American agents are "plugged into the underworld" of illegal diversion of deadly chemical weapons materials, but their successes are being undermined by the courts, says the U.S. customs commissioner.

"The penalties we have are there," William von Raab told the Senate Governmental Affairs Committee at a hearing Tuesday on the illegal export of biological agents and other material used to make chemical weapons. "The problem is judges don't apply them."The Customs Service, through informants and various sting operations, has controlled to some degree the diversion of the materials to terrorist nations, von Raab said.

"With the volume we're dealing with, I don't think we're losing a lot," he said. "We're pretty well plugged into the underworld."

However, the effort by the Customs Service, the State Department and the Commerce Department has been thwarted by the judicial system, which has failed to impose stiffer penalties, von Raab said.

The commissioner described the case of Peter Walaschek, a West German national arrested for purchasing three orders of thiodiglycol, a precursor for mustard gas, from Alcolac International Inc., of Baltimore, Md., for shipment to Greece and Singapore. The shipments were re-exported to Iran.

Customs agents, suspicious of Walaschek's third order, told inspectors in Norfolk, Va., to seize the chemical and replace it with water. The agents then tracked the shipment of water to Singapore; Karachi, Pakistan; and then Bandar Abbas, Iran.

Walaschek was arrested on July 27, 1988, in Maryland and pleaded guilty to violating the Export Administration Act. He admitted that he purchased the chemical at the request of Sayed Kharim Ali Sobhani, an Iranian diplomat stationed at his country's embassy in Bonn, West Germany.

But under protests from the government, Walaschek was placed in a halfway house. He later fled and is currently a fugitive in West Germany.

Von Raab said another part of the problem is that the criminals give the impression of being average businessmen.

"They look normal, they've done normal things - offering and accepting merchandise - but what they're dealing with is poison," the commissioner said.

The chemical industry is the United States' largest international trading industry with total shipments in 1988 at $238 billion, according to the Commerce Department. Current export controls apply to 40 of an estimated 20,000 commercially traded chemicals and chemical products.