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Current Patterns of Procurement, Use, and Distribution of Chemicals in Developing Countries

After hearing from guest speakers from developing countries and reviewing publicly available information on global procurement and distribution of laboratory chemicals, the committee was not surprised to find wide variation in developing countries. Many laboratory reagents take circuitous routes to their final destinations. For example, a laboratory chemical may be purchased from a U.S. chemical company, but the network of distribution may include the movement of the chemical from a manufacturing country (such as China) to the United States, then to a distributor in Europe, and finally to a developing country such as the Philippines. At the same time, some chemicals are also directly imported by developing countries from places such as Europe, China, and Japan. In some cases, distributors in a country may keep a stock of chemicals; in others, they obtain chemicals on request. Importation and customs issues can delay delivery of chemicals. It is not unusual for procurement of a single chemical to take as long as six months. There are also concerns about quality; some distributors repackage chemicals or obtain them from questionable sources. Transportation may raise problems; piracy at sea and theft from ground transport constitute risks.

Chemists and other scientists collectively use thousands of chemicals in their laboratory work, but some chemicals pose a particular risk to the general public if they are acquired by people who wish to inflict harm. Such chemicals are commonly known as dual-use or multiple-use chemicals. In this report, the committee has chosen to use the term chemicals of concern (COCs), which includes chemicals listed by the Chemical Weapons Convention, chemicals that have potential for mass destruction, explosives and



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1 Current Patterns of Procurement, Use, and Distribution of Chemicals in Developing Countries After hearing from guest speakers from developing countries and review- ing publicly available information on global procurement and distribution of laboratory chemicals, the committee was not surprised to find wide variation in developing countries. Many laboratory reagents take circuitous routes to their final destinations. For example, a laboratory chemical may be purchased from a U.S. chemical company, but the network of distribution may include the movement of the chemical from a manufacturing country (such as China) to the United States, then to a distributor in Europe, and finally to a developing country such as the Philippines. At the same time, some chemicals are also directly imported by developing countries from places such as Europe, China, and Japan. In some cases, distributors in a country may keep a stock of chemicals; in others, they obtain chemicals on request. Importation and customs issues can delay delivery of chemicals. It is not unusual for procurement of a single chemical to take as long as six months. There are also concerns about quality; some distributors repackage chemicals or obtain them from questionable sources. Transportation may raise problems; piracy at sea and theft from ground transport constitute risks. Chemists and other scientists collectively use thousands of chemicals in their laboratory work, but some chemicals pose a particular risk to the general public if they are acquired by people who wish to inflict harm. Such chemicals are commonly known as dual-use or multiple-use chemicals. In this report, the committee has chosen to use the term chemicals of concern (COCs), which includes chemicals listed by the Chemical Weapons Con- vention, chemicals that have potential for mass destruction, explosives and 

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 PROMOTING CHEMICAL LABORATORY SAFETY AND SECURITY precursors of improvised explosive devices, and chemicals of high acute toxicity (rated as Category 1 in the Globally Harmonized System of Clas- sification and Labeling of Chemicals). Examples of COCs are provided in Appendix D. A committee review of the chemical supply chain in developing coun- tries has uncovered the disturbing fact that essentially any chemical can be obtained from suppliers by anyone without much effort. The manufacture, importation, transport, storage, and sale of chemicals are poorly regulated. Even the end-user certificates required for the purchase of some hazardous chemicals can easily be obtained. Thus, academic laboratories and univer- sity chemical storage are not the only places from which dual-use chemicals can be obtained. Chemical laboratory activities in universities, government agencies, and private industry in developing countries are part of a global chemical enterprise. The large-scale manufacture and distribution of commodity and specialty chemicals for commercial purposes dominates the enterprise. However, small-scale chemical laboratory research and teaching activities present vulnerabilities for safety and security. They tend to operate inde- pendently, have less government and regulatory oversight, and are more accessible to the public. Characteristics of the global chemistry business are presented in this chapter to provide context for understanding chemical laboratory safety and security practices in developing countries. Safety and security practices are intended to help laboratories carry out their primary functions efficiently, safely, and securely, but improving safety and security is often seen as inhibitory rather than enabling. THE gLOBAL BuSINESS OF CHEMISTRY “Diverse” is the word that best describes the global chemical industry, whose products are used to satisfy daily consumer needs and for applica- tions as wide-ranging as crop protection, disease prevention, and energy production. The chemical industry converts raw materials such as oil, coal, gas, air, water, and minerals into a vast array of substances for use by chemical companies, other industries, and consumers. The wide variety of products range from commodity industrial chemicals used in making other substances to specialty chemicals tailored for unique applications.1 The chemical industry is reported to be one of the most regulated of all industries. Nonetheless, there is a persistent lack of hazard information about most chemical substances on the market and the products in which 1 OECD. Enironmental Outlook for the Chemicals Industry 00. http:/www.oecd.org/ehs (accessed May 8, 2010). Paris: Organisation for Economic Co-operation and Development, 2001.

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 CURRENT PATTERNS OF PROCUREMENT, USE, AND DISTRIBUTION they are used. In the future this will change as a result of the European Union REACH legislation,2 which will require hazard information on some of the 30,000 chemicals that are available for sale in Europe. There is no accurate account of the total number of chemicals on the market, but one major global supplier of laboratory chemicals and equipment, Sigma Aldrich, reported distributing about 130,000 chemical products (100,000 chemicals and 30,000 equipment products) to approximately 160 countries worldwide in 2008.3 The responsibility to provide this hazard information falls largely on the chemical industry. However, although some of the largest industrial firms in the world are chemical companies, a substantial number of chemi- cals are produced by small- and medium-sized enterprises (SMEs). For example, companies with fewer than 50 employees make 95 percent of the 50,000 chemicals produced in the United States. Governments have only limited interactions with SMEs, and these companies are often not very involved in the discussions on chemical safety.4 That makes it difficult to assess information related to chemical management and to implement regulatory controls and measures in SMEs. The difficulty in obtaining public data on the volume, distribution, and use of chemicals by specific countries involved in the global chemical enterprise is reflected in this chapter, in which most of the numbers are derived from secondary sources and are largely aggregated according to region. There is also little publicly available information on the volume and distribution of chemicals used by academic and research laboratories, especially those in developing countries. The analysis of supply and distri- bution to academic laboratories in particular is therefore supplemented by a bibliometric analysis of current chemical literature. 2 Registration,Evaluation, Authorization and Restriction of Chemicals (REACH) is a new European Community regulation on chemicals and their safe use (EC 1907/2006) that entered into force on June 1, 2007. See http://ec.europa.eu/enironment/chemicals/reach/reach_intro. htm (accessed January 12, 2010). 3 Creating Differentiation Through Innovation. Sigma Aldrich Annual Report. 2008. http:// www.sigmaaldrich.com/site-leel/corporate/annual-report-00/arhome-00.html (accessed January 22, 2010) and 2008 Form 10-K filing to the Securities and Exchange Commission: http://www.sec.go/Archies/edgar/data/0/00030000/d0k.htm (accessed January 22, 2010). 4 OECD. Enironmental Outlook for the Chemicals Industry 00. http:/www.oecd.org/ehs (accessed May 8, 2010). Paris: Organisation for Economic Co-operation and Development, 2001.

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0 PROMOTING CHEMICAL LABORATORY SAFETY AND SECURITY CHEMICAL SuPPLY In 2008 the global chemical industry was a $3.7 trillion enterprise.5 In the past, the United States and Western Europe were the top exporters of chemicals to developing countries, but now they lag behind Asia-Pacific countries, primarily because of production in China and India. Surpassing U.S. and European output, the Asia region experienced an increase of 9.1 percent in its share of world chemical sales (Figure 1-1) from 1997 (17.0 percent) to 2007 (30.4 percent), a stark contrast with the decline in both Europe (from 32.2 percent to 29.5 percent) and the countries adhering to the North American Free Trade Agreement (from 28.0 percent to 22.2 percent).6 Investment in new plants and equipment reflect a preference for the Asia-Pacific region. The American Chemistry Council (ACC) reports a growth in global capital investment from 2006 ($171 billion) through 2009 ($237 billion), and the Asia-Pacific region (excluding Japan) accounted for 56 percent of the gain in the period.7 In comparison, the United States accounted for only 6 percent of the gain. The shift to the Asia-Pacific re- gion is attributed largely to China’s increasing share of global chemicals production.8 According to the World Bank, developing countries are characterized as having low- to lower-middle-income economic status,9 but they can vary widely in socioeconomic standards and implementation of the rule of law, and they are neither major consumers nor producers of chemicals in global terms. Petrochemical commodities—polymers and fertilizers—are the main products of the developing countries’ industries. However, it is predicted that a shift in chemical production from developed countries making up the Organisation for Economic Co-operation and Development (OECD) to non-OECD countries will take place within the next 10 years. A number of developing countries have the capability for increasing pharmaceuticals production and many are investing in oil and gas, which are key drivers for 5 American Chemical Council. 2009. Guide to the Business of Chemistry. http://www.american chemistry.com (accessed October 23, 2009). 6 CEFIC (European Chemical Industry Council). 2009. Facts and Figures, Chapter 1: Pro- file of the Chemical Industry. http://www.cefic.org/factsandfigures/ (accessed February 11, 2010). 7 American Chemical Council. 2009. Guide to the Business of Chemistry. http://www.american chemistry.com (accessed October 23, 2009). 8 CEFIC (European Chemical Industry Council). 2009. Facts and Figures, Chapter 1: Pro- file of the Chemical Industry. http://www.cefic.org/factsandfigures/ (accessed February 11, 2010). 9See the World Bank country classifications: http://data.worldbank.org/about/country-classifications (accessed May 6, 2010).

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 CURRENT PATTERNS OF PROCUREMENT, USE, AND DISTRIBUTION 35.0 1997 30.0 2007 25.0 Percentage Shares 20.0 15.0 10.0 5.0 0.0 EU27 Asia Japan NAFTA Others Countries Regions FIGURE 1-1 Sales of chemicals by region where sold: 1997 vs. 2007. NOTE: “Asia” does not include Japan. SOURCE: Cefic. the chemicals industries. Important developing-country producers include India, China, Indonesia, and the Philippines.10 The production of agricultural chemicals is a focus of the chemical in- dustry in developing countries. These countries accounted for 5 percent of total world nitrogenous fertilizer production in 2002. Developing countries also contributed about 4 percent to total world production of pesticides (insecticides, fungicides, and disinfectants) in 1998, and about 5 percent in 2002.11 Although the current focus of the chemical market in Africa is on meeting local needs, the proximity, particularly for North African nations, to European markets has led to a greater focus on exporting. Morocco, for 10 OECD. Enironmental Outlook for the Chemicals Industry 00. http:/www.oecd.org/ehs (accessed May 8, 2010). Paris: Organisation for Economic Co-operation and Development, 2001. 11 N. Manda and J. Mohamed-Katarere. 2006. Chemicals. In Africa Enironmental Out- look-: Our Enironment, Our Wealth. Nairobi: United Nations Environmental Program. http://www.unep.org/DEWA/Africa/docs/en/AEO_Our_Eniron_Our_Wealth.pdf (accessed October 23, 2009).

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 PROMOTING CHEMICAL LABORATORY SAFETY AND SECURITY 60 Exports 50 Imports Percentage Shares 40 30 20 10 0 European Asia NAFTA Rest of Latin Africa Oceania Union Countries Europe America Major Regions in World Chemicals FIGURE 1-2 Regional shares of world exports and imports of chemicals, for 2007. SOURCE: Cefic. example, has two-thirds of the world’s reserve of phosphate rock and is a leading producer of phosphoric acid.12 CHEMICAL DISTRIBuTION geographic Distribution Patterns of distribution and customer identification are difficult to ob- tain from public information. The information used in this chapter comes primarily from the Cefic: European Chemical Industry Council and ACC reports. As mentioned earlier, in terms of regional sales of chemicals (Figure 1-1), Asia (other than Japan) accounts for the largest share: 30.4 percent of €1.82 trillion total world chemical sales in 2007. Export and import figures (Figure 1-2) for 2007 still point to the Euro- pean Union as the world leader, accounting for half the global trade. The top 100 chemical distributors have their main stocking locations in the United States and Canada with an average of 195 employees, and 12 K. Temsamani. 2009. Presentation at Meeting 3, Committee on Promoting Safe and Secure Chemical Management in Developing Countries, The National Academies, Washington D.C. (see Appendix C).

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3 CURRENT PATTERNS OF PROCUREMENT, USE, AND DISTRIBUTION they import an average of 21 percent of the chemicals that they sell.13 In 2005 they had on average 11.8 stocking locations around the world, in- cluding Europe (15 percent), Mexico (11 percent), Asia (9 percent), and Latin America (7 percent). Those distributors had an average of 3.7 mil- lion gallons of bulk storage capacity, an average of 377,000 square feet of warehouse space, and used various transport methods including trucks, vans, trailers, tankers, and railcars. As distinct from distributors, suppliers also have a global presence. Sigma-Aldrich for example has over 7,900 employees in 37 countries and reported distribution of its total sales as 43 percent in Europe, 35 percent in the United States, and 20 percent in Canada, Asia-Pacific, and Latin America combined.14 There are also confirmed reports that Sigma-Aldrich chemicals have reached Morocco, possibly through resellers. The Responsible Care® Status Report 2008 published by the Interna- tional Council of Chemical Associations lists 2,421 distribution “incidents” (accidental chemical releases during transport of goods by various means) in 26 (out of 53) countries in 2006. The report showed a general decline in the number of incidents since 2001, when there were 3,827 incidents reported. In the same period, there was a 15 percent increase in materials distributed.15 Sector Distribution Most chemical sales are to such industries as paints and coatings, cosmetics and personal care, foods and beverages, adhesives and sealants, and soaps and detergents.16 Specific data that would clarify the overall dis- tribution of chemicals to academic and research laboratories are not avail- able. Inferences can be derived from information gleaned from corporate reports of chemical suppliers. For example, in 2008, academic laboratories, government agencies, and nongovernment organizations accounted for 26 percent of Sigma-Aldrich’s customers; pharmaceutical companies (35 per- 13 S. Avery. 2006. The Top 100 Chemical Distributors: Demand remains strong despite high prices. http://www.purchasing.com/article/-The_Top_00_Chemical_Distributors_ Demand_remains_strong_despite_high_prices.php (accessed October 30, 2009). 14 Creating Differentiation Through Innovation. Sigma Aldrich Annual Report. 2008. http:// www.sigmaaldrich.com/site-leel/corporate/annual-report-00/arhome-00.html (accessed January 22, 2010) and 2008 Form 10-K filing to the Securities and Exchange Commission http://www.sec.go/Archies/edgar/data/0/00030000/d0k.htm (accessed January 22, 2010). 15 International Council of Chemical Associations. 2009. Responsible Care Status Report 2008. http://www.responsiblecare.org/filebank/Status%0Report%00_0.pdf (accessed January 26, 2010). 16 American Chemical Council. 2009. Guide to the Business of Chemistry. http://www. americanchemistry.com (accessed October 23, 2009).

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 PROMOTING CHEMICAL LABORATORY SAFETY AND SECURITY cent), chemical industries (31 percent), and hospitals and commercial labo- ratories (8 percent) complete the list. Sigma-Aldrich’s reported $2.2 billion in sales and a net income of $342 million in 2008 but did not report the corresponding quantities of chemicals sold. Customer Screening Increased sales in non-European markets have been bolstered by on- line transactions. For example, Web-based sales accounted for 42 percent of all Sigma-Aldrich Research sales in 2008.17 The trend is illustrated by the emergence of e-commerce portals of major suppliers and distributors. Products can be ordered online, but although all requests are supposed to be reviewed to verify membership in an organization, registering an online profile does not require such information as the organization’s name and address. The process does typically require proof of an established relation- ship with a local distribution branch through an existing account number. Such processes are part of the chemical industry’s steps to improve chemical safety and security. Responsible Care® is the chemical industry’s global, voluntary initiative aimed at improving the health, safety, and en- vironmental effects of the industry’s products and processes. According to an interaction during a recent seminar on chemical safety and security, it was stated that although large industries have established protocols (Figure 1-3), local distributors and middlemen have the ultimate responsibility for customer screening.18,19 At the same time, middlemen may skirt laws, have control over the market prices, hoard or adulterate chemicals, and carry out other malpractices. The problem, especially in developing countries, is that distributors cannot ensure that their customers will not resell the purchased chemicals. Chemicals are widely traded, even in hardware stores and grocery stores, and regulations for the control of biological, radioactive, and nuclear mate- rials are often inappropriate for chemicals.20 For example, a local reseller in 17 Creating Differentiation Through Innovation. Sigma Aldrich Annual Report. 2008. http:// www.sigmaaldrich.com/site-leel/corporate/annual-report-00/arhome-00.html. (accessed January 22, 2010) and 2008 Form 10-K filing to the Securities and Exchange Commission http://www.sec.go/Archies/edgar/data/0/00030000/d0k.htm (accessed January 22, 2010). 18 T. Cromwell. 2009. Leveraging the Relationship between Chemical Safety and Chemical Security to Reduce Terrorism Threats. Presentation given at Asia Pacific Seminar on Chemical Safety and Security to Counter Terrorism, Canberra, Australia. 19 R. Batungbacal. 2009. Asia Pacific Seminar on Chemical Safety and Security to Counter Terrorism, Canberra, Australia. Personal communication. 20 R. Mathews. 2009. Lessons Learned from Nuclear, Biological, and Radiological Experi- ences. Presentation given at Asia Pacific Seminar on Chemical Safety and Security to Counter Terrorism, Canberra, Australia.

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 CURRENT PATTERNS OF PROCUREMENT, USE, AND DISTRIBUTION FIGURE 1-3 Information/cyber security. SOURCE: Courtesy of The Dow Chemical Company © 2006. the Philippines replaces chemical labels, using generic names to avoid regu- lations on end-user certificates and Materials Safety Data Sheets (MSDSs), and sells the products to the general public. In such a case, the identity and responsibility of the eventual customer can no longer be ascertained by the distributor, let alone by a supplier who is practicing Responsible Care®. In the case of the release of the nerve agent sarin in the subway of To- kyo, Japan, on March 20, 1995, the Aum Shinrikyo cult responsible for the attack set up a dummy company to purchase the chemical precursors used in the production of the toxin. The facility where the sarin was synthesized escaped zoning and environmental authorities and was discovered only during the investigation of the incident.21 Vigilant suppliers can thwart malicious intentions from the very be- ginning. For example, an alert employee of a distributor in the Northern Territory of Australia, informed law-enforcement authorities when clients 21 N. Aoki. 2009. Sarin Gas Attacks. Presentation given at Asia Pacific Seminar on Chemical Safety and Security to Counter Terrorism, Canberra, Australia. See also www.cdc.go/ncidod/ eid/olno/olson.htm (accessed October 23, 2009).

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 PROMOTING CHEMICAL LABORATORY SAFETY AND SECURITY in Sydney ordered nitric acid, sulfuric acid, glycerin, and other chemicals.22 The clients intended to synthesize 40 kg of nitroglycerin to blow up and steal from ATMs and bank safes.23 Distributors, in general, are watchful for suspicious customer behavior, including excessive payments for rapid delivery, use of cash payments instead of charges to a corporate account, delivery to post office boxes, orders for unusual quantities, and insistence on unmarked packaging.24 LABORATORY-SCALE uSE OF CHEMICALS In the absence of publicly available data on the distribution of chemi- cals (especially COCs) to academic and research laboratories, the committee analyzed articles in scholarly journals to gain some insight into the patterns of use and distribution of laboratory chemicals in developing countries. The search (using the Web of Science database) was conducted for four countries where the Chemical Security Engagement Program is engaged: Indonesia, Malaysia, Pakistan, and the Philippines. It was limited to articles published in 2008 and articles whose correspondence addresses were only in those countries. An initial refinement specified fields of chemistry, for ex- ample, multidisciplinary, medicinal, physical, inorganic. A list of chemicals was compiled by using the keywords and abstracts of the articles. Pakistan is by far the most prolific publisher of the four countries with 412 articles compared with 166 from Malaysia, 10 from Indonesia, and 5 from the Philippines. Of the papers from Pakistan and Malaysia, 44 (11 percent) and 11 (6.5 percent), respectively, dealt with COCs. One of the articles from Pakistan used trinitrotoluene, and many articles in- volved heavy metals and some pesticides, although most of the chemicals written about were common organic solvents such as acetone, listed in Table D-5, “Chemicals Used in Clandestine Production of Illicit Drugs,” in Appendix D. 22 V. Otieno-Aligo. 2009. Application of Forensic Chemistry to Criminal Offences Involving the Use of Chemical Agents. Presentation given at Asia Pacific Seminar on Chemical Safety and Security to Counter Terrorism, Canberra, Australia. 23 G. Jones. 2007. Police Arrest Bomb Plotters Ahead of APEC. http://www.dailytelegraph. com.au/news/nsw-act/sydney-bomb-plotters-seized/story-efreuzi-0. 24 M. Donnan. 2009. Strengthening Chemical Security: An industry perspective. Presenta- tion given at Asia Pacific Seminar on Chemical Safety and Security to Counter Terrorism, Canberra, Australia.