The Washington Post-Despite fentanyl crackdown Chinese sellers are open for business

2024-03-21T20:12:01.965Z

When President Biden and Chinese President Xi Jinping pledged to revive a joint crackdown on illegal drug trafficking in November, it sent a brief shock wave through the vast network of Chinese suppliers fueling the production of fentanyl.

Drug suppliers hit pause on international orders, as local Chinese officials conducted site inspections and began circulating fresh reminders of regulations. Beijing sent a warning notice to its pharmaceutical industry and shut down 25 Chinese companies selling fentanyl precursors — the chemical building blocks of a drug that accounts for the majority of more than 70,000 synthetic opioid overdose deaths a year in the United States.

U.S. and Chinese officials hailed the breakthrough agreement, noting that the deal set the stage for dozens more meetings between the countries’ anti-drug agencies — the first such cooperation in almost three years, after geopolitical tensions roiled the relationship.

But seven months later, those same sellers say it’s business as usual.

Traditional routes for shipping small but potent packages of the chemicals used in the production of fentanyl remain largely unhindered, according to three people involved in the export of illicit precursors and seller advertisements across a dozen online platforms.

The three people — two salespeople for Chinese chemical companies and a Chinese reseller based in Mexico — described resuming sales this year after making minor adjustments to avoid scrutiny, including tweaking customs labeling on packages and pivoting to alternative compounds that have virtually identical applications.

“Possibly in the future there is some impact, but it’s not a problem right now,” said one Hubei-based salesperson for a chemical company that produces 1-Boc-4-AP — a fentanyl precursor — and the sedative xylazine. The person claimed the company had resumed sales of both compounds to Mexico in January after a six-week pause that started around the time of the Xi-Biden meeting.

“Like water flowing around rocks … if there is a demand there is a way,” the person said.

Reporters for The Washington Post were not able to verify specific sales since November, but the company’s online advertisement for the chemical remain active, advertising “safe and fast” delivery to the United States, Canada and Mexico.

The sellers spoke on the condition of anonymity, or using nicknames, to detail their involvement in sales of fentanyl precursors. Their accounts highlight the vast challenges facing U.S. officials, who have sought to parlay warming relations with Beijing into a broader crackdown on the supply of fentanyl in the United States — a problem the Chinese government has little incentive to dedicate resources to without its own large-scale opioid epidemic.

And yet, counternarcotics enforcement has become a rare — if fragile — topic of consensus at a time when the two sides find little else to agree on.

“As often seen with transnational criminal organizations, their business model adapts to law enforcement efforts and they will seek out new routes to circumvent law enforcement scrutiny,” a senior U.S. administration official said, speaking on the condition of anonymity to discuss sensitive diplomacy. Seizures of precursor chemicals transiting the United States fell drastically in late 2023 as a result of targeted law enforcement, but seizures of finished fentanyl remain at record highs, “suggesting these chemical companies are identifying alternate routes,” the official said.

China is the top global producer of the chemicals used to synthesize fentanyl, and much of the U.S. supply comes from illicit laboratories overseen by criminal groups in third-party countries, primarily Mexico, where cartels source Chinese chemicals and equipment, including pill presses.

Since November, U.S. officials have held multiple face-to-face and virtual meetings with their Chinese counterparts. They’ve held in-depth exchanges between U.S. and Chinese drug enforcement agencies, scientists and bankers and pressed Beijing to take steps to regulate — or “list” — new precursors, as well as tighten up customs and money-laundering oversight.

The negotiators are trying to recapture the momentum of previous cooperation, which — in its heyday between 2017 and 2022 — led to what U.S. officials claim was a vast reduction in seizures of fentanyl in its finished form at U.S. borders.

However, according to analysts, lawmakers and the Chinese drug sellers themselves, tackling the unwieldy network of China’s small chemical labs behind the dozens of precursors that are used to manufacture fentanyl will be a much harder task.

“The fentanyl listing back in 2017 was very different because … it was one drug, and that one listing was able to really shut down the trade. The precursor chemicals are just such a much more difficult problem to solve,” said another senior administration official in January speaking to reporters on the condition of anonymity under ground rules set by the White House, ahead of intensive talks in Beijing.

‘Easy money’

In the weeks following Biden and Xi’s November meeting, 34-year-old Aaron Z. faced a dilemma — his budding logistics business was under threat.

Aaron left southern China at the onset of the pandemic, staying temporarily in Thailand before settling with a friend in a large Mexican city close to the U.S. border. There, the pair began an online business reselling ingredients used to manufacture cosmetics through ads posted on Facebook and in WhatsApp groups, he said.

The business soon shifted to include the more lucrative trade in pharmaceutical chemicals, including 4-AP, a direct precursor to fentanyl.

“We don’t focus on individual sales but stockpile … creating stores of chemicals [in Mexico] that can easily be resold when there is a demand,” said Aaron, who declined to discuss his Mexican clientele. A former factory worker in southern China, Aaron said he’d never heard of fentanyl until he arrived in Mexico but found a ready market for precursor chemicals sourced from China and concealed in small postal packages. “It’s easy money,” he said.

Following the Xi-Biden agreement and the industry-wide warning sent from Beijing, Aaron said his two main suppliers of 4-AP — shell companies who themselves sourced it from mainland chemical labs — told him that shipment had been put on hold. He worried his stockpile in Mexico would run out in months.

“The feeling was confusion … no one knew what would happen next,” he said.

However, the shipments began again just weeks later, with only one change. “This time the [customs] label said soap powder,” he said. “Before there was no label.” He said his supplier simply told him that the situation in China was “more relaxed” now.

Aaron’s experience highlights some of the key challenges facing U.S. counternarcotics officials as they try to clamp down on the deadly cross-border fentanyl trade amid lax enforcement of producers in China and a Wild West of resellers and traffickers in Mexico.

“Sending notices out once is not enough; there needs to be prosecutions of violations,” said Vanda Felbab-Brown, a senior fellow at the Brookings Institution who specializes in international crime networks. “They’re already finding out that the heat is gone, and the actors just feel like they can get away with it.”

U.S. Secretary of State Antony Blinken pushed Chinese officials to take prosecutions more seriously following talks in Beijing in April.

“I underscored the importance of [China] taking additional action, in particular by prosecuting those who are selling chemicals and equipment used to make fentanyl, meeting its international commitments to regulate all of the precursors that are controlled by the U.N. Commission on Narcotic Drugs, and disrupting illicit financing networks,” said Blinken in a news conference following the talks.

A spokesman for the Chinese Embassy in Washington said that China is speeding up listing procedures on three precursors, including 4-AP, and is preparing to regulate further chemicals. “At present, the law enforcement agencies of the two sides are strengthening cooperation on six cases of transnational drug trafficking and carrying out joint investigation and crackdown,” said spokesman Liu Pengyu.

On Wednesday, the U.S. Department of Justice announced one such case — an indictment against 24 individuals involved in a money-laundering scheme linked to the Sinaloa cartel. Beijing informed U.S. authorities that it had taken one person into custody and was pursuing charges. It is the first instance of China publicly executing a domestic arrest related to international narcotics trafficking since the November meeting.

Liu said that the United States had provided further “clues” about individuals and companies involved in drug-related money laundering but that local law enforcement had not found evidence that those companies are involved in drug crimes in China. Liu added that the two sides plan to hold further exchanges later this month.

Prosecutions for Chinese chemical producers involved in the illicit fentanyl trade are rare. Beijing has primarily chosen to warn chemical makers about the threats of U.S. enforcement rather than the dangers of breaking China’s own domestic laws. In its November notice to the industry, it called for producers to be wary of the “‘risk’ of long-arm jurisdiction’ or even ‘fishing enforcement’” by U.S. authorities — a phrase meaning legal entrapment.

In practice, chemical makers say there’s little new oversight on a local level. One agent working for the Chinese chemical firm Chongqing Chemdad — which currently advertises the sale of fentanyl precursor 1-N-BOC-4 online — said that recent changes amounted to local authorities adding company staff to a WeChat group, where they are “reminded” of the regulations.

According to Strider Technologies, a strategic intelligence firm that analyzes open-source data on Chinese supply chains, there are around 1,500 China-based entities involved in the fentanyl industry, the vast majority of which are precursor manufacturers, dealers and pharmaceutical machinery companies.

U.S. authorities have launched their own enforcement action, including indictments by the Justice Department and sanctions by the Treasury Department against Chinese individuals and entities. But these actions have little effect inside China without domestic law enforcement support. In some cases, U.S. officials and researchers say, small labs and resale companies will change their name after being targeted in a U.S. indictment and swiftly resume sales.

That includes Hubei Amarvel Biotech Ltd — a Chinese company indicted in New York in June 2023 for the online sale of fentanyl products. Shortly after the firm’s website was seized, the company’s online presence, including staff profiles, reappeared on a revamped website with a slightly altered name — Amarveltech — where they continued to advertise the same products months after the U.S.-China announcement.

“Many of these companies are small in size and are able to resume operations quickly under different names. We encourage the PRC to take more deterrent enforcement action, such as public arrests,” the senior U.S. official said.

Fentanyl and some of the chemicals used to synthesize it are particularly easy to conceal due to their potency. Just one pound of the drug contains more than 200,000 doses. Sellers described to The Post hiding the drug among detergent powder, vitamin supplements, cosmetics and even inside electric toothbrushes.

U.S. officials remain optimistic that China has the means to disrupt the flow. In 2019, Beijing issued a missive to its firms — similar to the one in November — that was followed by a sharp drop in the export of fentanyl.

But success will rely on the ability of the United States and China to divorce the issue of counternarcotics from turmoil in the bilateral relationship, which has proved complex.

As broader U.S.-China relations sunk to a nadir in 2022 following a visit by then-Speaker Nancy Pelosi to Taiwan, counternarcotics cooperation became a casualty of the fraying ties: Beijing completely axed any communication on the topic. That cooperation was revived only last year when the Biden administration removed sanctions on the Chinese Ministry of Public Security’s Institute of Forensic Science, which was targeted over alleged abuses against ethnic Uyghurs.

Under Beijing’s strict domestic surveillance controls, the country has not experienced its own fentanyl epidemic, diminishing its motivations to resolve the issue. Officials have repeatedly and vehemently denied that Chinese firms play any role in driving the U.S. fentanyl epidemic.

“The root cause of the overdose lies in the U.S. itself. The problem is completely ‘made in USA,’” said Foreign Ministry spokeswoman Mao Ning in an April 2023 news conference, just months before formal discussions begun between Chinese and U.S. negotiators. “There is no such thing as illegal trafficking of fentanyl between China and Mexico.”

Hot selling stock

The online bazaar has caught the eye of U.S. lawmakers. The bipartisan House Select Committee on the Chinese Communist Party released a report in April that claimed it had identified more than 2,000 Chinese companies advertising sales of illicit substances online, including fentanyl precursors and other narcotics.

The Chinese Embassy spokesman Liu said that the government recently deployed a “network cleaning action” to crack down on the proliferation of online advertisements, which resulted in the closing of “14 online platforms, forcing the cancellation of 332 corporate accounts, removing 1,016 online stores, and cleaning up more than 146,000 pieces of information.”

The Post verified that some Chinese platforms that displayed advertisements for precursor chemicals in April had since censored some listings — with searches for the chemicals returning an error message citing “relevant laws, regulations, policies.”

But some Chinese sellers have become increasingly creative with their online advertising. The Post identified ads on a dozen platforms still offering fentanyl precursors for export. In one instance, a 1-Boc 4-AP seller disguised an advertisement as a song on the audio streaming platform SoundCloud. Another such ad was posted as a blog entry on Medium.com. In the ads, the companies offer to connect with buyers over messaging platforms like WhatsApp, Telegram and Signal — which are banned in China — and request payment in cryptocurrencies.

Berlin-based SoundCloud removed the advertisement after The Post requested comment and said it was doubling its investment in content moderation and working with the U.N.’s International Narcotics Control Board to track the sale of dangerous substances online. San Francisco-based Medium did not respond to a request for comment.

Many of the ads promise the ability to evade customs and target Mexican buyers. “We ship special … safe delivery” reads a current advertisement by Hebei Huanhao Biotechnology, entitled “Hot sale to Mexico.” The company was placed under U.S. sanctions in 2021 but continues to openly advertise precursor products.

Another Chinese company, Wuhan Boyuan Import and Export, posted ads for the controlled chemical 1-N-Boc-4 on Global Source, a Hong Kong platform. In the listing, it noted that the substance was of “purity 99.9%” at a price of $95 for 1 kilogram.

When The Post reached out to the Chinese companies, they denied selling illegal substances. An employee of Changzhou Huayang Technology said they were simply surveying demand. “Conducting market research on its own is not illegal,” the person said.

Asked why Wuhan Boyuan continued to advertise the chemicals for export, an agent for that company said it was “inconvenient” to explain, and hung up.

Vic Chiang and Pei Lin Wu in Taipei and Ellen Nakashima in Washington contributed to this report.