Legal regulations

The quota systems introduced and established by EU regulations play an important role in controlling and limiting the production and sale of HFCs. The introduction of restrictions was intended to reduce harmful greenhouse gas emissions and regulate the F-gas market. Unfortunately, due to legal loopholes and insufficient oversight in the early phases of the HFC phase-down, the regulations introduced contributed to an increase in smuggling. The absence of an effective licensing system and real-time data access for customs authorities enabled the open importation of HFCs without the required allocations — a practice referred to as “front door smuggling”. Ambiguities in the regulations, particularly regarding the import of substances for special applications (outside the quota system), further fuelled this illegal activity. Also significant was the price increase caused by the reduction in supply, as well as a range of technical restrictions, such as the ban on the distribution of gases in single-use containers and the requirement to licence each import. Although the new regulations are designed to curb smuggling and improve control over HFC flows in the EU, the initial ineffectiveness and legal loopholes contributed to the growth of illegal trading. Only the full implementation of procedures, oversight of transit, and the tightening of penalties for refrigerant smuggling can reduce the scale of the problem.

High costs

As a result of regulations and supply-side restrictions, the prices of legal F-gases have risen significantly, making smuggling an attractive option for individuals and companies seeking to reduce costs. The new quota system and use restrictions introduced by Regulation (EU) 2024/573 of the European Parliament and of the Council are increasing pressure on the availability of refrigerants — particularly those with high GWP — and are driving the intensification of reclamation and recycling activities for existing substances, with a view to minimising the need for the import and trading of F-gases, including illegal ones. Increasing the supply of secondary refrigerants (from recycling and reclamation) reduces the demand for virgin substances, which in turn eases pressure on the supply chain and may reduce the incentive for smuggling. This is also crucial in the context of the gradual phase-down of HFCs and rising refrigerant prices. Given the future quota reductions, the industry’s ability to reduce emissions, reclaim substances and innovate in the use of new refrigerants is fundamental to shaping the HVACR market. The reclamation, separation and reuse of recovered and processed F-gases should be a key goal for the industry, aimed at ensuring secure refrigerant supplies and reducing their environmental impact.

Difficulties in enforcement

Although regulations governing the import of F-gases exist, some ports, border crossings and customs systems do not have sufficient resources and tools to effectively track every instance of illegal transport. Falsifying import documents or concealing the true nature of the substances being transported are common methods used by smugglers. The incentive to smuggle HFCs arose from a range of loopholes and inadequate regulations that have existed in EU legislation since its introduction. One of the key factors was weak control over HFC transit, which allowed these substances to be traded illegally without the appropriate licences or customs oversight. Transit did not require full registration on the F-gas portal, which made it easier to circumvent official procedures. Furthermore, the lack of specialist training and appropriate equipment for customs services meant that inspections were insufficient, which facilitated illegal importation (source).