partial systems incorporating some of the CATF recommmendations.

The challenge now is building the administrative structures to 
implement these regimes; and the establishment of effective lines 
of communication between governments to exchange the information 
they collect, thereby enabling authorities to confirm the 
legitimate end-use of proposed transactions in regulated 
chemicals.  Industrialized countries are best able to do this, 
although most have not done so.  Drug producing countries will 
require assistance.

In 1992, work was begun on both aspects of the problem by two 
working organized as a result of a conference on chemical control 
held in Lyon, France in September 1991.  An international working 
group, led by the International Narcotics Control Board, has 
prepared a set of practical guidelines based on the CATF measures 
for governments to follow in drafting and implementing chemical 
regulatory regimes.  A second working group, chaired by the 
French, has  developed methods to share information contained in 
the chemical data bases of individual governments and 
international organizations. 

To build on this base, information sharing between regulatory 
agencies must expand.  Material and training assistance must be 
provided to less developed countries so they can implement their 
systems and participate in this international effort.  Procedures 
must be established to identify changes that may be required in 
chemical regulatory regimes to attack new methods of utilizing 
chemicals and new diversion techniques, and to bring under control 
chemicals being used as substitutes for regulated chemicals.  A 
policy framework has been established to accomplish these 
objectives; the spirit of international cooperation, particularly 
in the CATF, that facilitated building this framework must 
continue to achieve them.


CHEMICAL CONTROLS

Introduction

The central elements of any system to prevent the diversion of 
precursor and essential chemicals from legitimate commerce to 
illicit drug manufacture are the ability to verify the legitimate 
end use of a proposed transaction in a regulated chemical, and the 
authority to suspend a transaction if the legitimate end use 
cannot be verified.  Since the vast majority of chemicals diverted 
to illicit drug manufacture move in international commerce, 
verification requires the cooperation and exchange of information 
between governments in chemical shipping, transit and receiving 
countries.  The shipping country must be able to confirm with the 
receiving country the integrity of the buyer and the legitimate 
requirement for the regulated chemical before it permits an export 
shipment.  Transit countries must prevent diversion from 
authorized shipping channels while chemicals are on their 
territories.  Receiving countries should ascertain the competence 
and integrity of chemical importers, as well as the purpose for 
which the chemicals are being imported.

To participate effectively in this system, governments must have 
compatible chemical control regimes that regulate the same 
chemicals, collect the same information on proposed transactions, 
and provide mechanisms for rapidly sharing this information.

The implementation of this system requires the full cooperation of 
industry, which is being asked to participate in a governmental 
program to prevent a crime.  Not only must industry supply the 
information required by competent authorities to verify the 
legitimacy of transactions, it  plays a vital role in identifying 
and alerting authorities to suspect transactions.  Close 
cooperation between industry and enforcement authorities, 
therefore, is essential. 

The 1988 U.S. Chemical Diversion and Trafficking Act (CDTA) 
provides the USG the enforcement authorities required to control 
chemical diversion.  Many other governments, primarily in Western 
Europe, have until recently lacked these authorities and drug 
criminals have been able to turn to them as sources of supply. 

1992 Chemical Control Developments

The March 1992 INCSR reported that the US-chaired Chemical Action 
Task Force (CATF), as mandated by the Group of Seven 
Industrialized Nations (G-7), had developed a practical and 
feasible set of measures to stem the diversion of chemicals to 
illicit drug manufacture.  These measures build on those contained 
in Article 12 of the 1988 United Nations Convention against 
Illicit Traffic in Narcotic Drugs and Psychotropic Substances.  
They include provisions for regulating transactions in chemicals, 
including record keeping, administrative surveillance, vigilance 
by private operators, import and export licensing, and the 
authority to suspend or seize shipments in the case of suspect 
transactions.  There are also procedures for sharing of 
information between competent national enforcement authorities, 
including the U.S., to verify the legitimacy of proposed 
transactions.

The twenty-seven members of the CATF, representing the major 
chemical producing and transit countries, the major drug producing 
countries and concerned United Nations and regional organizations, 
have endorsed the measures ("the CATF recommendations").  They 
were endorsed by the G-7 at its 1991 London Economic Summit.

In 1992, the USG continued its lead role in the CATF.  Action was 
completed on some important CATF recommendations, and significant 
progress was made on others.

At its April 1992 meeting, the Commission on Narcotics Drugs of 
the United Nations approved by the required two-thirds majority 
the addition of ten chemicals to the tables of chemicals 
controlled under the terms of the 1988 UN Convention against 
Illicit Traffic in Narcotic Drugs and Psychotropic Substances.  
This increases to twenty-two the number of chemicals controlled by 
the Convention. The ten additional chemicals had been identified 
by the CATF following extensive study by its Chemicals Working 
Group.  The USG as a party to the Convention and the CATF 
Secretariat country prepared the documentation and submitted the 
recommendation for their addition to the United Nations.

Two working groups established by a U.S. sponsored conference on 
chemical control held in Lyon, France in September 1991, completed 
their work in January 1993.  The Secretariat of the International 
Narcotics Control Board (INCB) chaired the first working group to 
develop guidelines for chemical exporting, importing and transit 
countries to follow in investigating shipments of regulated 
chemicals.  The guidelines are intended primarily to assist 
countries with limited or no experience in establishing chemical 
diversion control systems.

The second working group, under French chairmanship, studied the 
form and content of the various international data bases in order 
to develop procedures for exchanging regulatory and law 
enforcement information between them.  The group concluded it 
would not be feasible to establish a new, centralized data base 
that would include regulatory and intelligence information now 
contained in the data bases of individual countries and 
international organizations.  Accordingly, it proposed the 
establishment of an international data sharing network, and 
recommended that the INCB serve as the gateway to the network.

A major effort was made in 1992 to have chemical regulatory 
regimes based on the CATF recommendations established at the 
national level.  These regimes will provide the network of 
compatible chemical control regimes necessary to effective 
international chemical control.  Chemical diversion control is 
most effective when it is exercised prior to the shipment.  
Denying a shipment keeps chemicals subject to diversion out of 
international commerce where the opportunities for diversion 
multiply during transit.  It also relieves governments further 
down the transaction chain from the difficult, dangerous and 
expensive tasks of storing and disposing of frequently volatile 
chemicals seized when diversion is discovered.

Therefore, initial emphasis has been placed on the leading 
chemical producing countries with the following results.

--  The U.S. has added two chemicals to those regulated by the 
CDTA     so that all 22 CATF recommended chemicals are covered.  
Legislation is pending in Congress to incorporate into the CDTA 
other CATF recommendations.  These include the registration of 
handlers of precursor chemicals, and the inclusion of brokers and 
dealers in the definition of regulated persons.

--  The Council of the European Communities on March 31, 1992, 
amended the European Community (EC) chemical regulation to conform 
with the CATF recommendations. This regulation became binding on 
all EC members on January 1, 1993.

--  Japan, a CATF member, in mid-1992 adopted laws and regulations 
incorporating the CATF recommendations.

Illicit drug producing countries have also moved swiftly to adopt 
chemical regulatory regimes.  The cocaine producing countries of 
Latin America have been in the forefront in adopting regimes based 
the CATF recommendations and the more comprehensive Organization 
of American States (OAS) Model Chemical Regulations.  Asian heroin 
producing countries are moving more slowly.  India and Pakistan 
have some controls on acetic anhydride, a key chemical in heroin 
manufacture, but other precursor and essential chemicals remain 
uncontrolled.  Thailand recognizes the need and value of chemical 
control and is moving to establish a system based on the CATF 
recommendations. 

An emerging area of concern are the countries of Eastern Europe 
and the newly independent states of the former Soviet Union.  Many 
of them have the capability to produce the precursor chemicals 
used in the manufacture of synthetic drugs and the essential  
chemicals used in heroin and cocaine manufacture, but lack the 
administrative structures necessary to monitor or regulate this 
production.

DEA organized a conference in June 1992 to sensitize Eastern 
European authorities to the problem.  The European Community, 
threatened most directly by synthetic drugs from the Eastern 
Europe, has included prevention of chemical diversion among the 
areas of cooperation included in the association agreements it has 
signed with Czechoslovakia, Hungary and Poland. 

Lessons Learned

The CATF met in plenary session May 13-14, 1992, in Washington, 
D.C. to review progress in the adoption and implementation of its
recommendations, and to decide on its future role.  The meeting 
noted two fundamental factors central to a successful system to 
prevent the diversion of chemicals to illicit drug manufacture:

--  Regulation must be universal. As long as there are unregulated 
source countries for chemicals, drug criminals can turn to them to 
obtain the chemicals they require.

--  The adoption of a chemical regulatory regime alone is 
insufficient; there must be an administrative structure to 
implement the regime.  Such a structure includes properly trained 
and equipped personnel; specified enforcement procedures; well-
established channels of communication between government and 
industry, and internationally between enforcement agencies.  
Although the cost of the bureaucratic structure required for 
chemical control is relatively low, it can be beyond the means and 
experience of many countries.

The foundation for achieving universal regulation has been laid.  
There is a recognition that chemical regulation is feasible and 
desirable, and there is an accepted set of measures to be 
incorporated into a chemical regulatory system.  The CATF has 
served as a catalyst for this.

The effective implementation of these regulatory systems has not 
been achieved, although progress has been made, particularly in 
the Andean countries.  Seizures of cocaine essential chemicals in 
these countries have not increased significantly, but there are 
anecdotal reports that cocaine traffickers are having more 
difficulty meeting their chemical requirements, indicating less 
overall availability of chemicals due to tighter regulatory 
controls.

But they are getting chemicals, either through direct importation 
and subsequent diversion or smuggling from neighboring countries, 
or through recycling of chemicals.  The regulatory systems being 
adopted to identify and prevent fraudulent shipments before they 
are made are not yet effective.  The CATF recognized at its May 
1992 Plenary Meeting that the implementation of these systems is 
best achieved by appropriate national and international 
enforcement agencies.

The CATF also recognized that its objectives of gaining policy-
level recognition of chemical regulation as important counter-
narcotics tool, and in developing feasible measures for a 
cooperative international chemical control system had been 
achieved.  The CATF, which has explicitly stated that it should 
not be institutionalized, proposed to phase out in 1993 and 
request appropriate United Nations organizations to assist in 
promoting adoption of chemical regulatory systems by those 
countries that have not done so, and assist those that have, as 
required, with material and training assistance.  This would 
maintain the momentum the CATF has developed in gaining widespread 
acceptance of chemical diversion control, and strengthen the 
central role of the United Nations
in this effort. 

International Cooperation

Regional organizations have taken the lead in organizing and 
conducting seminars and training programs to promote and implement 
chemical regulatory systems.  In 1992, the OAS conducted two 
policy seminars to promote such systems and two training courses.  
One policy seminar was held in Mexico City, May 6-8, 1992, and the 
second in Buenos Aires, Argentina, September 22-25, 1992.  Each 
dealt with the measures needed to implement complementary chemical 
regulatory regimes to prevent chemical
diversion.

A delegation from the Commission of the European Communities 
attended the Buenos Aires OAS seminar to explain the EC chemical 
regulation, and to invite Latin American governments to work with 
it in a cooperative program to ensure the legitimacy of chemical 
transactions between EC countries and Latin America to prevent 
diversion.

The OAS training courses were held in Caracas, Venezuela and 
Buenos Aires, Argentina.  These are workshop programs for 
enforcement officials conducted by U.S. Drug Enforcement 
Administration and Royal Canadian Mounted Police experts.  They 
and the policy seminars were funded by the United Nations 
International Drug Control Program from funds earmarked by the 
USG. 

The Pompidou Group, a Council of Europe organization founded to 
promote intra-European cooperation on counternarcotics issues, 
organized a meeting in September 1992, in Strasbourg, France, to 
promote chemical diversion cooperation with East European, Baltic 
and newly independent states governments.  Twenty-one countries 
and concerned international organizations attended.  The meeting 
highlighted the gap between Western European governments and the 
others in their adoption of chemical control regimes and their 
ability to implement them.  Follow-up meetings are being organized 
to mobilize Western European initiatives to address the gap. 

The United Nations International Drug Control Program is 
developing a pilot project, financed by the United Kingdom, to 
assist a country to establish an effective chemical regulatory 
regime.  The project will cover all aspects of the regime from the 
writing of laws and regulations to training of personnel for their 
implementation. 

Outlook

The adoption of chemical control regimes by major chemical 
producing and transit countries, as well as the cocaine producing 
countries of Latin America, is providing the legal framework to 
stem chemical diversion to cocaine producing regions.  The Asian 
heroin producing countries do not have comparable systems, but 
chemical producing countries still have the ability to monitor and 
regulate shipments to heroin producing areas.  The fact is, 
however, that with the exception of the control exercised by the 
USG under the US Chemical Diversion and Trafficking Act, much 
commerce in cocaine and heroin essential chemicals remains 
unregulated.  Traffickers continue to receive supplies from 
sources in Western Europe and Asia.

There is a lead time for regulatory systems to become effective.  
1993 will be a year for implementing the recently adopted systems.  
Western European sources should begin to close down, and 
traffickers will turn increasingly to secondary sources such as 
Eastern Europe, South America and Asia.  Other countries with a 
basic chemical industry can produce many of the essential 
chemicals required for heroin and cocaine production.

Smuggling of essential chemicals into drug producing countries 
from neighboring countries is a growing problem as the drug 
producing countries become more effective in regulating their own 
chemical trade.  It is a particular concern when the adjacent 
countries have chemical industries.  Domestic commerce must be 
regulated to ensure that locally manufactured chemicals are used 
legitimately and not smuggled into neighboring countries. 

Policy level attention, therefore, will continue to be required to 
urge the adoption and implementation of chemical control regimes 
by secondary chemical source countries and countries where 
smuggling could originate.  At the same time, action must be taken 
to counter trafficker responses to more effective chemical 
regulation. 

Already, traffickers are reacting to increasing controls by 
recycling and, in a few documented cases, synthesizing chemicals, 
and seeking new refining techniques that require different or 
fewer chemicals.  Solvents used in cocaine production, such as 
ether, can be recycled five to seven times by relatively simple, 
but dangerous, distillation techniques.  (Cocaine traffickers are 
little concerned about the welfare of lab workers.)

Synthesis involves the manufacture of a cocaine or heroin 
essential chemical from other chemicals.  It is a more much 
complex process than recycling and will be possible only by more 
sophisticated traffickers.

Trafficker responses increase the urgency of effective chemical 
regulation.  Recycling means traffickers must be denied the 
initial supplies of chemicals they require.  New refining 
techniques that require fewer chemicals create the same 
requirement.  Enforcement agencies and international organizations 
must continue to be vigilant to the substitution of new chemicals 
for regulated chemicals, or their synthesis from unregulated 
chemicals.  And they must move quickly to have the newly 
identified chemicals included in the international network of 
controls.  The key to this will continue to be inclusion in the 
chemicals covered by the 1988 UN Convention, coupled with the 
flexibility in national laws to add newly identified chemicals 
quickly to their lists of chemicals regulated.


COUNTRY REPORTS

(Note:  Chemical control is a rapidly evolving area as countries 
adopt and implement regulations based on their obligations under 
the 1988 UN Convention, and their membership in the CATF, the OAS 
and the EC.  (See chart on page 20.)  These country reports are 
based on the most current information available for major drug 
producing and chemical manufacturing and trading countries.)

EUROPE

The European Community has taken the lead in mandating the 
measures to be incorporated into national chemical regulatory 
systems of member states, in initiating channels of communication 
with other chemical source countries and drug source countries, 
and in assisting less developed countries implement their chemical 
regulatory systems. 

On March 31, 1992, the Council of the European Communities amended 
the EC Chemical Regulation to incorporate the CATF 
recommendations.  This regulation became binding on the twelve EC 
member countries on January 1, 1993.  Among the control measures 
included is the requirement that exports of certain essential 
chemicals to cocaine and heroin producing areas, and chemical 
transit countries, be contingent on prior notification to the 
receiving state so it may disapprove the transaction, when the 
receiving state requests this procedure.  The EC has written 35 
governments offering to establish such a requirement.  As of mid-
October, it had received favorable responses from 14.

An EC delegation participated in the September 1992 OAS seminar in 
Buenos Aires to brief Latin American governments on the EC 
chemical control regulation.  In June 1992, an EC expert visited 
Southeast Asia to brief eight governments on the new EC chemical 
regulation, to assess the situation and to lay the groundwork for 
future cooperation.  The EC is now planning a multi-country 
training workshop on chemical controls for Southeast Asian 
countries that will culminate in the signing of a formal 
cooperation agreement with the Association of Southeast Asian 
Nations (ASEAN).

The EC also has earmarked $250,000 to provide chemical control 
training for East European countries in 1993.

Belgium is primarily a transit country for European chemical 
exports.  As an EC member it was obliged to adopt chemical 
controls in accordance with the EC chemical regulation.  Belgium 
is also a CATF member and has reported to the Task Force that it 
has in place regulations based on the CATF recommendations.

France is an EC member and obliged to adopt the EC chemical 
regulation.  It had used its existing chemical control regulations 
to cooperate in international efforts to prevent chemical 
diversion.  In the CATF, France chaired the Legal and Regulatory 
Issues Working Group which developed the control measures that are 
the basis of the CATF recommendations.  In 1992, it chaired a 
multilateral working group to develop procedures for the 
information sharing required to implement the CATF 
recommendations. 

Germany is the world's leading manufacturer of pharmaceuticals, 
and produces or sells virtually all types of precursor and 
essential chemicals.  The three leading chemical manufacturing 
companies in terms of sales volume are German.  Until now, Germany 
has relied largely on voluntary measures requiring industry 
cooperation to ensure the legitimacy of transactions in regulated 
chemicals and to prevent diversion.  Most companies cooperate with 
this program.  Germany has an arrangement with Colombia to provide 
prior notification of transactions in five essential and precursor 
chemicals.

As an EC member, Germany was obliged to adopt the EC chemical 
regulation on January 1, 1993, which includes mandatory controls.  
Germany is also a member of the CATF and has reported to the CATF 
that it was increasing its budget in order to implement the 
statutory export control system on regulated chemicals as of 
January 1, 1993.  However, chemicals produced in Germany continue 
to be found in cocaine laboratories in the Andean countries.  

Italy had in effect prior to January 1, 1993, chemical control 
laws including the provisions of the new EC chemical regulation.  
Under these laws, chemical shipments to, through and from Italy 
are closely monitored.  Italy is a member of the CATF and chaired 
its Chemicals Working Group.

The Netherlands is a major transit and brokering country for 
European chemical exports.  It is an EC and CATF member and has 
adopted chemical controls in accordance with the EC chemical 
regulation and the CATF recommendations.  The Dutch chemical 
industry has in place a code of conduct to help identify 
suspicious transactions.

Spain, as an EC member, is adopting chemical controls in 
accordance with the EC chemical regulation.  It also is a CATF 
member.

Sweden, a member of the CATF, has established a working group to 
study the CATF recommendations and the EC chemical regulation with 
the intention of enacting new legislation early in 1993 which will 
be harmonized as much as possible with the EC regulation.  As part 
of the Nordic initiative between police and customs authorities, 
Sweden participates in a monitoring program for imports and 
exports of the CATF recommended chemicals plus six others.  It has 
little chemical trade with heroin and cocaine producing countries.

Switzerland is a member of the CATF.  Since June 1, 1991, it has 
had a domestic precursor chemical control regime in force covering 
46 chemicals, including most of those recommended by the CATF.  
The Swiss Federal Council decided on March 9, 1992, to accept the 
CATF recommendations, and the government intends to conform the 
existing regime with the CATF recommendations and the new EC 
chemical regulation.  With regard to its exports, Switzerland 
intends to follow the CATF recommendations. 

Turkey has laws and regulations controlling trade in acetic 
anhydride, a key chemical in heroin manufacture.  It is not a 
member of the CATF, but participated in the February 1992 CATF 
meeting in Kuala Lumpur, Malaysia focusing on the application of 
the CATF recommendations in heroin producing areas.  At the 
meeting, the Turkish delegation reported that it was confident 
that controls on licit imports of acetic anhydride were preventing 
diversion.  The chemical, however, was entering the country 
through illegal importation using mislabeling of contents and 
altered manifests, and smuggling, primarily from Syria.  Turkey 
has not ratified  the 1988 UN Convention and does not regulate 
other essential chemicals covered by the Convention.  Trade in 
these chemicals is small.  Turkey did respond positively to the EC 
offer of prior notification of shipments of heroin and cocaine 
essential chemicals.

The United Kingdom, as an EC member, was obliged by January 1, 
1993, to adopt chemical control procedures in accordance with the 
EC chemical regulation.  It had successfully used existing 
legislation to detect and eliminate domestic labs manufacturing 
synthetic drugs.  HMG collaborated in preparing the EC regulation 
to incorporate the CATF recommendations, and has worked with its 
EC partners in formulating a directive governing intracommunal 
trade in precursor and essential chemicals.  As a CATF member, it 
has been active in promoting the objectives of the CATF.  It 
played the leading role in organizing, funding and chairing the 
February 1992 CATF meeting in Kuala Lumpur, Malaysia, focusing an 
the application of the CATF recommendations in areas where heroin 
is produced.  It organized a seminar in September 1992 under the 
aegis of the Council of Europe's Pompidou Group to present the 
CATF recommendations to member states who did not participate in 
the Task Force, as well as to East European governments.


SOUTH AMERICA

Argentina has a highly developed petrochemical industry and is a 
major South American producer of precursor and essential 
chemicals.  It has in place chemical control legislation based on 
the OAS Model Chemical Regulations and cooperates in OAS 
initiatives to promote chemical regulation.  In 1992, it hosted an 
OAS policy-level seminar for chemical producing countries and a 
training workshop for enforcement personnel.  Argentina is a CATF 
member that responded positively to the EC offer to provide prior 
notification of cocaine essential chemicals.

Argentine chemicals, however, continue to reach Bolivian cocaine 
traffickers.  Joint Argentine-DEA investigations have revealed 
that chemicals have been purchased legally in Argentina and then 
transported to front companies in Bolivia.  Chemicals are also 
believed to be purchased for domestic use and smuggled into 
Bolivia.  

Bolivia has three laws addressing the control of precursor and 
essential chemicals.  These laws incorporate the basic elements of 
the CATF recommendations and the OAS Model Chemical Regulations.  
It also has signed a bilateral agreement with the USG to 
facilitate chemical regulation by exchanging information on 
transactions in key cocaine essential chemicals.  The Government 
of Bolivia is an active  participant in the CATF and it responded 
positively to the EC offer to provide advance notification of 
shipments of regulated chemicals. 

Progress is being made in implementing these control regimes.  The 
lead agency, the National Bureau for Registration, Control, and 
Regulation of Controlled Chemicals and Precursors, is receiving 
USG (INM) technical and financial assistance.  It has planned and 
executed several major operations resulting in large lab seizures.  
The agency also maintains a registry of all companies dealing in 
regulated chemicals.  To date, the records of over 800 companies 
are being maintained in the registry, and a team of 20 civilian 
investigators makes unannounced inspections of these companies and 
their warehouses to determine if any regulated chemicals are being 
diverted for illegal purposes.  The U.S. Coast Guard is helping 
the GOB establish a port safety program, including commerce 
controls such as inspections for illegal chemicals.  Despite these 
advances in controlling licit commerce to prevent chemical 
diversion, Bolivia remains vulnerable to chemical smuggling from 
neighboring countries, primarily Argentina, Brazil and Chile.

Brazil is South America's largest chemical manufacturing country, 
as well as a major country for the transit to Andean cocaine 
producing regions of chemicals from non-Brazilian sources.  It is 
a member of the CATF, and it responded positively to the EC's 
offer of prior notification of EC member shipments of regulated 
chemicals.

Brazil has imposed some limited control over domestically 
manufactured chemicals, but none over imported chemicals.  
Chemicals destined for cocaine manufacture in other countries can 
be exported easily, or they can be imported for domestic 
consumption in Brazil and smuggled across Brazil's long Western 
borders with Colombia, Peru and Bolivia. 

Chemical control legislation consistent with the OAS Model 
Chemical Regulations has been pending in the Brazilian Congress 
for over a year.  It may be passed in 1993, but the bureaucratic 
structure to administer it will need to be established.

Under current legislation, chemical operators are reporting, on a 
voluntary basis, any suspicious transactions involving ethyl 
ether, acetone and acetic anhydride.  Suspicious shipments can be 
suspended.  The law also requires firms handling regulated 
chemicals to be registered and to maintain records on all 
transactions involving them.

Chile is a major supplier of the essential chemicals used for 
cocaine manufacture in Bolivia.  It has little legislative 
authority to combat this trade.  The government recognizes the 
problem and is moving to combat it.  Comprehensive 
counternarcotics legislation, including chemical control 
provisions based on the OAS Model Chemical Regulations, is pending 
in the Chilean Congress. 

Colombia has chemical control legislation in place consistent with 
the OAS Model Chemical Regulations.  It also remains the world's 
leading supplier of cocaine hydrocloride to the world markets.  
Much of this is refined in Colombia from cocaine base flown in 
from Bolivia and Peru, indicating traffickers are obtaining the 
chemicals they require.  The chemicals are legitimately imported 
and subsequently diverted, illegally imported by mis-labeling, use 
of front companies, etc, or smuggled in via land and sea routes.

The United States was the principal chemical supplier to Colombia 
until 1989, when U.S exports dropped precipitously following 
implementation of the U.S. Chemical Diversion and Trafficking Act.  
Colombian traffickers were able to turn to other sources, 
primarily in Western Europe, to replace the U.S. supplied 
chemicals. 

The Colombian Government is seeking to implement its chemical 
legislation but lacks the resources to do so.  It actively 
participates in international chemical control initiatives such as 
the CATF, where it contributes significant insights from the 
perspective of a chemical importing and drug producing country.  
Colombia has signed a bilateral  chemical control agreement with 
the USG and responded positively to the EC offer to provide prior 
notification of shipments of cocaine essential chemicals.  Germany 
already provides prior notification of exports of five precursor 
and essential chemicals.  In return, Colombia sends Germany a 
monthly copy of approved import licences for German vendors. 

Ecuador has chemical control legislation based on the OAS Model 
Chemical Regulations.  It has been an active member of the CATF.  
It has signed a bilateral agreement with the US to facilitate 
regulation of chemical commerce with the United States and 
responded positively to the EC's offer of prior notification of EC 
member exports of regulated chemicals.  

However, Ecuador lacks the administrative and enforcement 
structure to fully implement these controls and to prevent the 
smuggling of diverted cocaine essential chemicals to Colombia.  
The Government of Ecuador has included enhanced chemical control 
mechanisms in its 1992-97 National Plan developed by the National 
Drug Council.  It is actively seeking USG assistance in its 
implementation.  Among the proposed chemical control measures is a 
survey of the legitimate requirements of domestic industry for 
regulated chemicals to prevent the importation of excess amounts 
that can be smuggled into Colombia.

Peru has in force chemical laws consistent with the OAS Model 
Chemical Regulations.  It has a bilateral chemical control 
agreement with the US and has responded positively to the EC offer 
of prior notification of shipments in regulated chemicals.  Under 
our bilateral agreement, US and Peruvian enforcement agencies are 
informally exchanging information on a limited number of 
chemicals.  The government lacks the regulatory and enforcement 
capacity to fully enforce its laws or to participate completely in 
cooperative regulatory mechanisms with chemical source countries.  
Cocaine essential chemicals, therefore, remain available to 
traffickers, either through diversion from legitimate commerce or 
smuggling from neighboring countries.

Venezuela has chemical control legislation before Congress based 
on the OAS Model Chemical Regulations.  It is using existing 
authorities to cooperate with international efforts to prevent the 
use of Venezuela as conduit for cocaine essential chemicals en 
route to Colombia.  In February 1992, Venezuela and the US 
cooperated in seizing 68 metric tons of the cocaine essential 
chemical methyl ethyl ketone being transported overland to Bogota.  
In March 1992, Venezuela and the US signed a bilateral chemical 
control agreement to facilitate further cooperation. 


MEXICO AND CENTRAL AMERICA

Mexico has an important chemical industry.  Diversion from this 
industry is the primary source of chemicals used in the 
manufacture of Mexican heroin.  Mexico is not considered a major 
source of chemicals for illicit drug manufacture in other 
countries. 

Mexico is not a member of the CATF, but it has adopted chemical 
control regulations based on the OAS Model Chemical Regulations.  
In May 1992, the OAS conducted a seminar in Mexico City on 
Trafficking of Precursor and Essential Chemicals in Central 
America and Mexico. The seminar dealt with the measures required 
in the region to minimize chemical diversion in the context of the 
1988 UN Convention and the OAS Model Chemical Regulations.  Mexico 
and DEA have begun sharing information on chemical control 
procedures and chemical shipments.  DEA also has assigned an 
officer full time to our Embassy in Mexico City with the sole 
function of tracking and liaison with Mexican authorities on 
precursor and essential chemical diversion control.  

Panama has chemical control laws consistent with chemical control 
objectives of the 1988 UN Convention.  It  is not a significant 
chemical manufacturing country, and chemical control is a 
secondary enforcement priority to drug interdiction and money 
laundering.  However, under a bilateral chemical control agreement 
with the US, the government has cooperated fully in providing 
information on companies suspected of transporting precursor and 
essential chemicals through Panama for illicit purposes. 


THE CARIBBEAN

The Bahamas is not a major chemical producing or transit country.  
It is not a member of the CATF.  In 1992, the government did 
implement regulations to control the importation and exportation 
of precursor and essential chemicals as called for in Article 12 
of the 1988 UN Convention.  The regulations cover the 22 chemicals 
listed in the Convention plus an additional 25 substances known to 
be used in illicit drug manufacture.

The Dominican Republic regulates its limited trade in precursor 
and essential chemicals under provisions of the Drug and Substance 
Control Law of 1988, as amended in 1990.  In order to import, 
manufacture, or use drug related chemicals, a company must obtain 
a license from the Ministry of Public Health and Social 
Assistance.  Records of all licenses and import/export 
certificates are maintained by the Ministry and are shared with 
USG officials as required for investigative purposes.  The 
Dominican Republic is not a member of the CATF.

Jamaica does not have legislation regulating the use of precursor 
and essential chemicals.  However, Jamaica has a sophisticated 
import/export monitoring and information-retention computer 
program under Jamaica Promotions (JAMPRO).  Through JAMPRO, 
Jamaica has initiated a chemical control program patterned after a 
DEA program that monitors the flow of drug-related chemicals into 
and within the country.  Jamaica is not a member of the CATF. 


SOUTHWEST ASIA

India manufactures seven of the most important heroin essential 
chemicals.  The Government has controls on acetic anhydride within 
50 kilometers of the Pakistani border and 100 kilometers of the 
Burmese borders.  Export of the chemical is banned.  Internally, 
the Government is establishing a requirement for companies to 
report their utilization of acetic anhydride.  These controls have 
reduced but not eliminated smuggling across both borders.  There 
also is some regulation of acetone, diethylether and chloroform, 
but the Government's general attitude is that essential chemicals 
have a wide range of legal industrial uses and any attempt to to 
regulate them will create additional problems.  This facilitates 
the supply of essential chemicals to illicit domestic drug 
manufacture.  India is a member of the CATF and in discussions 
there it has noted that the Government intention to privatize much 
chemical production capacity further complicates regulation. 

Pakistan in 1991 placed controls on imports of acetic anhydride, a 
key heroin essential chemical, and criminalized its unlicensed 
import, manufacture and use.  The Pakistani delegation to the CATF 
heroin chemical meeting in Kuala Lumpur stated that acetone and 
acetic acid are subject to the same controls, although they are 
not on the restricted list.  There is limited domestic production 
of these three chemicals, but it is not as rigorously regulated.  
Smuggling is believed to provide most of the chemicals required by 
the heroin labs in the tribal areas along the Pakistan/Afghan 
border. India is the primary source, although some chemicals may 
come from Central Asia and and Western and Eastern Europe
via Afghanistan.


SOUTHEAST ASIA

Burma has not enacted specific chemical control legislation, but 
the country's narcotics legislation provides the necessary 
authority for action against trafficking and possession of 
precursor and essential chemicals.  In 1992, authorities seized 
1237 gallons of acetic anhydride.  Enforcement efforts are 
hampered by the fact that most chemicals used illicitly in the 
country are smuggled in from India and China, rather than imported 
commercially and diverted.  A Burmese delegation attended the 
Kuala Lumpur heroin chemical meeting and stressed the country's 
problems with smuggling.  Burma responded positively to the EC 
offer of prior notification of shipments of heroin and cocaine 
essential chemicals. 

Malaysia is not a member of the CATF but it hosted a CATF expert 
meeting on heroin chemicals in February 1992.  It has not adopted 
chemical controls in accordance with the CATF recommendations, but 
it does control by licensing the importation and distribution of 
acetic anhydride.  Since heroin production is negligible in 
Malaysia, there is little domestic diversion.  There is evidence 
that acetic anhydride may be sold or exchanged with traffickers in 
Thailand and Burma.  Some acetic anhydride produced in Indonesia 
also reportedly passes through Malaysia en route to heroin 
traffickers in Thailand and Burma. 

Singapore is not signatory to the 1988 UN Convention.  However, it 
prohibits the domestic possession, consumption or sale of the 
chemicals listed in the Convention except under strictly 
controlled license.  With these controls, chemical diversion does 
not appear to be a serious problem within Singapore.  Similiar 
controls are not imposed on the resale and transhipment of 
precursor and essential chemicals to third countries, but 
authorities cooperate with Embassy Singapore's DEA Country Office 
to monitor such activity in accordance with the U.S. Chemical 
Diversion and Trafficking Act.  Singapore accepted the EC offer of 
prior notification of shipments of heroin and cocaine essential 
chemicals. 

Thailand is a member of the CATF and has reported to the Task 
Force that is establishing a working group to draw up steps to 
implement the CATF recommendations.  At present, there are few 
controls over precursor and essential chemicals, and only a 
limited ability to enforce the controls that do exist.  Heroin 
essential chemicals acetic anhydride and acetyl choride are 
included among controlled substances in the 1979 Narcotics Act.  
Ether and chloroform are controlled under the 1952 Commodities 
Control Act and cannot be shipped without a permit into the 
northern provinces. 

While a few significant chemical seizures were made in 1992, 
authorities have difficulty differentiating between chemicals 
intended for legitimate industrial use and those intended for 
illicit drug manufacture.  There is also evidence that traffickers 
are synthesizing heroin-essential chemicals from unregulated 
chemicals.  Smuggling is an additional problem.  Thai authorities 
have reported to the CATF two principal suspected routes for 
smuggling into northern Thailand, from China via Burma and from 
India via Burma. 


EAST ASIA

China, under a law adopted in 1988, regulates the sale, 
distribution and import/export of certain precursor and essential 
chemicals, including three listed in 1988 UN Convention.  During 
the first half of 1992, the government seized 41,952 kilograms of 
drug-related chemicals.  The government is considering a proposal 
to put under control the other chemicals listed in the Convention.  
China is a member of the CATF and has participated in most of its 
meetings, including the special February 1992 CATF Heroin Chemical 
Meeting in Kuala Lumpur, Malaysia. 

The chemicals covered by the 1988 law include acetic anhydride, a 
key heroin chemical.  In addition to domestic controls, acetic 
anhydride produced or sourced in China cannot be legally exported.  
There are reports of smuggling to traffickers outside China, 
particularly heroin traffickers in the Golden Triangle. 

Hong Kong is not a major chemical or drug manufacturing area.  It 
regulates to varying degrees eight of the 22 chemicals listed in 
the 1988 UN Convention.  Four of these are precursor chemicals 
used in the manufacture of synthetic drugs and they are controlled 
under the Pharmacy and Poisons Ordinance.  Four are essential 
chemicals used in heroin and cocaine manufacture.  The most 
important is acetic anhydride, controlled stringently under the 
1975 Acetylating Substances Ordinance.  This ordinance played a 
major role in surpressing heroin manufacture in Hong Kong. 

Hong Kong is a free port and a major regional transit point for 
chemicals in the area.  Some licensing control is exercised over 
this trade, but verification of legitimate end-use is not 
required, so subsequent diversion is possible.  Hong Kong 
participated in the February 1992 CATF Heroin Chemical Meeting 
where its delegation reported that in 1990 Hong Kong imported 
110,105 tons of the 22 chemicals listed in the 1988 UN Convention, 
and re-exported 78,647 tons or 71 percent.  One hundred percent of 
the acetic anhydride imported was re-exported to China.  The U.S. 
was the source of 73 percent of this.

Japan, a major chemical producer, has achieved great progress in 
the past year in chemical control.  It is a member of the CATF, 
and at the February 1992 CATF Heroin Chemical Meeting in Kuala 
Lumpur announced it intended to adopt the CATF recommendations by 
mid-year.  In May of 1992 the precursor chemical control law was 
enacted accomplishing this.  Since then, responsibility for 
monitoring precursor and essential chemical transactions has been 
transferred from the the Ministry of Health and Welfare to the 
Ministry of International Trade and Industry (MITI) which has 
rigorously enforced the new requirements.  Embassy Tokyo's DEA 
Country Office has had excellent cooperation from MITI in 
recording and tracking movements of regulated chemicals.
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