CANADA FUELS U.S. MARKET FOR 'SPEED'

Lax laws Fail To Track Supplies Of Key Chemical In Street Drug

WASHINGTON -- The U.S. says Canada must tighten laws on buying and
selling a chemical used in cold medicine after a year-long criminal
investigation revealed Canada to be the largest supplier to the U.S.
of the main ingredient in methamphetamine -- better known as speed.

U.S. federal agents carried out a series of raids across the country
yesterday, arresting more than 50 people in connection with a
smuggling operation that depends on what U.S. officials say are lax
Canadian regulations.

Canadian law does not require firms selling pseudoephedrine, a
chemical commonly used in cold and allergy medicines, but also a key
ingredient in methamphetamine, to do checks on customers or determine
final usage of the product.

Two drug-smuggling operations, one based in Chicago and the other in
Detroit, have used the loophole to legally purchase tonnes of
pseudoephedrine in Canada from two Quebec-based companies -- Frega
and Formulex -- and then smuggle it illegally into the U.S. The
chemical is then sold to groups, primarily Mexican crime
organizations, which use it to produce cheap illicit street drugs.

U.S. officials said nearly 100 per cent of the methamphetamine
produced in the country in the past two years has its origins in
Canada.

Nearly all of the arrests made yesterday were of Middle Eastern men,
primarily from Jordan and Iran, involved in two large-scale drug
smuggling and production rings.

Asa Hutchison, head of the U.S. Drug Enforcement Administration, says
much of the drug profits were being funnelled back to the Middle
East, but investigators had not uncovered any evidence that the money
was being used to fund terrorism.

Mr. Hutchison emphasized several times that no Canadians were
involved in illegal activities, and praised Canadian customs
officials and the RCMP for their co-operation. He said a tip from the
RCMP in October resulted in Americans tracing the movements of
smugglers and ultimately seizing 37 million tablets in California.

However, comments by American officials raised concerns about whether
Quebec pharmaceutical suppliers knew the product they were supplying
was being used for illegal purposes.

Referring to a bust last April in which U.S. customs officials seized
43 million tablets -- about 12 tonnes of pseudoephedrine -- at the
Ambassador Bridge between Detroit and Windsor, U.S. Customs boss
Robert Bonner said questions had to be raised about the amount of
product being purchased.

"There was enough decongestant in that truck to unplug every nose in
Michigan for several years," he said.

During the operation dubbed Mountain Express III, American agents
seized 110 million pseudoephedrine tablets in eight different
seizures, which officials estimated would produce up to 9,000 pounds
of methamphetamine. DEA officials say methamphetamine has a street
value of about $12,000 a pound.

The seizure of 110 million pseudoephedrine tablets represents 25 per
cent of the total amount of the product imported into Canada in the
past year.

Seven of the seizures occurred along the Ontario-Michigan border,
while one was at Grande Portage, Minnesota, south of Thunder Bay.

The pills, which are sold commercially in bottles of 50 or 100 units,
were being shipped by smugglers in increasingly large containers. In
a bust late last year, drug enforcement officers found the pills
being shipped in seven-gallon cans containing 80,000 pills each.

The Americans say Canadian imports of pseudoephedrine have increased
by 1,400 per cent since the mid-1990s.

Asked if he thought the Canadian companies were knowingly turning a
blind eye to the fact that they are obviously selling more
pseudoephedrine than could be consumed in Canada and in essence
profiting from illegal drug production, Mr. Hutchison was diplomatic.

"Well, you'd be asking me to judge intent and motive, and I don't
believe I am in a position to do that."

Mr. Bonner said Canada must change its laws, as the U.S. did several
years ago, to make it illegal to divert pseudoephedrine for
illegitimate uses.

"The question here is diversion for illegal manufacture. Right now in
Canada they do not have, in my judgment, adequate laws and
regulations to protect against the illegal diversion of
pseudoephedrine. I understand that the Canadians, the government at
the political level, is aware of this problem, and I have been
advised that they are taking steps to strengthen their laws and
regulations to make it more difficult -- much more difficult -- for
this kind of illegal diversion."

He said Canadian law should require corporations to look at how much
pseudoephedrine they are importing and whether that amount matches
the amount needed by the Canadian population. As well, he called for
bulk distributors to be adequately identified and registered and that
information be given on the end use of the chemical.

Yesterday in Ottawa, federal officials acknowledged the smuggling of
pseudoephedrine to the U.S. for the production of illegal drugs
constitutes a major problem. Spokesmen from Health Canada, the RCMP
and Canada Customs said the government plans to implement new
regulations by the end of this year to "monitor and control" the
growing problem.

"Clearly the diversion of legal chemicals, including pseudoephedrine,
from Canada for illicit use is of concern to the RCMP," said Sgt.
Paul Marsh, a spokesman for the Mounties. He said the RCMP has been
working closely with the U.S. Drug Enforcement Administration to
"dismantle" several pseudoephedrine "trafficking networks" that have
sprung up in recent years.

Sgt. Marsh said Canadian companies legally import the raw powder for
pseudoephedrine from several countries, mainly China, India, Germany
and the Czech Republic. The companies then manufacture the powder
into pills to be used for legally available cold remedies.

At some point afterwards, he said, the pills are "diverted" and
exported to the U.S., where they are used for the production of
illicit drugs such as methamphetamine.

Sgt. Marsh said "it can be challenging for the law-enforcement
community because there are no regulations at the present time to
monitor the exportation and how the pseudoephedrine is being
distributed in Canada."

In the absence of that "official" monitoring system, he said, the
RCMP keeps in close touch with Canadian companies that manufacture
chemicals "to keep track of what the trends are."

But ultimately, he said "there is no requirement for these companies
to report to law enforcement officials."

One of the Canadian firms that legally manufactures and sells
pseudoephedrine is Montreal-based Formulex Canada.

Sonia Riopelle, a spokeswoman for the firm, said yesterday that the
company follows all of the rules required of it by Health Canada. She
said that when the company sells its products to another firm, it
must keep records that indicate the purchasing order and shipping
order, as well as proof that the buyer has a drug identification
number that permits it to make the purchase.

"The only thing that (Health Canada) is requiring is that we keep a
log book with everything that's been purchased and sold." She said
nothing obliges Formulex to know what the buyer ultimately does with
the product.

"As far as we're concerned, it's supposed to be used for
decongestant," she said. But the buyer is "responsible for what he
does with his product.

"We manufacture it, but what they do with it, it's their responsibility."

Asked if this opens the door for possible misuse of the product by a
buyer, Ms. Riopelle replied: "That is quite possible. I cannot
guarantee. It might be exported and then resold. I have no idea."

Collette Gentes-Hawn of Canada Customs said there is nothing her
department can do to stop the exports of the product, because it is
not deemed a controlled substance. Several government departments, as
well as private companies, have been involved in a group led by
Health Canada to tighten the regulations.

Health Canada official Carole Bouchard said the government is
developing a comprehensive regulatory framework under the Controlled
Drugs and Substances Act that would put pseudoephedrine under tighter
control. But she said discussions are still under way and could not
provide details on how the regulations will be formed, including
whether they would include a specific provision that forces
manufacturers of pseudoephedrine to know what their buyers do with
the product.

In addition to the mandatory regulations, she said it's possible that
a voluntary "code of conduct" will be developed for the industry.