94-25071. Implementation of the Domestic Chemical Diversion Control Act of 1993 (Pub. L. 103-200)

[Federal Register Volume 59, Number 197 (Thursday, October 13, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-25071]

[[Page Unknown]]

[Federal Register: October 13, 1994]

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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Parts 1307, 1309, 1310, 1313 and 1316

Implementation of the Domestic Chemical Diversion Control Act of
1993 (Pub. L. 103-200)

AGENCY: Drug Enforcement Administration (DEA), Justice.

ACTION: Proposed rule.

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SUMMARY: DEA is proposing these regulations to implement the Domestic
Chemical Diversion Control Act of 1993, which became effective on April
16, 1994, in order to provide additional safeguards against the
diversion of regulated chemicals.

DATES: Written comments or objections must be received on or before
December 12, 1994.

ADDRESSES: Comments and objections should be submitted in quintuplicate
to the Deputy Administrator, Drug Enforcement Administration,
Washington, D.C. 20537, Attention: Federal Register Representative/CCR.

FOR FURTHER INFORMATION CONTACT:
G. Thomas Gitchel, Chief, Liaison and Policy Section, Office of
Diversion Control, Drug Enforcement Administration, Washington, D.C.
20537, Telephone (202) 307-4025.

SUPPLEMENTARY INFORMATION:

I. Introduction

The Chemical Diversion and Trafficking Act of 1988, (PL 100-690)
(CDTA) was passed by Congress to control the diversion of certain
chemicals (hereinafter referred to as listed chemicals) that are
necessary for the illicit manufacture of drugs such as heroin, cocaine,
methamphetamine and LSD. The CDTA and its implementing regulations, as
set forth in Title 21, Code of Federal Regulations (21 CFR), parts 1310
and 1313, established a system of recordkeeping and reporting
requirements through which DEA and the chemical industry could identify
persons seeking to divert listed chemicals for the manufacture of
illicit drugs. The CDTA allows for the tracking and, where necessary,
control of domestic and international transactions involving listed
chemicals.
The CDTA has had strong success. The greatest impact has been in
the international arena, with a significant reduction in exports of
listed chemicals from the United States to countries that are known
sources of cocaine. Domestically, the volume of chemicals available to
clandestine laboratories was reduced. However, these successes also
highlighted several shortcomings in the CDTA, including:
1. The CDTA provided a mechanisms for DEA, with the cooperation of
the chemical industry, to identify persons engaging in suspicious
transactions and, as needed, take action against those persons.
However, lacking evidence that an individual knowingly supplied
chemicals for the illicit manufacture of drugs, DEA's options were
limited.
2. Persons engaged in the illicit manufacture of methamphetamine
and methcathinone were able to obtain supplies of the listed chemicals
critical to the manufacture of such drugs through the purchase of drug
products that were exempted from the provisions of the CDTA.
3. Illicit drug manufacturers in foreign countries began to
purchase their supplies of listed chemicals from countries other than
the United States, on occasion utilizing the services of United States
based brokers and traders to facilitate the transactions.
To address these and other concerns, Congress passed legislation in
late 1993 to amend the CDTA.

II. The Domestic Chemical Diversion Control Act of 1993 (Pub. L. 103-
200)

The Domestic Chemical Diversion Control Act of 1993 (DCDCA) was
signed into law on December 17, 1993, and became effective on April 16,
1994. The DCDCA is intended to close avenues used by illicit drug
manufacturers to circumvent the CDTA. The main provisions of the DCDCA
are as follows:
1. Precursor and essential chemicals have been redesignated as List
I and List II chemicals respectively.
2. Any person who manufactures, distributes, imports or exports a
List I chemical must obtain a registration from DEA. DEA is authorized
to deny an application for registration or suspend or revoke a
registration to manufacture, distribute, import or export a List I
chemical, if it is established that such registration would not be in
the public interest.
3. Transactions involving drug products marketed under the Food,
Drug, and Cosmetic Act (FDCA) which contain ephedrine, either as the
sole active medicinal ingredient or in combination with therapeutically
insignificant quantities of another active medicinal ingredient, are
now included in the definition of regulated transaction. Subjecting
these products to the registration, recordkeeping and reporting
requirements eliminates a virtually unrestricted source of ephedrine
for illicit manufacturers of methamphetamine and methcathinone. The
DCDCA also grants DEA the authority to remove the exemption for any
other drug that contains a listed chemical if DEA determines that the
drug is being diverted in order to obtain the listed chemical for use
in the illicit manufacture of a controlled substance.
4. Brokers and traders based in the United States who arrange
international transactions involving listed chemicals will be subject
to the same reporting and recordkeeping requirements as exporters of
listed chemicals, thus controlling a previously unmonitored source of
chemicals for clandestine laboratories in foreign countries.
5. Manufacturers of listed chemicals are required to provide DEA
with annual reports regarding the manufacture of such chemicals. The
reports will provide DEA with information regarding the volume of
listed chemicals available in the United States.

III. Implementation of the DCDCA

To implement the DCDCA, DEA is proposing the following regulatory
changes and additions:
1. A new part 1309 of Title 21, Code of Federal Regulations is to
be added, setting forth the specific requirements for registration, the
application forms to be used, the application fees, exemptions from the
registration requirement, security provisions, and administrative
procedures regarding approval or denial of an application, revocation
of registration, and administrative hearings. With respect to the
requirement of registration in the proposed Section 1309.21, DEA has
granted a temporary exemption from the registration requirement pending
implementation of the registration program, as set forth in an Interim
Rule published in the Federal Register on March 24, 1994 (59 FR 13881).
Under the CDTA, regulated persons consist of those firms engaged in
the distribution, importation or exportation of chemicals. The DCDCA
regulates drug products containing ephedrine which are distributed by
retail distributors such as convenience stores, liquor stores, truck
stops, gas stations, nutrition centers, etc. These retail outlets do
not distribute any other listed chemicals and their activities consist
solely of the sale of such products directly to walk-in customers. DEA
has determined that retail distributors should be categorized
separately in light of the limited scope and volume of their chemical
activities.
Pursuant to 21 U.S.C. 822(d), the Administrator may waive the
requirement of registration. The Administrator is proposing in
Sec. 1309.25 of these regulations to exempt persons registered with DEA
to manufacture, distribute, dispense, import, or export a controlled
substance from the chemical registration requirement for equivalent
activities involving drug products that are regulated as List I
chemicals pursuant to Sec. 1310.01(f)(1)(iv). This includes such
traditional sources for these products as pharmacies, hospitals,
pharmaceutical manufacturers, distributors, etc. Further, the
Administrator proposes in Sec. 1309.27 to exempt from the registration
requirement those persons who manufacture a List I chemical solely for
internal use, with no subsequent distribution or exportation.
With respect to the exemptions from the registration requirement,
DEA has determined that persons who manufacture List I chemicals solely
for internal use, without any subsequent distribution or exportation of
such chemicals, should not be required to obtain a registration, since
there is a low risk of diversion from such persons.
It has also been determined that persons who are registered with
DEA to manufacture, distribute, or dispense controlled substances shall
not be required to obtain a separate registration to distribute drug
products that are regulated as List I chemicals. Further, persons who
are registered with DEA to import or export controlled substances shall
not be required to obtain a separate registration to engage in the same
activities with drug products which are regulated as List I chemicals.
Persons registered to engage in activities with controlled substances
are subjected to more comprehensive investigations by Federal and state
authorities relating to their controlled substance registrations than
is required for a chemical registration. The Administrator reserves the
right in this proposal to cancel a person's exemption from the
registration requirement, if continuation of the exemption would not be
in the public interest.
2. Section 1310.01 is amended to revise the definitions of
``regulated transaction'' and ``regulated person'', and to add new
definitions of ``broker'' and ``trader'', and ``international
transaction''.
3. Chemical mixtures that met the definition of ``chemical
mixture'' set forth in Sec. 1310.01(g) prior to the effective date of
the DCDCA shall remain exempted from the definition of regulated
transaction until DEA has promulgated final regulations regarding the
procedures by which manufacturers may request exemption of chemical
mixtures.
4. Section 1310.02 is amended to remove three chemicals from List
I: d-lysergic acid, n-ethylephedrine and n-ethylpseudoephedrine; and to
add to List I: nitroethane and benzaldehyde, as established by the
DCDCA. In addition, the DEA chemical codes assigned to the listed
chemicals have been added.
5. Section 1310.03 is amended to implement the requirement that
manufacturers of listed chemicals report certain data to DEA. This
requirement will only apply to bulk manufacturers of listed chemicals.
6. Section 1310.04 is amended to reflect the additions and
deletions of the List I chemicals and to set forth the proposed
thresholds for the new chemicals. With respect to the newly added
chemicals Nitroethane and Benzaldehyde, records and reports must be
kept only for those transactions, including cumulative transactions
within a calendar month, which equal or exceed the proposed thresholds.
7. Sections 1310.05 and 1310.06 are amended to include a reporting
requirement with respect to drug products containing ephedrine that are
regulated as List I chemicals and to set forth the required format for
the chemical manufacturer reports. Drug products containing ephedrine
are legitimately distributed solely for human consumption. Thus, the
distribution of 375 dosage units (approximately a two-month supply at
the current recommended therapeutic dose) or more of such drug products
in a calendar month to a person who is not registered with DEA to
distribute or export a List I chemical would be considered
extraordinary and therefore would have to be reported.
8. Section 1310.08 is amended to add international transactions to
the types of transactions regulated.
9. Sections 1310.10 through 1310.15 are added to set forth the
procedures regarding removal of the exemption from recordkeeping and
reporting requirements of drugs distributed under the Food, Drug, and
Cosmetic Act, the exemption from recordkeeping and reporting
requirements of chemical mixtures, and the identification of drugs
which contain ephedrine in combination with therapeutically significant
quantities of another medicinal ingredient.
10. Section 1313.02 is amended to revise the definitions for
``regulated person'' and ``regulated transaction''; and definitions for
``regular importer'', ``established record as an importer'', ``broker''
and ``trader'', and ``international transaction''; and to remove the
definition of ``regular supplier''.
11. Sections 1313.12, 1313.15 and 1313.21 are amended to set forth
criteria regarding the waiver of the 15 day notification requirement
for certain imports and exports of listed chemicals and the removal of
the waiver of the 15 day notification requirement for exports of listed
chemicals to specified countries.
12. Sections 1313.32, 1313.33 and 1313.34 are added to establish
the notification requirements for brokers and traders engaging in
international transactions.

IV. Fees

Section 1309.11 proposes the application fee for registration and
reregistration of manufacturers, distributors, importers and exporters
of List I chemicals, as authorized by section 3(a) of the DCDCA. The
proposed fee was established pursuant to the Office of Management and
Budget (OMB) Circular A-25, as revised on July 15, 1993 (58 FR 38142),
which sets forth Federal policy regarding user fees.
1. Circular A-25, Section 6 provides that ``[A] user charge * * *
will be assessed against each identifiable recipient for special
benefits derived from Federal activities beyond those received by the
general public.'' The section further requires that the user charge be
sufficient to ``* * * recover the full cost to the Federal Government
for providing the special benefit.'' A special benefit is described as
a Government service which ``Enables the beneficiary to obtain more
immediate or substantial gains or values (which may or may not be
measurable in monetary terms) than those that accrue to the general
public (e.g., receiving a patent, insurance, or guarantee provision, or
a license to carry on a specific activity or business [emphasis added]
or various kinds of public land use)''.
Sections 822 and 957 of Title 21, United States Code, as amended by
the DCDCA, require that any person who manufactures, distributes,
imports or exports a List I chemical must obtain annually a
registration in accordance with DEA rules and regulations. A
registration to manufacture, distribute, import or export List I
chemicals is a benefit under Circular A-25, in that it allows the
registrant to engage in certain activities while a member of the
general public may not. Therefore, the costs associated with DEA's
issuance of a registration to manufacture, distribute, import or export
a List I chemical; certain costs associated with advising registrants
of their responsibilities; and maintenance of the integrity of the
registration system must be recovered through assessment of a user fee.
2. Section 6(d) of Circular A-25 describes the requirements for
determining the full cost of a service or benefit. ``Full cost'' is
defined as all direct and indirect costs, including, but not limited
to: direct and indirect personnel costs, including salaries, fringe
benefits (such as life and health insurance and retirement) and travel;
physical overhead, including material and supply costs such as forms,
postage, equipment, rent and utilities; management and supervisory
costs; and the costs of enforcement, collection, research,
establishment of standards, and regulation. Section 6(d)(1)(e) provides
that the cost figures shall be established utilizing ``the best
available records of the agency and new cost accounting systems need
not be established solely for this purpose.'' The cost of the services
provided by DEA were determined by use of proven and accepted budget
estimating techniques as outlined in the DOJ budget guidelines and OMB
Circular A-11.

Considerations for the Establishment of the Original Fee

DEA has identified two distinct categories of chemical registrants:
retail distributors, such as convenience stores, gas stations, truck
stops, liquor stores, etc., whose regulated activities consist of the
direct sale to walk-in customers of drug products that are regulated as
List I chemicals; and non-retailers, such as manufacturers which
distribute, distributors, importers and exporters of List I chemicals.
Based upon contacts with the chemical industry and surveys of the
industry over the past three years, DEA estimates that approximately
1,500 applications for registration will be received from non-
retailers.
Based on the information gathered from various sources, including
association data, surveys of ephedrine manufacturers and distributors,
and correspondence received from ephedrine distributors, DEA estimates
that there may have been as many as 100,000 retail distributors that,
prior to the April 16, 1994 effective date of the DCDCA, sold drug
products that are now subject to regulation. However, estimating the
number of persons who will continue to engage in activities with the
regulated drug products is speculative, due to a variety of factors.
Some retailers who engaged in this previously unregulated activity may
decide to no longer sell items for which registration is required by
law. Also, the activities of retail distributors may be affected by
state laws, such as those in Wisconsin, Florida and Missouri, which
require that drug products containing ephedrine as the sole medicinal
ingredient may only be dispensed pursuant to prescription. Another
consideration is the availability of alternative products that are not
subject to the registration, recordkeeping and reporting requirements.
DEA has learned that certain distributors of single-entity ephedrine
products have already advised their retail customers to switch to such
alternative products to avoid the registration and recordkeeping
requirements. Therefore, for purposes of establishing the initial fee,
DEA estimates that 10,000 applications will be submitted by retail
distributors. The number of applications is important only when
considering apportionment of indirect costs associated with initial
registration. For the first year of the registration program, this
amount will constitute $22.00 of the total fee. Thus, a larger or
smaller number of applicants would not result in any significant
increase or decrease in the registration fee.
During the implementation of the DCDCA, DEA will focus on
processing applications, conducting pre-registration and follow-up
investigations and the creation and dissemination of information
regarding the registrant's responsibilities under the DCDCA. DEA
expects that the majority of its chemical control resources will be
required to handle the applications which will be submitted immediately
following implementation of the regulations.
Once the pre-registration process for existing businesses has been
handled, the primary focus of DEA's chemical control program will be
investigations of violative firms and registration denial or revocation
proceedings. Such enforcement activities protect the integrity of the
registration system by ensuring that registrants continue to meet the
requirements of the DCDCA. DEA's activities will include, but not be
limited to, extensive investigation and collection of documentation
regarding violative practices by registrants; attorney review and
preparation by DEA's Office of Chief Counsel; staff and attorney time
to prepare for proceedings to deny or revoke a registration;
Administrative Law Judge and staff to conduct registration denial
hearings; and DEA budget and controller staff time for budget planning,
accounting and auditing of fees collected. The benefits of these
activities accrue to the over-all registrant population and the costs
for such activities must be averaged across the entire registrant
population. However, as described earlier, the expected registrant
population and the extent of these enforcement activities are
speculative at this time. Therefore, the costs associated with these
activities have not been included in this initial fee, since they are
indirect costs that would have to be averaged across a presently
unknown population of applicants.
After the registration process is completed and the registrant
population and extent of activities necessary to protect the integrity
of the system has been determined, DEA will revise its fee schedule to
recover the full costs of its chemical control program, as required by
Circular A-25. DEA will publish in the Federal Register its revised fee
schedule and invite comment by interested parties.
In light of the above, the initial registration fee will be based
upon the cost of processing the individual application, the associated
investigation of the qualifications and suitability for registration,
and the creation and dissemination of information regarding the
responsibilities under the DCDCA. Reregistration fees under this
proposal will include enforcement and compliance costs associated with
maintenance of the integrity of the registration and control system.
These fees will not include enforcement costs of reviews of records and
reports of fully complaint registrants exclusively to identify leads to
possible illicit drug laboratories.

The Initial Registration Investigation

The fundamental purpose of the pre-registration investigation is to
determine the fitness and suitability of the applicant to engage in the
activities for which registration is requested and to ensure that the
applicant is familiar with its responsibilities to prevent the
diversion of regulated products or chemicals. This will be accomplished
through an on-site visit to the applicant (following receipt and
processing of the application for registration by clerical personnel)
by DEA Diversion Investigators. During this on-site visit, the
applicant's responsibilities with respect to security, record-keeping
and reporting will be discussed; the applicant's existing provisions
for security, record-keeping and reporting, if any, will be reviewed,
along with previous sales and customers; and the applicant will be
provided with material, such as the Chemical Handlers Manual, regarding
chemical trafficking and controls. In addition, the investigator will
perform background checks on the applicant, owner and employees, and
prepare the necessary reports summarizing the results of the
registration review.
Retail distributors engage in a limited activity as regulated by
the DCDCA. By contrast, non-retail chemical firms may deal in a range
of List I chemicals, in bulk lots or, pursuant to orders received by
mail, telephone, facsimile or other electronic means. Consequently, the
average pre-registration investigation for a retail distributor will
entail less DEA investigative time than for a non-retail chemical firm.

Method for Collection of Fees

For the initial registration fee, DEA has established separate
costs for processing the application, and for conducting the pre-
registrant investigation. Both costs will be incurred by the applicant
prior to their initial registration under the DCDCA.
As noted above, DEA anticipates receiving 1500 applications from
non-retail chemical firms and approximately 10,000 applications from
retail distributors. DEA will place priority on the completion of the
pre-registration investigations of non-retail chemical firms. All non-
retail applications will be processed and reviewed within the first
year of the effective date of this regulation. Therefore, the full fee
(application and pre-registration investigation costs) must be
submitted with the application.
Because of the demands for resources to conduct registration
reviews of non-retail applications and for other chemical control
activities, DEA will be unable to process and review all of the
applications submitted by retail distributors within the first year
following the effective date of the final rule. As a consequence,
retail distributors will be subject to a split fee schedule for their
initial registration. Each retail distributor will include with their
application the established fee to cover the costs of processing the
application.
Based on available resources, DEA will identify and notify
approximately 1500-2000 of the retail applicants that they are
scheduled for pre-registration review in the first year. Each applicant
so identified will be required to pay the additional established cost
for the registration investigation prior to commencement of the review.
Based upon the volume of applications received, DEA may conduct
additional retail registration investigations in the first year. In the
second year, DEA will redirect resources spent conducting non-retail
pre-registration investigations to the retail level. DEA anticipates an
additional 6,000 to 8,000 pre-registrant investigations to be conducted
in the second year. These retail distributors will similarly be
notified of the investigation fee to be paid. They will not be required
to submit another application fee. However, if a retail distributor
fails to submit the required investigation fee within 30 days after
notification by DEA, that retail distributor's application will be
withdrawn.

Reregistration Fees

Following the completion of the initial registration process, DEA
will dedicate ongoing resources to insuring the controls of the DCDCA
are being maintained, protecting the integrity of the system, and
providing assistance, guidance, and interpretation of the chemical
control requirements to the registrants. These costs, along with
application processing costs will establish the basis for the annual
reregistration fee. Since many of these costs will be averaged across
the registrant population, it is only possible to establish a
reregistration fee at this time based upon estimated populations. After
the full second year of the regulations implementing the DCDCA, the fee
schedule will be reviewed, as required by Circular A-25, and a new fee
structure proposed for public comment, based upon the actual registrant
population.
As stated above, DEA will complete the registration process for all
non-retail applicants in the first year. Investigative resources
devoted to these pre-registration investigations (approximately 12
workyears) will be directed towards completion of the pre-registration
process of retail distributor applicants in the second year. At the
non-retail level, DEA will dedicate eight workyears of investigator
time to conduct follow-up investigations of approximately 75 non-retail
firms. Each investigation will require a comprehensive review of each
registrant's records, reporting systems and security provisions to
ensure that the registrant is complying with the chemical control
requirements, and chemicals are not being distributed to persons
seeking to divert them. Investigators will conduct a comprehensive on-
site review of the registrant's records; verification of transactions
and purchasers, including record checks of and visits to purchasers;
travel; and report preparation. This cost, plus the reregistration
processing fee and the above listed indirect costs averaged over the
estimated 1500 non-retail registrants will constitute the non-retail
reregistration fee.
At the retail level, due to the large volume of firms and the
general lack of experience in the required record-keeping and reporting
requirements, DEA will conduct a greater number of follow-up
investigations. However, in light of the anticipated smaller volumes of
regulated transactions of such firms, each follow-up is scheduled for a
smaller amount of on-site time. DEA anticipates that two Diversion
Investigator workyears will be required to conduct follow-up
investigations at the retail level. This cost, plus the reregistration
processing fee and above listed indirect costs averaged over the
estimated 2000 retail distributors registered in the first year will
constitute the reregistration fee.
As DEA completes the second year of the chemical registration
program, the bulk of the retail distributor new applications will have
been processed, thus freeing the resources assigned to conduct the
registration investigations. In the following years, there will be a
greater number of registrants submitting applications for
reregistration. DEA will dedicate proportionally greater resources to
these registrants. As noted earlier, following the initial two years of
the registration program, DEA will conduct a review of the fee
structure and, as needed, publish a notice in the Federal Register
regarding amendment of the fee schedule.

Registration Costs.

The costs associated with the registration process are as follows.
DEA estimates that 1,500 non-retail applications and approximately
10,000 retail applications will be received. As previously stated, the
personnel costs listed below include all direct and indirect costs,
including salaries, fringe benefits (such as life and health insurance
and retirement) and travel; physical overhead, including material and
supply costs such as forms, postage, equipment, rent and utilities:

Costs for Processing an Application and Issuing a Retail Distributor Registration

Cost for processing a retail distributor application

----------------------------------------------------------------------------------------------------------------
Clerical Time\1\... .25 hours................................................ $6.52
Material Costs:\2\
Application ......................................................... 0.22
Form.
Postage........ ......................................................... 0.39
Chemical ......................................................... 0.30
Handlers
Manual.
------------------------

Total ......................................................... 7.43
Application
Processing
Cost.
----------------------------------------------------------------------------------------------------------------
Cost for registration review for a retail distributor applicant

----------------------------------------------------------------------------------------------------------------
Direct Costs:
Investigator 5.5 hours................................................ 219.56
Time\3\.
Clerical .25 hours................................................ 6.52
Time\4\.
Material Costs:
Registratio ......................................................... 0.10
n
Certificat
e.
Postage.... ......................................................... 0.29
------------------------
Total ......................................................... 226.47
Direct
Costs.
Indirect Costs:
Management/Supe ......................................................... 5.58
rvisory
Time\5\.
Regulatory/Poli ......................................................... 1.93
cy
Development\6\.
Applicant/Regis ......................................................... 14.49
trant
Support\7\.
------------------------
Total ......................................................... 22.00
Indirect
Costs.
========================
Total Direct ......................................................... 248.47
and Indirect
Costs.
Notes Regarding the Costs Associated With Issuance of a Retail Distributor Registration

2 hours time at the applicant's place of business to review with the applicant the chemical registration and
control regulations; review the applicant's existing recordkeeping, reporting and security systems; and
discuss customer and trafficking patterns.
.75 hours to conduct the necessary background and record checks of the applicant, owner and employees.
.75 hours to prepare the reports regarding the results of the registration review.

\4\The clerical time spent during the registration review includes the time necessary to approve the
registration, initiate issuance of the registration certificate, and file copies of the report and
application.
\5\Management/Supervisory time is that time spent by management and supervisory personnel in the overall
development and maintenance of the registration program, including establishment of program priorities and
policy, resource allocation, and administrative direction. The following positions are involved:
Deputy Assistant Administrator and Deputy Director of the Office of Diversion Control--.05 work year each--
$14,619.
Chief and Deputy Chief Chemical Operations Section--.1 work year each--$27,651.
Chief, Liaison and Policy Section--.1 work year--$11,853.
Chief, Policy Unit--.1 work year--$10,045.
Total--$64,168.
Because the Management/Supervisory costs are related to the general operation of the registration program, they
must be averaged across the entire applicant population. For 11,500 applicants, the average cost would be
$5.58.
\6\Regulatory and policy development time consists of .25 work year of a program analyst time for drafting new/
amended regulations and Federal Register notices, issuance of policy statements and directives related to the
registration program and responding to registrant queries regarding registration matters. This time is for
general chemical registration program purposes and must be spread equally across the applicant population. The
cost of that time, $22,202, divided by 11,500 applicants equals $1.93.
\7\Applicant/Registrant support time will consist of 2 work years of Diversion Investigator time, which will be
dedicated to providing technical assistance, advice and informational materials to the industry to assist in
complying with the registration, recordkeeping and reporting requirements. The total cost for 2 work years of
Diversion Investigator time is $166,616, divided by 11,500 applicants equals $14.49.

Costs for Processing an Application and Issuing a Non-Retail Registration

Direct Costs:
Clerical Time\1\........................................................ .5 hour.............. $13.05
Material Costs:\2\
Application Form.................................................... ..................... 0.22
Postage............................................................. ..................... 0.39
Chemical Handlers Manual............................................ ..................... 0.30
Registration Certificate............................................ ..................... 0.10
Postage............................................................. ..................... 0.29
Investigator Time\3\.................................................... 14 hours............. 558.88
------------
Total Direct Costs.................................................... ..................... 573.23
Indirect Costs
Management/Supervisory Time\4\.......................................... ..................... 5.58
Regulatory/Policy Development\5\........................................ ..................... 1.93
Applicant/Registrant Support\6\......................................... ..................... 14.49
------------
Total Indirect Costs.................................................. ..................... 22.00
============
Total Direct and Indirect Costs....................................... ..................... 595.23
----------------------------------------------------------------------------------------------------------------
Notes Regarding the Costs Associated With Issuance of a Non-Retail Registration

\1\Clerical time includes the time required for preparing and mailing out application packages, time for
processing applications received, including computer data entry, encoding the application form, filing, and
transmitting a copy of the application to the appropriate DEA field office for the registration review
process. Following the registration review, time is required to approve the registration, initiate issuance of
the registration certificate, and file copies of the report and application.
\2\The printing cost for application forms of the same format as will be used for chemical registration is
$4,500 for 20,000 forms or 22.5 cents per form. The cost for the last printing of the Chemical Handlers Manual
was $2,250 for 7,500 copies, or 30 cents per copy.
\3\The investigator time to conduct the registration review consists of:
10 hours, 5 hours time each for two investigators, at the applicants place of business to review with the
applicant the chemical registration and control regulations; review the applicant's existing recordkeeping,
reporting and security systems; and discuss customer and trafficking patterns.
2 hours for travel to and from the applicant's location.
1 hour to conduct the necessary background and record checks of the applicant, owner and employees.
1 hour to prepare the reports regarding the results of the registration review.
\4\Management/Supervisory time is that time spent by management and supervisory personnel in the overall
development and maintenance of the registration program, including establishment of program priorities and
policy, resource allocation, and administrative direction. The following positions are involved:
Deputy Assistant Administrator and Deputy Director of the Office of Diversion Control--.05 work year each--
$14.619.
Chief and Deputy Chief Chemical Operations Section--.1 work year each--$27,651.
Chief, Liaison and Policy Section--.1 work year--$11,853.
Chief, Policy Unit--.1 work year--$10,045.
Total Costs--$64,168.
Because the Management/Supervisory costs are related to the general operation of the registration program, they
must be averaged across the entire applicant population. For 11,500 applicants, the average cost would be
$5.58.
\5\Regulatory and policy development time consists of .25 work year of a program analyst time for drafting new/
amended regulations and Federal Register notices, issuance of policy statements and directives related to the
registration program and responding to registrant queries regarding registration matters. This time is for
general chemical registration program purposes and must be spread equally across the applicant population. The
cost of that time, $22,202, divided by 11,500 applicants equals $1.93.
\6\Applicant/Registrant Support time will consist of 2 work years of Diversion Investigator time, which will be
dedicated to providing technical assistance, advice and informational materials to the industry to assist in
complying with the registration, recordkeeping and reporting requirements. The total cost for 2 work years of
Diversion Investigator time is $166,616, divided by 11,500 applicants equals $14.49.

Costs for Processing a Retail Reregistration Application

Direct Costs:
Clerical .25 hours................................................ $6.52
Time\1\.
Material
Costs:\2\
Forms...... ......................................................... .45
Postage.... ......................................................... .68
------------------------
Total ......................................................... 7.65
Direct
Costs.
Indirect Costs:
Management/Supe ......................................................... 18.33
rvisory
Time\3\.
Regulatory/Poli ......................................................... 6.34
cy
Development\4\.
Follow-up ......................................................... 83.30
Investigation
Time\5\.
------------------------
Total ......................................................... 107.97
Indirect
Costs.
========================
Total Direct ......................................................... 115.62
and Indirect
Costs.
Notes Regarding the Costs Associated With a Retail Distributor Reregistration

\1\Clerical time includes the time required for preparing and mailing out application packages, time for
processing applications received, including computer data entry, encoding the application form, filing, and
preparing the fee for deposit.
\2\The forms cost covers both the reregistration application form and the registration certificate. Postage is
for mailing the reregistration application and the registration certificate.
\3\ Management/Supervisory time is that time spent by management and supervisory personnel in the overall
development and maintenance of the registration program, including establishment of program priorities and
policy, resource allocation, and administrative direction. The following positions are involved:
Deputy Assistant Administrator and Deputy Director of the Office of Diversion Control--.05 work year each--
$14,619.
Chief and Deputy Chief Chemical Operations Section--.1 work year each--$27,651.
Chief, Liaison and Policy Section--.1 work year--$11,853.
Chief, Policy Unit--.1 work year--$10,045.
Total Costs--$64,168.
Because the Management/Supervisory costs are related to the general operation of the registration program, they
must be averaged across the entire reregistration applicant populations. For the initial reregistration year,
DEA anticipates receiving 3,500 retail and non-retail reregistration applications. The average cost per
application would be $18.33.
\4\Regulatory and policy development time consists of .25 work year of a program analyst time for drafting new/
amended regulations and Federal Register notices, issuance of policy statements and directives related to the
registration program and responding to registrant queries regarding registration matters. This time is for
general chemical registration program purposes and must be spread equally across the reregistration applicant
population. The cost of that time, $22,202, divided by 3,500 applicants equals $6.34.
\5\DEA will conduct follow-up investigations of retail registrants to ensure that they are complying with the
chemical control requirements. The investigations will consist of a comprehensive review of each registrant's
records, reporting systems and security provisions. Each investigation will require on-site record reviews;
transaction follow-ups, including purchaser verification and record checks; travel; and report preparation.
Based on present estimates, DEA anticipates that all such investigations combined will require 2 work years of
Diversion Investigator time. The total cost for 2 work years of Diversion Investigator time is $166,616,
divided by 2,000 retail reregistration applicants equals $83.30.

Costs for Processing a Non-Retail Reregistration Application

Direct Costs:
Clerical .25 hours................................................ $6.52
Time\1\.
Material
Costs\2\
Forms...... ......................................................... .45
Postage.... ......................................................... .68
------------------------
Total ......................................................... 7.65
Direct
Costs.
Indirect Costs
Management/Supe ......................................................... 18.33
rvisory
Time\3\.
Regulatory/Poli ......................................................... 6.34
cy
Development\4\.
Follow-up ......................................................... 444.31
Investigation
Time\5\.
------------------------
Total ......................................................... 468.98
Indirect
Costs.
========================
Total Direct ......................................................... 476.63
and Indirect
Costs.
Notes Regarding the Costs Associated With a Non-Retail Registration

\1\Clerical time includes the time required for preparing and mailing out application packages, time for
processing applications received, including computer data entry, encoding the application form, filing, and
preparing the fee for deposit.
\2\The forms cost covers both the reregistration application form and the registration certificate. Postage is
for mailing the reregistration application and the registration certificate.
\3\Management/Supervisory time is that time spent by management and supervisory personnel in the overall
development and maintenance of the registration program including establishment of program priorities and
policy, resource allocation, and administrative direction. The following positions are involved:
Deputy Assistant Administrator and Deputy Director of the Office of Diversion Control--.05 work year each--
$14,619.
Chief and Deputy Chief Chemical Operations Section--.1 work year each--$27,651.
Chief, Liaison and Policy Section--.1 work year--$11,853
Chief, Policy Unit--.1 work year--$10,045.
Total Costs--$64,168.
Because the Management/Supervisory costs are related to the general operation of the registration program, they
must be averaged across the entire reregistration applicant population. For the initial renewal year, DEA
anticipates receiving 3,500 retail and non-retail reregistration applications. The average cost per applicant
would be $18.33.
\4\Regulatory and policy development time consists of .25 work year of a program analyst time for drafting new/
amended regulations and Federal Register notices, issuance of policy statements and directives related to the
registration program and responding to registrant queries regarding registration matters. This time is for
general chemical registration program purposes and must be spread equally across the reregistration applicant
population. The cost of that time, $22,202, divided by 3,500 reregistration applicants, 3,500, equals $6.34.
\5\DEA will conduct follow-up investigations of approximately 75 non-retail registrants to ensure that
registrants are complying with the chemical control requirements and that chemicals are not being distributed
to persons which wishing to divert them. The investigations will consist of a comprehensive review of each
registrant's records, reporting systems and security provisions. Each investigation will require comprehensive
on-site review of the registrant's records; verification of transactions and purchasers, including record
checks of and visits to purchasers; travel; and report preparation. Based on current estimates, DEA
anticipates that all such follow-up investigations combined will require 8 workyears of Diversion Investigator
time. The total cost for 8 workyears of Diversion Investigator time is $666,464, divided by 1,500 non-retail
reregistration applicants equals $444.31.

V. Regulatory Flexibility and Small Business Impact

DEA has examined the impact of the DCDCA and this proposed rule in
the light of Executive Order 12866 and the Regulatory Flexibility Act
(PL 96-354). DEA has identified approximately 1,500 firms or persons,
other than retail distributors, who handle List I chemicals. These non-
retail chemical firms are generally known to DEA because most have been
subject to the recordkeeping and reporting requirements of the CDTA for
a number of years. Independent retail distributors, however, are
primarily small business entities.
DEA has found that in addition to the traditional sources of
distribution (i.e., hospitals, pharmacies, pharmaceutical manufacturers
and distributors, etc.), independently owned and operated retail
outlets such as convenience stores, liquor stores, truck stops, gas
stations, and nutrition centers engage in sales to the public of the
single entity drug products that are not regulated. Based on
information received from various distributors, the potential affected
population of retail outlets that handled the single entity drug
products prior to the April 1994 effective date of the DCDCA, could be
as high as 100,000. How many of these will choose to continue their
sales of the single entity drug products and be subject to the
registration, recordkeeping and reporting requirements is unclear, due
to such factors as: (1) The introduction of state laws making drug
products containing ephedrine prescription drugs, (2) the availability
of alternative products which are not subject to the chemical
regulations at this time, and (3) the intent of the DCDCA to eliminate
sales by those persons who have been supplying clandestine
laboratories.
The DCDCA requires that any person wishing to distribute, import,
or export a List I chemical must obtain a registration from DEA for
each location at which such activities are carried out, prior to
conducting such activities. The statutory basis for this requirement is
found in Sections 822 and 957 of the CSA, as amended by the DCDCA.
Therefore, a separate registration must be issued for each location
pursuant to the factors regarding the public interest set forth in
Section 823(h) of the CSA. Prior to taking final action on an
application, DEA will conduct an on-site investigation at each location
for which registration is requested. The guidelines set forth in the
Office of management and Budget (OMB) Circular A-25 require that the
costs of the registration process must be recovered through application
fees charged to the applicants. As noted in the fee analysis, the
preregistration investigation for retail distributor applicants will be
less intensive than the investigation for other chemical applicants,
due to the limited scope and volume of a retail distributor's chemical
activities. As a result, the retail distributor's fees will be
significantly less than those for non-retail chemical applicants. In
addition to the cost of registration and reregistration, it is
estimated that applicants would be required to expend one-half hour per
year completing the appropriate application for registration or
reregistration.
In reviewing the implementation of the registration requirement,
DEA gave consideration to the specific purposes for requiring
registration and the nature of the problem of diversion of List I
chemicals and made the following determinations:
1. DEA will not require that persons already registered to engage
in certain activities with controlled substances obtain a separate
registration for similar activities with FDA approved drug products
which are regulated as List I chemicals. A principal reason for
requiring registration is to allow DEA to determine the fitness of the
applicant to conduct a specified activity and to allow DEA, if
circumstances require, to prohibit the applicant from engaging in the
activity. Persons required to register with DEA to engage in activities
with controlled substances are subject to Federal and State
investigations of their fitness which exceed the requirements for
registration for List I chemical activities. Further, the proposed
regulation allows that DEA may remove any person's exemption from the
registration requirement and may, if appropriate, take action against
the person's controlled substance registration, if the person engages
in activities in violation of the chemical laws and regulations.
Accordingly, DEA is proposing in Sec. 1309.25 to exempt persons
registered with DEA to handle controlled substances from the
requirement to obtain a separate chemical registration for certain
similar activities with the regulated FDA approved drug products. The
exemption could potentially exempt over 70,000 hospitals, pharmacies,
distributors, manufacturers, importers, and exporters of controlled
substances who are currently registered with DEA to handle controlled
substances.
2. DEA will not require persons who manufacture a List I chemical
solely for internal use, with no subsequent distribution or exportation
of the chemical, to obtain a chemical registration. DEA has found that
such persons have not been a source of any significant diversion of
List I chemicals; the primary sources of diversion are through the
distribution channels which deal directly with the public. If these
manufacturers should later become a source of diversion, the exemption
can be removed. DEA is proposing in Section 1309.27 that such
manufacturers be exempted from the chemical registration requirement.
DEA has also determined that the requirement that manufacturers of
listed chemicals report to DEA annually can be limited without
compromising the intent of the requirement. DEA's primary interest in
this area is determining the total quantity of each individual listed
chemical that is available on the domestic market. Therefore, DEA
proposes that only bulk manufacturers of the chemicals need report to
DEA; other manufacturers, such as repacker/relabelers, dosage form,
etc., do not need to report.
DEA has also considered the impact on small businesses of the
application of the existing chemical recordkeeping and reporting
requirements to those drug products containing ephedrine which are now
regulated as List I chemicals. The recordkeeping and reporting
provisions of the CDTA, as set forth in section 830 of the CSA and
parts 1310 and 1313 of title 21 of the Code of Federal Regulations,
have been in place since 1989 and form the backbone of DEA's chemical
control program. The requirements were developed jointly with the
chemical industry to provide the necessary information to track
chemical transfers while minimizing the recordkeeping and reporting
burden on the chemical industry. A retail distributor must keep records
that reflect the name and address of the purchaser, the date of the
transaction, the type of chemical and amount being transferred, and the
form of identification provided by the purchaser. The requirement to
make reports is limited to those transactions that are unusual or
suspicious and to thefts or losses of listed chemicals. It is estimated
that creating and storing a record will require an average of one
minute per record. These recordkeeping procedures are accepted practice
in the conduct of legitimate chemical commerce in the years they have
been in effect.
DEA is obligated to implement the mandate of Congress as set out in
the DCDCA. The DCDCA states that persons who wish to manufacture,
distribute, import or export List I chemicals must register with DEA.
Further, the DCDCA makes drug products containing ephedrine as the sole
medicinal ingredient subject to such registration, as well as to the
existing chemical recordkeeping and reporting requirements.
Consideration was given to exempting retail distributors from the
registration, recordkeeping and reporting requirements. However, such
an action would negate the purpose of the DCDCA by leaving a
significant portion of the sales of regulated ephedrine products
unregulated. Controlling the diversion of these products requires
monitoring and recordkeeping by all portions of the industry. DEA has
proposed steps to lessen the impact on retail distributors of the
DCDCA's requirements, while simultaneously carrying out the chemical
control mandate of the DCDCA.
In addition to these proposed regulations to implement the DCDCA,
DEA has published two other notices that should be given consideration
by parties concerned with the DCDCA. The first, published on March 17,
1994 (59 FR 12562), proposes removal of the established threshold for
ephedrine to reduce the diversion of ephedrine to clandestine
laboratories for the illicit manufacture of methamphetamine and
methcathinone. The second, published on March 24, 1994 (59 FR 13881),
establishes a temporary exemption from the registration requirements
for persons who manufacture, distribute, import or export List I
chemicals.
This notice proposes two new information collections: The DEA 510
and 510a application forms for registration and reregistration, and the
reports required from certain manufacturers of listed chemicals. DEA is
submitting a request to the Office of Management and Budget for review
and approval of these new collections pursuant to the provisions of the
Paperwork Reduction Act of 1980, 44 U.S.C. et seq.
This regulation has been drafted and reviewed in accordance with
Executive Order 12866, section 1(b), Principals of Regulation. The DEA
has determined that this rule is a significant regulatory action under
Executive Order 12866, section 3(f), Regulatory Planning and Review,
and accordingly this rule has been reviewed by the Office of Management
and Budget.
This action has been analyzed in accordance with the principles and
criteria in Executive Order 12612, and it has been determined that the
proposed rule does not have sufficient federalism implications to
warrant the preparation of a Federalism Assessment.

List of Subjects

21 CFR Part 1307

Drug traffic control.

21 CFR Part 1309

Administrative practice and procedure, Drug traffic control, List I
and List II chemicals, Security measures.

21 CFR Part 1310

Drug traffic control, List I and List II chemicals, Reporting and
recordkeeping requirements.

21 CFR Part 1313

Drug traffic control, Exports, Imports, List I and List II
chemicals, Transshipment and in-transit shipments.

21 CFR Part 1316

Administrative practice and procedure, Drug traffic control,
Research, Seizures and forfeitures.

I. For the reasons set out above, it is proposed that 21 CFR part
1307 be amended as follows:

PART 1307--[AMENDED]

1. The authority citation for part 1307 continues to read as
follows:

Authority: 21 U.S.C. 821, 822(d), 871(b), unless otherwise
noted.

2. Section 1307.03 is proposed to be amended by revising the
introductory language to read as follows:

Sec. 1307.03 Exceptions to regulations.

Any person may apply for an exception to the application of any
provision of parts 1301-1313, or 1316 of this chapter by filing a
written request stating the reasons for such exception. Requests shall
be filed with the Administrator, Drug Enforcement Administration,
Department of Justice, Washington, DC 20537. The Administrator may
grant an exception in his discretion, but in no case shall he be
required to grant an exception to any person which is not otherwise
required by law or the regulations cited in this section.
II. 21 CFR part 1309 is proposed to be added to read as follows:

PART 1309--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS, IMPORTERS
AND EXPORTERS OF LIST I CHEMICALS

General Information

Sec.
1309.01 Scope of part 1309.
1309.02 Definitions.
1309.03 Information; special instructions.

Fees for Registration and Reregistration

1309.11 Fee Amounts.
1309.12 Time and Method of Payment; refund.

Requirements for Registration

1309.21 Persons required to register.
1309.22 Separate registration for independent activities.
1309.23 Separate registration for separate locations.
1309.24 Exemption of agents and employees.
1309.25 Exemption of certain controlled substance registrants.
1309.26 Exemption of law enforcement officials.
1309.27 Exemption of certain manufacturers.

Applications for Registration

1309.31 Time for application for registration; expiration date.
1309.32 Application forms; contents, signature.
1309.33 Filing of application; joint filings.
1309.34 Acceptance for filing; defective applications.
1309.35 Additional information.
1309.36 Amendments to and withdrawals of applications.

Action on Applications for Registration: Revocation or Suspension of
Registration

1309.41 Administrative review generally.
1309.42 Certificate of registration; denial of registration.
1309.43 Suspension or revocation of registration.
1309.44 Suspension of registration pending final order.
1309.45 Extension of registration pending final order.
1309.46 Order to show cause.

Hearings

1309.51 Hearings generally.
1309.52 Purpose of hearing.
1309.53 Waiver or modification of rules.
1309.54 Request for hearing or appearance; waiver.
1309.55 Burden of proof.
1309.56 Time and place of hearing.
1309.57 Final order.

Modification, Transfer and Termination of Registration

1309.61 Modification in registration.
1309.62 Termination of registration.
1309.63 Transfer of registration.

Security Requirements

1309.71 General security requirements.
1309.72 Felony conviction; employer responsibilities.
1309.73 Employee responsibility to report diversion.

Authority: 21 U.S.C. 821, 822, 823, 824, 830, 871(b), 875, 877,
958.

General Information

Sec. 1309.01 Scope of part 1309.

Procedures governing the registration of manufacturers,
distributors, importers and exporters of List I chemicals pursuant to
sections 102, 302, 303, 1007 and 1008 of the Act (21 U.S.C. 802, 822,
823, 957 and 958) are set forth generally by those sections and
specifically by the sections of this part.

Sec. 1309.02 Definitions.

(a) The Term Act means the Controlled Substances Act (84 Stat.
1242; 21 U.S.C. 801) and/or the Controlled Substances Import and Export
Act (84 Stat. 1285; 21 U.S.C. 951).
(b) The term hearing means any hearing held pursuant to the part
for the granting, denial, revocation, or suspension of a registration
pursuant to sections 303 and 304 of the Act (21 U.S.C. 823-824).
(c) The term person includes any individual, corporation,
government or governmental subdivision or agency, business trust,
partnership, association, or other legal entity.
(d) The terms register and registration refer only to registration
required and permitted by sections 302 and 1007 of the Act (21 U.S.C.
822 and 957).
(f) The term registrant means any person who is registered pursuant
to either section 303 or section 1008 of the Act (21 U.S.C. 823 and
958).
(g) The term retail distributor means a distributor whose List I
chemical activities are restricted to the sale of drug products that
are regulated as List I chemicals pursuant to Sec. 1310.01(f)(1)(iv),
directly to walk-in customers for personal use.
Any term not defined in this section shall have the definition set
forth in section 102 of the Act (21 U.S.C. 802) or in Secs. 1310.01 and
1313.02 of this chapter.

Sec. 1309.03 Information; special instructions.

Information regarding procedures under these rules and instructions
supplementing these rules will be furnished upon request by writing to
the Drug Enforcement Administration, Chemical Operations Section,
Office of Diversion Control, Washington, DC 20537.

Fees for Registration and Reregistration

Sec. 1309.11 Fee amounts.

(a) For each initial registration to manufacture for distribution,
distribute, import, or export the applicant shall pay a fee of $595 for
an annual registration.
(b) For each reregistration to manufacture for distribution,
distribute, import, or export, the registrant shall pay a fee of $477
for an annual registration.
(c) For each initial registration to conduct business as a retail
distributor the applicant shall pay an application processing fee of $7
and an investigation fee of $248, for an annual registration.
(d) For each reregistration to conduct business as a retail
distributor the registrant shall pay a fee of $116.

Sec. 1309.12 Time and method of payment; refund.

(a) For each application for registration or reregistration to
manufacture for distribution, distribute, import, or export the
applicant shall pay the fee when the application for registration or
reregistration is submitted for filing.
(b) For retail distributor initial applications, the applicant
shall pay the application processing fee when the application for
registration is submitted for filing. The investigation fee shall be
paid within 30 days after DEA notifies the applicant that the
preregistration investigation has been scheduled.
(c) For retail distributor reregistration applications, the
registrant shall pay the fee when the application for reregistration is
submitted for filing.
(d) Payments should be made in the form of a personal, certified,
or cashier's check or money order made payable to ``Drug Enforcement
Administration.'' Payments made in the form of stamps, foreign
currency, or third party endorsed checks will not be accepted. These
application fees are not refundable.

Requirements for Registration

Sec. 1309.21 Persons required to register.

(a) Every person who distributes, imports, or exports any List I
chemical, other than those List I chemicals contained in a product
exempted under Sec. 1310.01(f)(1)(iv) of this chapter, or who proposes
to engage in the distribution, importation, or exportation of any List
I chemical, shall obtain annually a registration specific to the List I
chemicals to be handled, unless exempted by law or pursuant to
Secs. 1309.24-1309.27. Only persons actually engaged in such activities
are required to obtain a registration; related or affiliated persons
who are not engaged in such activities are not required to be
registered. (For example, a stockholder or parent corporation of a
corporation distributing List I chemicals is not required to obtain a
registration.)
(b) Every person who distributes or exports a List I chemical they
have manufactured, other than a List I chemical contained in a product
exempted under Sec. 1310.01(f)(1)(iv) of this chapter, or proposes to
distribute or export a List I chemical they have manufactured, shall
obtain annually a registration specific to the List I chemicals to be
handled, unless exempted by law or pursuant to Secs. 1309.24-1309.27.

Sec. 1309.22 Separate registration for independent activities.

(a) The following groups of activities are deemed to be independent
of each other:
(1) Retail distributing of List I chemicals;
(2) Non-Retail distributing of List I chemicals;
(3) Importing List I chemicals; and
(4) Exporting List I chemicals.
(b) Every person who engages in more than one group of independent
activities shall obtain a separate registration for each group of
activities, unless otherwise exempted by the Act or Secs. 1309.24-
1309.26, except that a person registered to import any List I chemical
shall be authorized to distribute that List I chemical, but no other
chemical that the person is not registered to import.

Sec. 1309.23 Separate registration for separate locations.

(a) A separate registration is required for each principal place of
business at one general physical location where List I chemicals are
distributed, imported, or exported by a person.
(b) The following locations shall be deemed to be places not
subject to the registration requirement:
(1) A warehouse where List I chemicals are stored by or on behalf
of a registered person, unless such chemicals are distributed directly
from such warehouse to locations other than the registered location
from which the chemicals were originally delivered; and
(2) An office used by agents of a registrant where sales of List I
chemicals are solicited, made, or supervised but which neither contains
such chemicals (other than chemicals for display purposes) nor serves
as a distribution point for filling sales orders.

Sec. 1309.24 Exemption of agents and employees.

The requirement of registration is waived for any agent or employee
of a person who is registered to engage in any group of independent
activities, if such agent or employee is acting in the usual course of
his or her business or employment.

Sec. 1309.25 Exemption of certain controlled substance registrants.

(a) The requirement of registration is waived for any person who
distributes a product containing a List I chemical that is regulated
pursuant to Sec. 1310.01(f)(1)(iv) of this chapter, if that person is
registered with the Administration to manufacture, distribute or
dispense a controlled substance.
(b) The requirement of registration is waived for any person who
imports or exports a product containing a List I chemical that is
regulated pursuant to Sec. 1310.01(f)(1)(iv) of this chapter, if that
person is registered with the Administration to engage in the same
activity with a controlled substance.
(c) The Administrator may, upon finding that continuation of the
waiver would not be in the public interest, suspend or revoke a
person's waiver pursuant to the procedures set forth in Secs. 1309.43-
1309.46 and 1309.51-1309.57. In considering the revocation or
suspension of a person's waiver, the Administrator shall also consider
whether action to revoke or suspend the person's controlled substance
registration pursuant to 21 U.S.C. 824 is warranted.
(d) Any person exempted from the registration requirement under
this section shall comply with the security requirements set forth in
Sec. 1309.71-1309.73 and the recordkeeping and reporting requirements
set forth under parts 1310 and 1313 of this chapter.

Sec. 1309.26 Exemption of law enforcement officials.

(a) The requirement of registration is waived for the following
persons in the circumstances described in this section:
(1) Any officer or employee of the Administration, any officer of
the U.S. Customs Service, any officer or employee of the United States
Food and Drug Administration, any other Federal officer who is lawfully
engaged in the enforcement of any Federal law relating to listed
chemicals, controlled substances, drugs or customs, and is duly
authorized to possess and distribute List I chemicals in the course of
official duties; and
(2) Any officer or employee of any State, or any political
subdivision or agency thereof, who is engaged in the enforcement of any
State or local law relating to listed chemicals and controlled
substances and is duly authorized to possess and distribute List I
chemicals in the course of his official duties.
(b) Any official exempted by this section may, when acting in the
course of official duties, possess any List I chemical and distribute
any such chemical to any other official who is also exempted by this
section and acting in the course of official duties.

Sec. 1309.27 Exemption of certain manufacturers.

The requirement of registration is waived for any manufacturer of a
List I chemical, if that chemical is produced solely for internal
consumption by the manufacturer and there is no subsequent distribution
or exportation of the List I chemical.

Application for Registration

Sec. 1309.31 Time for application for registration; expiration date.

(a) Any person who is required to be registered and who is not so
registered may apply for registration at any time. No person required
to be registered shall engage in any activity for which registration is
required until the application for registration is approved and a
Certificate of Registration is issued by the Administrator to such
person.
(b) Any person who is registered may apply to be reregistered not
more than 60 days before the expiration date of his registration.
(c) At the time a person is first registered, that person shall be
assigned to one of twelve groups, which shall correspond to the months
of the year. The expiration date of the registrations of all
registrants within any group will be the last day of the month
designated for that group. In assigning any of the above persons to a
group, the Administration may select a group the expiration date of
which is less than one year from the date such business activity was
registered. If the person is assigned to a group which has an
expiration date less than eleven months from the date of which the
person is registered, the registration shall not expire until one year
from that expiration date; in all other cases, the registration shall
expire on the expiration date following the date on which the person is
registered.

Sec. 1309.32 Application forms; contents; signature.

(a) Any person who is required to be registered pursuant to
Sec. 1309.21 and is not so registered, shall apply on DEA Form 510.
(b) Any person who is registered pursuant to Sec. 1309.21, shall
apply for reregistration on DEA Form 510a.
(c) DEA Form 510 may be obtained at any divisional office of the
Administration or by writing to the Registration Unit, Drug Enforcement
Administration, Department of Justice, Post Office Box 28083, Central
Station, Washington, DC 20005. DEA Form 510a will be mailed to each
List I chemical registrant approximately 60 days before the expiration
date of his or her registration; if any registered person does not
receive such forms within 45 days before the expiration date of the
registration, notice must be promptly given of such fact and DEA Form
510a must be requested by writing to the Registration Unit of the
Administration at the foregoing address.
(d) Each application for registration shall include the
Administration Chemical Code Number, as set forth in Sec. 1310.02 of
this chapter, for each List I chemical to be distributed, imported, or
exported.
(e) Registration shall not entitle a person to engage in any
activity with any List I chemical not specified in his or her
application.
(f) Each application shall include all information called for in
the form, unless the item is not applicable, in which case this fact
shall be indicated.
(g) Each application, attachment, or other document filed as part
of an application, shall be signed by the applicant, if an individual;
by a partner of the applicant, if a partnership; or by an officer of
the applicant, if a corporation, corporate division, association, trust
or other entity. An applicant may authorize one or more individuals,
who would not otherwise be authorized to do so, to sign applications
for the applicant by filing with the application or other document a
power or attorney for each such individual. The power of attorney shall
be signed by a person whose is authorized to sign applications under
this paragraph and shall contain the signature of the individual being
authorized to sign the application or other document. The power of
attorney shall be valid until revoked by the applicant.

Sec. 1309.33 Filing of application; joint filings.

(a) All applications for registration shall be submitted for filing
to the Registration Unit, Drug Enforcement Administration, Chemical
Registration/ODC, Post Office Box 2427, Arlington, Virginia 22202-2427.
The appropriate registration fee and any required attachments must
accompany the application.
(b) Any person required to obtain more than one registration may
submit all applications in one package. Each application must be
complete and must not refer to any accompanying application for
required information.

Sec. 1309.34 Acceptance for filing; defective applications.

(a) Applications submitted for filing are dated upon receipt. If
found to be complete, the application will be accepted for filing.
Applications failing to comply with the requirements of this part will
not generally be accepted for filing. In the case of minor defects as
to completeness, the Administrator may accept the application for
filing with a request to the applicant for additional information. A
defective application will be returned to the applicant within 10 days
of receipt with a statement of the reason for not accepting the
application for filing. A defective application may be corrected and
resubmitted for filing at any time.
(b) Accepting an application for filing does not preclude any
subsequent request for additional information pursuant to Sec. 1309.35
and has no bearing on whether the application will be granted.

Sec. 1309.35 Additional information.

The Administrator may require an applicant to submit such documents
or written statements of fact relevant to the application as he deems
necessary to determine whether the application should be granted. The
failure of the applicant to provide such documents or statements within
a reasonable time after being requested to do so shall be deemed to be
a waiver by the applicant of an opportunity to present such documents
or facts for consideration by the Administrator in granting or denying
the application.

Sec. 1309.36 Amendments to and withdrawals of applications.

(a) An application may be amended or withdrawn without permission
of the Administrator at any time before the date on which the applicant
receives an order to show cause pursuant to Sec. 1309.46. An
application may be amended or withdrawn with permission of the
Administrator at any time where good cause is shown by the applicant or
where the amendment or withdrawal is in the public interest.
(b) After an application has been accepted for filing, the request
by the applicant that it be returned or the failure of the applicant to
respond to official correspondence regarding the application, including
a request that the applicant submit the required fee, when sent by
registered or certified mail, return receipt requested, shall be deemed
to be a withdrawal of the application.

Action of Applications for Registration: Revocation or Suspension of
Registration

Sec. 1309.41 Administrative review generally.

The Administrator may inspect, or cause to be inspected, the
establishment of an applicant or registrant, pursuant to subpart A of
part 1316 of this chapter. The Administrator shall review the
application for registration and other information gathered by the
Administrator regarding an applicant in order to determine whether the
applicable standards of section 303 of the Act (21 U.S.C. 823) have
been met by the applicant.

Sec. 1309.42 Certificate of registration; denial of registration.

(a) The Administrator shall issue a Certificate of Registration
(DEA Form 511) to an applicant if the issuance of registration or
reregistration is required under the applicable provisions of section
303 of the Act (21 U.S.C. 823). In the event that the issuance of
registration or reregistration is not required, the Administrator shall
deny the application. Before denying any application, the Administrator
shall issue an order to show cause pursuant to Sec. 1309.46 and, if
requested by the applicant, shall hold a hearing on the application
pursuant to Sec. 1309.51.
(b) The Certificate of Registration (DEA Form 511) shall contain
the name, address, and registration number of the registrant, the
activity authorized by the registration, the amount of fee paid, and
the expiration date of the registration. The registrant shall maintain
the certificate of registration at the registered location in a readily
retrievable manner and shall permit inspection of the certificate by
any official, agent or employee of the Administration or of any
Federal, State, or local agency engaged in enforcement of laws relating
to List I chemicals or controlled substances.

Sec. 1309.43 Suspension or revocation of registration.

(a) The Administrator may suspend any registration pursuant to
section 304(a) of the Act (21 U.S.C. 824(a)) for any period of time he
determines.
(b) The Administrator may revoke any registration pursuant to
section 304(a) of the Act (21 U.S.C. 824(a)).
(c) Before revoking or suspending any registration, the
Administrator shall issue an order to show cause pursuant to
Sec. 1309.46 and, if requested by the registrant, shall hold a hearing
pursuant to Sec. 1309.51. Notwithstanding the requirements of this
Section, however, the Administrator may suspend any registration
pending a final order pursuant to Sec. 1309.44.
(d) Upon service of the order of the Administrator suspending or
revoking registration, the registrant shall immediately deliver his or
her Certificate of Registration to the nearest office of the
Administration.

Sec. 1309.44 Suspension of registration pending final order.

(a) The Administrator may suspend any registration simultaneously
with or at any time subsequent to the service upon the registrant of an
order to show cause why such registration should not be revoked or
suspended, in any case where he finds that there is an imminent danger
to the public health or safety. If the Administrator so suspends, he
shall serve with the order to show cause pursuant to Sec. 1309.46 an
order of immediate suspension that shall contain a statement of his
findings regarding the danger to public health or safety.
(b) Upon service of the order of immediate suspension, the
registrant shall promptly return his Certificate of Registration to the
nearest office of the Administration.
(c) Any suspension shall continue in effect until the conclusion of
all proceedings upon the revocation or suspension, including any
judicial review thereof, unless sooner withdrawn by the Administrator
or dissolved by a court of competent jurisdiction. Any registrant whose
registration is suspended under this section may request a hearing on
the revocation or suspension of his registration at a time earlier than
specified in the order to show cause pursuant to Sec. 1309.46, which
request shall be granted by the Administrator, who shall fix a date for
such hearing as early as reasonably possible.

Sec. 1309.45 Extension of registration pending final order.

In the event that an applicant for reregistration (who is doing
business under a registration previously granted and not revoked or
suspended) has applied for reregistration at least 45 days before the
date on which the existing registration is due to expire, and the
Administrator has issued no order on the application on the date on
which the existing registration is due to expire, the existing
registration of the applicant shall automatically be extended and
continue in effect until the date on which the Administrator so issues
his order. The Administrator may extend any other existing registration
under the circumstances contemplated in this section even though the
registrant failed to apply for reregistration at least 45 days before
expiration of the existing registration, with or without request by the
registrant, if the Administrator finds that such extension is not
inconsistent with the public health and safety.

Sec. 1309.46 Order to show cause.

(a) If, upon examination of the application for registration from
any applicant and other information gathered by the Administration
regarding the applicant, the Administrator is unable to make the
determinations required by the applicable provisions of section 303 of
the Act (21 U.S.C. 823) to register the applicant, the Administrator
shall serve upon the applicant an order to show cause why the
application for registration should not be denied.
(b) If, upon information gathered by the Administration regarding
any registrant, the Administrator determines that the registration of
such registrant is subject to suspension or revocation pursuant to
section 304 of the Act (21 U.S.C. 824), the Administrator shall serve
upon the registrant an order to show cause why the registration should
not be revoked or suspended.
(c) The order to show cause shall call upon the applicant or
registrant to appear before the Administrator at a time and place
stated in the order, which shall not be less than 30 days after the
date of receipt of the order. The order to show cause shall also
contain a statement of the legal basis for such hearing and for the
denial, revocation, or suspension of registration and a summary of the
matters of fact and law asserted.
(d) Upon receipt of an order to show cause, the applicant or
registrant must, if he desires a hearing, file a request for a hearing
pursuant to Sec. 1309.54. If a hearing is requested, the Administrator
shall hold a hearing at the time and place stated in the order,
pursuant to Sec. 1309.51.
(e) When authorized by the Administrator, any agent of the
Administration may serve the order to show cause.

Hearings

Sec. 1309.51 Hearings generally.

(a) In any case where the Administrator shall hold a hearing on any
registration or application therefor, the procedures for such hearing
shall be governed generally by the adjudication procedures set forth in
the Administrative Procedure Act (5 U.S.C. 551-559) and specifically by
sections 303 and 304 of the Act (21 U.S.C. 823-824), by Secs. 1309.51-
1309.57, and by the procedure for administrative hearings under the Act
set forth in Secs. 1316.41-1316.67 of this chapter.
(b) Any hearing under this part shall be independent of, and not in
lieu of, criminal prosecutions or other proceedings under the Act or
any other law of the United States.

Sec. 1309.52 Purpose of hearing.

If requested by a person entitled to a hearing, the Administrator
shall hold a hearing for the purpose of receiving factual evidence
regarding the issues involved in the denial, revocation, or suspension
of any registration. Extensive argument should not be offered into
evidence but rather presented in opening or closing statements of
counsel or in memoranda or proposed findings of fact and conclusions of
law.

Sec. 1309.53 Waiver or modification of rules.

The Administrator or the presiding officer (with respect to matters
pending before him) may modify or waive any rule in this party by
notice in advance of the hearing, if he determines that no party in the
hearing will be unduly prejudiced and the ends of justice will thereby
be served. Such notice of modification or waiver shall be made a part
of the record of the hearing.

Sec. 1309.54 Request for hearing or appearance; waiver.

(a) Any person entitled to a hearing pursuant to Secs. 1309.42 and
1309.43 and desiring a hearing shall, within 30 days after the date of
receipt of the order to show cause, file with the Administrator a
written request for a hearing in the form prescribed in Section 1316.47
of this chapter.
(b) Any person entitled to a hearing pursuant to Secs. 1309.42 and
1309.43, within the period permitted for filing a request for a
hearing, file with the Administrator a waiver of an opportunity for a
hearing, together with a written statement regarding his position on
the matters of fact and law involved in such hearing. Such statement,
if admissible, shall be made a part of the record and shall be
considered in light of the lack of opportunity for cross-examination in
determining the weight to be attached to matters of fact asserted
therein.
(c) If any person entitled to a hearing pursuant to Secs. 1309.42
and 1309.43 fails to file a request for a hearing, or if he so files
and fails to appear at the hearing, he shall be deemed to have waived
his opportunity for the hearing, unless he shows good cause for such
failure.
(d) If any person entitled to a hearing waives or is deemed to
waive his or her opportunity for the hearing, the Administrator may
cancel the hearing, if scheduled, and issue his final order pursuant to
Sec. 1309.57 without a hearing.

Sec. 1309.55 Burden of proof.

(a) At any hearing for the denial of a registration, the
Administrator shall have the burden of proving that the requirements
for such registration pursuant to section 303 of the Act (21 U.S.C.
823) are not satisfied.
(b) At any hearing for the revocation or suspension of a
registration, the Administrator shall have the burden of proving that
the requirements for such revocation or suspension pursuant to section
304(a) of the Act (21 U.S.C. 824(a)) are satisfied.

Sec. 1309.56 Time and place of hearing.

The hearing will commence at the place and time designated in the
order to show cause or notice of hearing published in the Federal
Register (unless expedited pursuant to Sec. 1309.44(c)) but thereafter
it may be moved to a different place and may be continued from day to
day or recessed to a later day without notice other than announcement
thereof by the presiding officer at the hearing.

Sec. 1309.57 Final order.

As soon as practicable after the presiding officer has certified
the record to the Administrator, the Administrator shall cause to be
published in the Federal Register his final order in the proceeding,
which shall set forth the final rule and the findings of fact and
conclusions of law upon which the rule is based. This order shall
specify the date on which it shall take effect, which date shall not be
less than 30 days from the date of publication in the Federal Register
unless the Administrator finds that the public interest in the matter
necessitates an earlier effective date, in which case the Administrator
shall specify in the order his findings as to the conditions which led
him to conclude that an earlier effective date was required.

Modification, Transfer and Termination of Registration

Sec. 1309.61 Modification in registration.

Any registrant may apply to modify his or her registration to
authorize the handling of additional List I chemicals or to change his
or her name or address, by submitting a letter of request to the Drug
Enforcement Administration, Chemical Registration/ODC, Post Office Box
2427, Arlington, Virginia 22202-2427. The letter shall contain the
registrant's name, address, and registration number as printed on the
certificate of registration, and the List I chemicals to be added to
his registration or the new name or address and shall be signed in
accordance with Sec. 1309.32(g). No fee shall be required to be paid
for the modification. The request for modification shall be handled in
the same manner as an application for registration. If the modification
in registration is approved, the Administrator shall issue a new
certificate of registration (DEA Form 511) to the registrant, who shall
maintain it with the old certificate of registration until expiration.

Sec. 1309.62 Termination of registration.

The registration of any person shall terminate if and when such
person dies, ceases legal existence, or discontinues business or
professional practice. Any registrant who ceases legal existence or
discontinues business or professional practice shall notify the
Administrator promptly of such fact.

Sec. 1309.63 Transfer of registration.

No registration or any authority conferred thereby shall be
assigned or otherwise transferred except upon such conditions as the
Administrator may specifically designate and then only pursuant to his
written consent.

Security Requirements

Sec. 1309.71 General security requirements.

(a) All applicants and registrants shall provide effective controls
and procedures to guard against theft and diversion of List I
chemicals. Specific attention shall be paid to storage of and
controlling access to List I chemicals as follows:
(1) Chemicals shall be stored in containers sealed in such a manner
as to indicate any attempts at tampering with the container. Where
chemicals cannot be stored in sealed containers, access to the
chemicals should be controlled through physical means or through human
or electronic monitoring.
(2) In retail settings open to the public where drugs containing
List I chemicals that are regulated pursuant to Sec. 1310.01(f)(1)(iv)
of this chapter are distributed, such drugs will be stocked behind a
counter where only employees have access.
(b) In evaluating the effectiveness of security controls and
procedures, the Administrator shall consider the following factors:
(1) The type, form, and quantity of List I chemicals handled;
(2) The location of the premises and the relationship such location
bears on the security needs;
(3) The type of building construction comprising the facility and
the general characteristics of the building or buildings;
(4) The availability of electric detection and alarm systems;
(5) The extent of unsupervised public access to the facility;
(6) The adequacy of supervision over employees having access to
List I chemicals;
(7) The procedures for handling business guests, visitors,
maintenance personnel, and nonemployee service personnel in areas where
List I chemicals are processed or stored;
(8) The adequacy of the registrant's or applicant's systems for
monitoring the receipt, distribution, and disposition of List I
chemicals in its operations.
(c) Any registrant or applicant desiring to determine whether a
proposed system of security controls and procedures is adequate may
submit materials and plans regarding the proposed security controls and
procedures either to the Special Agent in Charge in the region in which
the security controls and procedures will be used, or to the Chemical
Operations Section Office of Diversion Control, Drug Enforcement
Administration, Washington, DC 20537.

Sec. 1309.72 Felony conviction; employer responsibilities.

(a) The registrant shall not employ, as an agent or employee who
has access to List I chemicals, any person who has been convicted of a
felony offense relating to controlled substances or listed chemicals or
who has, at any time, had an application for registration with the DEA
denied, had a DEA registration revoked or has surrendered a DEA
registration for cause. For purposes of this subsection, the term ``for
cause'' means a surrender in lieu of, or as a consequence of, any
Federal or State administrative, civil or criminal action resulting
from an investigation of the individual's handling of controlled
substances or listed chemicals.
(b) It is the position of DEA that employees who possess, sell, use
or divert listed chemicals or controlled substances will subject
themselves not only to State or Federal prosecution for any illicit
activity, but shall also immediately become the subject of independent
action regarding their continued employment. The employer will assess
the seriousness of the employee's violation, the position of
responsibility held by the employee, past record of employment, etc.,
in determining whether to suspend, transfer, terminate or take other
action against the employee.

Sec. 1309.73 Employee responsibility to report diversion.

Reports of listed chemical diversion by fellow employees is not
only a necessary part of an overall employee security program but also
serves the public interest at large. It is, therefore, the position of
DEA that an employee who has knowledge of diversion from his employer
by a fellow employee has an obligation to report such information to a
responsible security official of the employer. The employer shall treat
such information as confidential and shall take all reasonable steps to
protect the confidentiality of the information and the identity of the
employee furnishing information. A failure to report information of
chemical diversion will be considered in determining the feasibility of
continuing to allow an employee to work in an area with access to
chemicals. The employer shall inform all employees concerning this
policy.

III. 21 CFR Part 1310 is proposed to be amended as follows:

PART 1310--[AMENDED]

1. The authority citation for part 1310 continues to read as
follows:

Authority: 21 U.S.C. 802, 830, 871(b).

2. Section 1310.01 is proposed to be amended by revising paragraphs
(b), (c), (d), (e), (f) and (g), redesignating paragraph (k) as
paragraph (m) and adding new paragraphs (k) and (l) as follows:

Sec. 1310.01 Definitions.

* * * * *
(b) The term listed chemical means any List I chemical or List II
chemical.
(c) The term List I chemical means a chemical specifically
designated by the Administrator in Section 1310.02(a) that, in addition
to legitimate uses, is used in manufacturing a controlled substance in
violation of the Act and is important to the manufacture of a
controlled substance.
(d) The term List II chemical means a chemical, other than a List I
chemical, specifically designated by the Administrator in
Sec. 1310.02(b) that, in addition to legitimate uses, is used in
manufacturing a controlled substance in violation of the Act.
(e) The term regulated person means any individual, corporation,
partnership, association, or other legal entity who manufactures,
distributes, imports, or exports a listed chemical, a tableting
machine, or an encapsulating machine, or who acts as a broker or trader
for an international transaction involving a listed chemical, tableting
machine, or encapsulating machine.
(f) The term regulated transaction means:
(1) A distribution, receipt, sale, or importation, or exportation
of a listed chemical, or an international transaction involving
shipment of a listed chemical, or if the Administrator establishes a
threshold amount for a specific listed chemical, a threshold amount as
determined by the Administrator, which includes a cumulative threshold
amount for multiple transactions, of a listed chemical, except that
such term does not include:
(i) A domestic lawful distribution in the usual course of business
between agents or employees of a single regulated person; in this
context, agents or employees means individuals under the direct
management and control of the regulated person;
(ii) A delivery of a listed chemical to or by a common or contract
carrier for carriage in the lawful and usual course of the business of
the common or contract carrier, or to or by a warehouseman for storage
in the lawful and usual course of the business of the warehouseman,
except that if the carriage or storage is in connection with the
distribution, importation, or exportation of a listed chemical to a
third person, this paragraph does not relieve a distributor, importer,
or exporter from compliance with this part or parts 1309 and 1313 of
this chapter;
(iii) Any category of transaction or any category of transaction
for a specific listed chemical or chemicals specified by regulation of
the Administrator as excluded from this definition as unnecessary for
enforcement of the Act;
(iv) Any transaction in a listed chemical that is contained in a
drug that may be marketed or distributed lawfully in the United States
under the Federal Food, Drug, and Cosmetic Act unless--
(A) The drug contain ephedrine or its salts, optical isomers, or
salts of optical isomers as the only active medicinal ingredient or
contains ephedrine or its salts, optical isomers or salts of optical
isomers and therapeutically insignificant quantities of another active
medicinal ingredient. For purposes of this paragraph, the term
``therapeutically insignificant quantities'' shall apply if the product
formulation (i.e., the qualitative and quantitative composition of
active ingredients within the product) is not listed in any of the
following compendiums:
(1) American Pharmaceutical Association (APhA) Handbook of
Nonprescription Drugs;
(2) Drug Facts and Comparisons (published by Wolters Kluwer
Company); or
(3) USP DI (published by authority of the United States
Pharmacopeial Convention, Inc.);
(4) Or the product is not listed in Sec. 1310.15 as an exempt drug
product. For drug products having formulations not found in the above
compendiums, the Administrator shall determine, pursuant to a written
request as specified in Sec. 1310.14, whether the active medicinal
ingredients are present in quantities considered therapeutically
significant for purposes of this paragraph.
(B) The Administrator has determined that the drug or group of
drugs is being diverted to obtain the listed chemical for use in the
illicit production of a controlled substance; and
(C) The quantity of ephedrine or other listed chemical contained in
the drug included in the transaction or multiple transaction equals or
exceeds the threshold established for that chemical by the
Administrator; or
(v) Any transaction in a chemical mixture listed in Sec. 1310.13.
(g) The term chemical mixture means a combination of two or more
chemical substances, at least one of which is not a listed chemical,
except that such term does not include any combination of a listed
chemical with another chemical that is present solely as an impurity or
which has been created to evade the requirements of the act.
* * * * *
(k) The terms broker and trader mean any individual, corporation,
corporate division, partnership, association, or other legal entity
which assists in arranging an international transaction in a listed
chemical by--
(1) Negotiating contracts;
(2) Serving as an agent or intermediary; or
(3) Bringing together a buyer and seller, a buyer and transporter,
or a seller and transporter.
(l) The term international transaction means a transaction
involving the shipment of a listed chemical across an international
border (other than a United States border) in which a broker or trader
located in the United States participates.
* * * * *
3. Section 1310.02 is proposed to be amended by revising paragraphs
(a) and (b) to read as follows:

Sec. 1310.02 Substances covered.

The following chemicals have been specifically designated by the
Administrator of the Drug Enforcement Administration as the listed
chemicals subject to the provisions of this part and parts 1309 and
1313 of this chapter. Each chemical has been assigned the DEA Chemical
Code Number set forth opposite it.

(a) List I chemicals:

(1) Anthranilic acid, its esters, and its salts
8530
(2) Benzyl cyanide
8570
(3) Ephedrine, its salts, optical isomers, and salts of optical isomers
8113
(4) Ergonovine and its salts
8675
(5) Ergotamine and its salts
8676
(6) N-Acetylanthranilic acid, its esters, and its salts
8522
(7) Norpseudoephedrine, its salts, optical isomers, and salts of
optical isomers
8317
(8) Phenylacetic acid, its esters, and its salts
8791
(9) Phenylpropanolamine, its salts, optical isomers, and salts of
optical isomers
1225
(10) Piperidine and its salts
2704
(11) Pseudoephedrine, its salts, optical isomers, and salts of optical
isomers
8112
(12) 3,4-Methylenedioxyphenyl-2-propanone
8502
(13) Methylamine and its salts
8520
(14) Ethylamine and its salts
8678
(15) Propionic anhydride
8328
(16) Insosafrole (Isosafrole)
8704
(17) Safrole
8323
(18) Piperonal
8750
(19) N-Methylephedrine, its salts, optical isomers, and salts of
optical isomers (N-Methylephedrine)
8115
(20) N-Methylpseudoephedrine, its salts, optical isomers, and salts of
optical isomers
8119
(21) Hydriotic acid (Hydriodic Acid)
6695
(22) Benzaldehyde
8256
(23) Nitroethane
6724

(b) List II Chemicals:

(1) Acetic anhydride
8519
(2) Acetone
6532
(3) Benzyl chloride
8568
(4) Ethyl ether
6584
(5) Potassium permanganate
6579
(6) 2-Butanone (or Methyl Ethyl Ketone or MEK)
6714
(7) Toluene
6594
(8) Hydrochloric acid
6545
(9) Sulfuric acid
6552

* * * * *
4. Section 1310.03 is proposed to be amended by redesignating the
introductory text as paragraph (a) and adding a new paragraph (b) as
follows:

Sec. 1310.03 Persons required to keep records and file reports.

(a) * * *
(b) Each regulated person who manufactures a listed chemical shall
file reports regarding such manufacture as specified by Sec. 1310.05.
However, a manufacturer of a drug product that is exempted under
Sec. 1310.01(f)(1)(iv) shall not be required to file reports regarding
such manufacture.

5. Section 1310.04 is proposed to be amended by revising paragraphs
(a), (b), and (f)(1), introductory text, removing paragraphs
(f)(1)(xv), (f)(1)(xxi), and (f)(1)(xxiii); redesignating paragraphs
(f)(1) (xvi) through (xx) as (f)(1) (xv) through (xix), paragraph
(f)(1) (xxii) as (f)(1) (xx) and paragraph (f)(1) (xxiv) as (f)(1)
(xxi); and adding new paragraphs (f)(1) (xxii) and (xxiii), revising
(f)(2), introductory test and (f)(2)(iv) to read as follows:

Sec. 1310.04 Maintenance of records.

(a) Every record required to be kept subject to Section 1310.03 for
a List I chemical, a tableting machine, or an encapsulating machine
shall be kept by the regulated person for four years after the date of
the transaction.
(b) Every record required to be kept subject to Section 1310.03 for
List II chemical shall be kept by the regulated person for two years
after the date of the transaction.
* * * * *
(f) * * *
(1) List I Chemicals:

------------------------------------------------------------------------
Chemical Threshold by base weight
------------------------------------------------------------------------
(i) ***
(xxii) Benzaldehyde........................... 4 kilograms.
(xxiii) Nitroethane........................... 2.5 kilograms.
------------------------------------------------------------------------

(2) List II Chemicals:
(i) * * *
(iv) Exports, transshipments and international transactions to
Designated Countries set forth in Section 1310.08(b).
* * * * *
6. Section 1310.05 is proposed to be amended by redesignating
paragraphs (a)(2) through (a)(4) as paragraphs (a)(3) through (a)(5),
adding a new paragraph (a)(2), revising paragraph (b), and adding a new
paragraph (d) to read as follows:

Sec. 1310.05 Reports.

(a) * * *
(2) Any regulated transaction with a person not registered with DEA
who is obtaining within a calendar month and quantity of 375 dosage
units or more of a drug product containing ephedrine, which is
regulated pursuant to Sec. 1310.01(f)(1)(iv). The requirement to make
such reports is waived if a pharmacist employed by the regulated person
consults with the purchaser regarding the appropriate uses and dosing
of the product for legitimate medical purposes and includes
documentation of the consultation in the record of the transaction.
* * * * *
(b) Each report submitted pursuant to paragraphs (a)(1), (a)(3),
(a)(4), and (a)(5) of this section shall, whenever possible, be made
orally to the DEA Divisional Office for the area in which the regulated
person making the report is located at the earliest practicable
opportunity after the regulated person becomes aware of the
circumstances involved and as much in advance of the conclusion of the
transaction as possible. Written reports of transactions listed in
paragraphs (a)(1), (a)(4) and (a)(5) of this section will subsequently
be filed as set forth in Sec. 1310.06 within 15 days after the
regulated person becomes aware of the circumstances of the event.
Written reports of transactions listed in paragraph (a)(2) of this
section shall be submitted to the DEA Divisional Office for the area in
which the regulated person making the report is located within 5 days
following the end of the calendar month in which the transaction took
place. A transaction may not be completed with a person who description
or identifying characteristic has previously been furnished to the
regulated person by the Administration unless the transaction is
approved by the Administration.
* * * * *
(d) Each regulated bulk manufacturer of a listed chemical shall
submit manufacturing, inventory, transaction and use data on an annual
basis as set forth in Sec. 1310.06 (h). For purposes of this paragraph
only, the term bulk manufacturer means a person who produces a listed
chemical by means of chemical synthesis or by extraction from other
substances. The term bulk manufacturer does not include persons whose
sole activity consists of the repackaging or relabeling of listed
chemical products or the manufacture of drug products containing listed
chemicals. This data shall be submitted annually to the Drug and
Chemical Evaluation Section, Drug Enforcement Administration (DEA),
Washington DC 20537, on or before the 31st day of January of the year
immediately following the period for which submitted. This reporting
requirement does not apply to drug products which are exempted under 21
U.S.c. 802 (39)(A)(iv) except as set forth in Sec. 1310.06 (h)(5). Each
report shall be submitted on company letterhead and signed by an
appropriate, responsible official.
7. Section 1310.06 is amended by revising paragraphs (a),
introducing text, (a)(1), (c), and (d) and by adding a new paragraph
(h) to read as follows:

Sec. 1310.06 Content of records and reports.

(a) Each record required by Sec. 1310.03 shall include the
following:
(1) The name, address, and, if required, DEA registration number of
each party to the regulated transaction.
* * * * *
(c) Each report required by Sec. 1310.05(a) shall include the
information as specified by Sec. 1310.06(a) and, where obtainable, the
registration number of the other party, if such party is registered. A
report submitted pursuant to Sec. 1310.059a)(1) or (a)(4) must also
include a description of the circumstances leading the regulated person
to make the report, such as the reason that the method of payment was
uncommon or the loss unusual. If the report is for a loss or
disappearance under Sec. 1310.05(a)(4), the circumstances of such loss
must be provided (in-transit, theft from premise, etc.)
(d) A suggested format for the reports is provided below:

Supplier:

Registration Number----------------------------------------------------
Name-------------------------------------------------------------------
Business Address-------------------------------------------------------
City-------------------------------------------------------------------
State------------------------------------------------------------------
Zip--------------------------------------------------------------------
Business Phone---------------------------------------------------------
Purchaser:

Shipping Address (If different than purchaser Address):

Street-----------------------------------------------------------------
City-------------------------------------------------------------------
State------------------------------------------------------------------
Zip--------------------------------------------------------------------
Date of Shipment-------------------------------------------------------
Name of Listed Chemical(s)---------------------------------------------
Quantity and Form of Packaging-----------------------------------------
Description of Machine:

Make-------------------------------------------------------------------
Model------------------------------------------------------------------
Serial #---------------------------------------------------------------
Method of Transfer-----------------------------------------------------

If Loss or Disappearance:

Date of Loss-----------------------------------------------------------
Type of Loss-----------------------------------------------------------
Description of Circumstances-------------------------------------------
* * * * *
(h) Each annual report required by Sec. 1310.05 (d) shall provide
the following information for each listed chemical manufactured:
(1) The name and address of the listed chemical manufacturer and
person to contact for information.
(2) The name and total quantity of the listed chemical manufactured
during the preceding calendar year.
(3) The year end inventory of the listed chemical as of the close
of business on the 31st day of December of the preceding calendar year.
(4) The total quantity of listed chemical used for internal
consumption during the preceding calender year and a written
description of this use.
(5) The quantity of listed chemical manufactured which has been
converted to a product exempted under Sec. Sec. 1310.01(f)(1)(iv) or
1310.01(f)(1)(v) and a written description of the exempt products
produced.
(6) The total annual quantity of the listed chemical distributed
during the preceding calendar year. This data shall include an
itemization of foreign versus domestic distribution.
(7) If applicable, the total annual quantity of the listed chemical
purchased during the preceding calendar year.
(8) Data shall identify the specific isomer, salt or ester when
applicable but quantitative data shall be reported as annydrous base or
acid in kilograms.

8. Section 1310.07 is proposed to be amended by revising paragraphs
(a) and (b) to read as follows:

Sec. 1310.07 Proof of identity.

(a) Each regulated person who engages in a regulated transaction
must identify the other party to the transaction. For domestic
transaction, this shall be accomplished by having the other party
present documents which would verify the identity, or registration
status if a registrant, of the other party to the regulated person at
the time the order is placed. For export transactions, this shall be
accomplished by good faith inquiry through reasonably available
research documents or publicly available information which would
indicate the existence of the foreign customer. No proof of identity is
required for foreign suppliers.
(b) The regulated person must verify the existence and apparent
validity of a business entity ordering a listed chemical, tableting
machine or encapsulating machine. For domestic transactions, this may
be accomplished by such methods as checking the telephone directory,
the local credit bureau, the local Chamber of Commerce or the local
Better Business Bureau, or, it the business entity is a registrant, by
verification of the registration. For export transactions, a good faith
inquiry to verify the existence and apparent validity of a foreign
business entity may be accomplished by such methods as verifying the
business telephone listing through international telephone information,
the firm's listing in international or foreign national chemical
directories or other commerce directories of trade publications,
confirmation through foreign subsidiaries of the U.S. regulated person,
verification through the country of destination's embassy Commercial
Attache, or official documents provided by the purchaser which confirm
the existence and apparent validity of the business entity.
* * * * *
9. Section 1310.08 is proposed to be amended by revising paragraph
(b) to read as follows:

Sec. 1310.08 Excluded transactions.

* * * * *
(b) Exports, transshipments, and international transactions of
hydrochloric and sulfuric acids, except for exports, transshipments and
international transactions to the following countries.
* * * * *
10. Section 1310.10, 1310.11, 1310.12, 1310.13, 1310.14 and 1310.15
are proposed to be added to read as follows:

Sec. 1310.10 Removal of the exemption of drugs distributed under the
Food, Drug and Cosmetic Act.

(a) The Administrator may remove from exemption under
Sec. 1310.01(f)(1)(iv) any drug or group of drugs that the
Administrator finds is being diverted to obtain a listed chemical for
use in the illicit production of a controlled substance. In removing a
drug or group of drugs from the exemption the Administrator shall
consider:
(1) The scope, duration, and significance of the diversion;
(2) Whether the drug or group of drugs is formulated in such a way
that it cannot be easily used in the illicit production of a controlled
substance; and
(3) Whether the listed chemical can be readily recovered from the
drug or group of drugs.
(b) Upon determining that a drug or group of drugs should be
removed from the exemption under paragraph (a) of this section, the
Administrator shall issue and publish in the Federal Register his
proposal to remove the drug or group of drugs from exemption, which
shall include a reference to the legal authority under which the
proposal is based. The Administrator shall permit any interested person
to file written comments on or objections to the proposal. After
considering any comments or objections filed, the Administrator shall
publish in the Federal Register his final order.
(c) The Administrator shall limit the removal of a drug or group of
drugs from exemption under paragraph (a) of this section to the most
identifiable type of the drug or group of drugs for which evidence of
diversion exists unless there is evidence, based on the pattern of
diversion and other relevant factors, that the diversion will not be
limited to that particular drug or group of drugs.
(d) Any manufacturer seeking reinstatement of a particular drug
product that has been removed from an exemption under paragraph (a) of
this section, may apply to the Administrator for reinstatement of the
exemption for that particular drug product on the grounds that the
particular drug product is manufactured and distributed in a manner
that prevents diversion. In determining whether the exemption should be
reinstated the Administrator shall consider:
(1) The package sizes manner of packaging of the drug product;
(2) The manner of distribution and advertising of the drug product;
(3) Evidence of diversion of the drug product;
(4) Any actions taken by the manufacturer to prevent diversion of
the drug product; and
(5) Such other factors as are relevant to and consistent with the
public health and safety, including the factors described in paragraph
(a) of this section as applied to the drug product.
(e) Within a reasonable period of time after receipt of the
application for reinstatement of the exemption, The Administrator shall
notify the applicant of his acceptance or non-acceptance of his
application, and if not accepted, the reason therefor. If the
application is accepted for filing, the Administrator shall issue and
publish in the Federal Register his order on the reinstatement of the
exemption for the particular drug product, which shall include a
reference to the legal authority under which the order is based. This
order shall specify the date on which it shall take effect. The
Administrator shall permit any interested person to file written
comments on or objections to the order. If any such comments raise
significant issues regarding any finding of fact or conclusion of law
upon which the order is based, the Administrator shall immediately
suspend the effectiveness of the order until he may reconsider the
application in light of the comments and objections filed. Thereafter,
the Administrator shall reinstate, revoke, or amend his original order
as he determines appropriate.
(f) Unless the Administrator has evidence that the drug product is
being diverted, as determined by applying the factors set forth in
paragraph (a) of this section, and the Administrator so notifies the
applicant, transactions involving a specific drug product will not be
considered regulated transactions during the following periods:
(1) While a bonafide application for reinstatement of exemption
under paragraph (d) of this section for the specific drug product is
pending resolution, provided that the application for reinstatement is
filed not later than 60 days after the publication of the final order
removing the exemption; and
(2) For a period of 60 days following the Administrator's denial of
an application for reinstatement.
(g) An order published by the Administrator in the Federal Register
pursuant to paragraph (e) of this section to reinstate an exemption may
be modified or revoked with respect to a particular drug product upon a
finding that:
(1) Applying the factors set forth in paragraph (a) to the
particular drug product, the drug product is being diverted; or
(2) There is a significant change in the data that led to the
issuance of the final rule.

Sec. 1310.11 Reinstatement of exemption for drug products distributed
under the Food, Drug and Cosmetic Act.

(a) The Administrator has reinstated the exemption for the drug
products listed in paragraph (e) of this section from application of
sections 302, 303, 310, 1007, and 1008 of the Act (21 U.S.C. 822-823,
830, and 957-958 to the extent described in paragraphs (b), (c), and
(d) of this section.
(b) Records and reports: All regulated persons who manufacture an
exempted drug product must keep complete and accurate records and file
all reports required under Secs. 1310.05 and 1310.06 on all listed
chemicals used in manufacturing the exempt drug product. Transactions
involving reinstated exempt drug products contained in paragraph (e) of
this section are not regulated transactions and thus records and
reports are not required to be kept for listed chemicals once they
become part of the reinstated exempt drug product.
(c) No reinstated exemption granted pursuant to 1310.10 affects the
criminal liability for illegal possession or distribution of listed
chemicals contained in the exempt drug product.
(d) Changes in exempt drug product compositions: Any change in the
quantitative or qualitative composition, trade name or other
designation of an exempt drug product listed in paragraph (e) of this
section requires a new application for reinstatement of the exemption.
(e) The following drug products, in the form and quantity listed in
the application submitted (indicated as the ``date'') are designated as
reinstated exempt drug products for the purposes set forth in this
section:

Exempt Drug Products
------------------------------------------------------------------------
Product
Supplier name Form Date
------------------------------------------------------------------------
[Reserved]
------------------------------------------------------------------------

Sec. 1310.12 Exemption of chemical mixtures; application.

(a) The Administrator may, by publication of a Final Rule in the
Federal Register, exempt from the application of all or any part of the
Act, a chemical mixture consisting of two or more chemical substances,
at least one of which is not a List I or List II chemical, if:
(1) The mixture is formulated in such a way that it cannot be
easily used in the illicit production of a controlled substance; and
(2) The listed chemical or chemicals contained in the chemical
mixture cannot be readily recovered.
(b) Any person seeking an exemption for a chemical mixture from the
application of all or any part of the Act, pursuant to paragraph (a) of
this section, may apply to the Administrator, Drug Enforcement
Administration, Department of Justice, Washington, DC 20537.
(c) An application for exemption under this section shall contain
the following information:
(1) The name, address, and registration number, if any, of the
applicant;
(2) The date of the application;
(3) The name, address, and registration number, if any, of the
manufacturer or importer of the chemical mixture, if not the applicant;
(4) The exact trade name(s) of the applicant's chemical mixture
and, if the applicant formulates or manufactures the chemical mixture
for other entities, the exact trade names of the chemical mixtures and
the names of the entities for which the chemical mixtures were
prepared;
(5) The complete qualitative and quantitative composition of the
chemical mixture (including all listed and non-listed chemicals) and
its intended use;
(6) The chemical and physical properties of the mixture and how
they differ from the properties of the listed chemical or chemicals;
(7) A statement which the applicant believes is justification for
granting an exemption for the chemical mixture. The statement must
explain how the chemical mixture meets the exemption criteria set forth
in paragraph (a) of this section.
(8) The identification of any information on the application which
is considered by the applicant to be a trade secret or confidential and
entitled to protection under U.S. laws restricting the public
disclosure of such information.
(d) The Administrator may require the applicant to submit such
additional documents or written statements of fact relevant to the
application which he deems necessary for determining if the application
should be granted.
(e) Within a reasonable period of time after the receipt of a
completed application for an exemption under this section, the
Administrator shall notify the applicant of acceptance or non-
acceptance of the application. If the application is not accepted, an
explanation will be provided. The Administrator is not required to
accept an application if any information required pursuant to paragraph
(c) of this section or requested pursuant to paragraph (d) of this
section is lacking or not readily understood. The applicant may,
however, amend the application to meet the requirements of paragraphs
(c) and (d) of this section. If the application is accepted for filing,
the Administrator shall issue and publish in the Federal Register an
order on the application, which shall include a reference to the legal
authority under which the order is based. This order shall specify the
date on which it shall take effect. The Administrator shall permit any
interested person to file written comments on or objections to the
order. If any comments or objections raise significant issues regarding
any findings of fact or law upon which the order is based, the
Administrator shall immediately suspend the effectiveness of the order
until he may reconsider the application in light of the comments and
objections filed. Thereafter, the Administrator shall reinstate,
revoke, or amend the original order as deemed appropriate.
(f) The Administrator may at any time revoke or modify any
exemption granted pursuant to this section by following the procedures
set forth in paragraph (e) of this section for handling an exemption
application which has been accepted for filing.

Sec. 1310.13 Exempt chemical mixtures.

(a) The chemical mixtures listed in paragraph (e) of this section
have been exempted by the Administrator from application of sections
302, 303, 310, 1007, and 1008 of the Act (21 U.S.C. 822-3, 830, and
957-8 to the extent described in paragraphs (b), (c), and (d) of this
section.
(b) Records and reports: All regulated persons who manufacture an
exempt chemical mixture must keep complete and accurate records and
file all reports required under Secs. 1310.05 and 1310.06 on all listed
chemicals used in manufacturing the exempt chemical mixture.
Transactions involving approved exempt chemical mixtures contained in
paragraph (e) of this section are not regulated transactions and thus
records and reports are not required to be kept for listed chemicals
once they become part of an exempt chemical mixture.
(c) No exemption granted pursuant to Sec. 1310.12 affects the
criminal liability for illegal possession or distribution of listed
chemicals contained in the exempt chemical mixture.
(d) Changes in chemical mixture compositions: Any change in the
quantitative or qualitative composition, trade name or other
designation of an exempt chemical mixture listed in paragraph (e) of
this section requires a new application for exemption.
(e) The following chemical mixtures, in the form and quantity
listed in the application submitted (indicated as the ``date'') are
designated as exempt chemical mixtures for the purposes set forth in
this section:

Exempt Chemical Mixtures
------------------------------------------------------------------------
Product
Supplier name Form Date
------------------------------------------------------------------------
[Reserved]
------------------------------------------------------------------------

Sec. 1310.14 Exemption of drug products containing ephedrine and
therapeutically significant quantities of another active medicinal
ingredient.

(a) Any manufacturer of a drug product containing ephedrine in
combination with another active medicinal ingredient, the product
formulation of which is not listed in the compendiums set forth in
Sec. 1310.01(f)(1)(iv)(A), may request that the Administrator exempt
the product as one which contains ephedrine together with a
therapeutically significant quantity of another active medicinal
ingredient.
(b) An application for an exemption under this section shall
contain the following information:
(1) The name and address of the applicant;
(2) The exact trade name of the drug product for which exemption is
sought;
(3) The complete quantitative and qualitative composition of the
drug product;
(4) A brief statement of the facts which the applicant believes
justify the granting of an exemption under this section; and
(5) Verification from the Food and Drug Administration that the
product may be lawfully marketed or distributed under the Food, Drug,
and Cosmetic Act.
(6) The identification of any information on the application which
is considered by the applicant to be a trade secret or confidential and
entitled to protection under U.S. laws restricting the public
disclosure of such information by government employees.
(c) The administrator may require the applicant to submit such
additional documents or written statements of fact relevant to the
application which he deems necessary for determining if the application
should be granted.
(d) Within a reasonable period of time after the receipt of a
completed application for an exemption under this section, the
Administrator shall notify the applicant of acceptance or nonacceptance
of the application. If the application is not accepted, an explanation
will be provided. The Administrator is not required to accept an
application if any of the information required in paragraph (b) of this
section or requested pursuant to paragraph (c) of this section is
lacking or not readily understood. The applicant may, however, amend
the application to meet the requirements of paragraphs (b) and (c) of
this section. If the application is accepted for filing, the
Administrator shall issue and publish in the Federal Register an order
on the application, which shall include a reference to the legal
authority under which the order is based. This order shall specify the
date on which it shall take effect. The Administrator shall permit any
interested person to file written comments on or objections to the
order. If any comments or objections raise significant issues regarding
any findings of fact or law upon which the order is based, the
Administrator shall immediately suspend the effectiveness of the order
until he may reconsider the application in light of the comments and
objections filed. Thereafter, the Administrator shall reinstate,
revoke, or amend the original order as deemed appropriate.

Sec. 1310.15 Exempt drug products containing ephedrine and
therapeutically significant quantities of another active medicinal
ingredient.

(a) The drug products containing ephedrine and therapeutically
significant quantities of another active medicinal ingredient listed in
paragraph (e) of this section have been exempted by the Administrator
from application of sections 302, 303, 310, 1007, and 1008 of the Act
(21 U.S.C. 822-3, 830, and 957-8) to the extent described in paragraphs
(b), (c), and (d) of this section.
(b) Records and reports: All regulated persons who manufacture an
exempt drug product must keep complete and accurate records and file
all reports required under Secs. 1310.05 and 1310.06 on all listed
chemicals used in manufacturing the exempt drug product. Transactions
involving approved exempt drug products contained in paragraph (e) of
this section are not regulated transactions and thus records and
reports are not required to be kept for listed chemicals once they
become part of an exempt drug product.
(c) No exemption granted pursuant to Sec. 1310.14 affects the
criminal liability for illegal possession or distribution of listed
chemicals contained in the exempt drug product.
(d) Changes in drug product compositions: Any change in the
quantitative or qualitative composition of an exempt drug product
listed in paragraph (e) of this section requires a new application for
exemption.
(e) In addition to the drug products listed in the compendium set
forth in Sec. 1310.01(f)(1)(iv)(A), the following drug products, in the
form and quantity listed in the application submitted (indicated as the
``date'') are designated as exempt drug products for the purposes set
forth in this section:

Exempt Drug Products Containing Ephedrine and Therapeutically
Significant Quantities of Another Active Medicinal Ingredient
------------------------------------------------------------------------
Product
Supplier name Form Date
------------------------------------------------------------------------
[Reserved]
------------------------------------------------------------------------

IV. 21 CFR Part 1313 is proposed to be amended as follows:

PART 1313--[AMENDED]

1. The authority citation for part 1313 continues to read as
follows:

Authority: 21 U.S.C. 802, 830, 871(b), 971.

2. Section 1313.02 is proposed to be amended by revising paragraphs
(c), (d), (h) and (i); redesignating paragraph (m) as paragraph (o) and
adding new paragraphs (m) and (n) to read as follows:

Sec. 1313.02 Definitions.

* * * * *
(c) The term regulated person means any individual, corporation,
partnership, association, or other legal entity who manufactures,
distributes, imports, or exports a listed chemical, a tableting
machine, or an encapsulating machine, or who acts as a broker or trader
for an international transaction involving a listed chemical, a
tableting machine, or an encapsulating machine.
(d) The term regulated transaction means:
(1) A distribution, receipt, sale, importation, exportation, or
international transaction of a listed chemical, or if the Administrator
establishes a threshold amount for a specific listed chemical, a
threshold amount as determined by the Administrator, which includes a
cumulative threshold amount for multiple transactions, of a listed
chemical, except that such term does not include:
(i) A domestic lawful distribution in the usual course of business
between agents or employees of a single regulated person; in this
context, agents or employees means individuals under the direct
management and control of the regulated person;
(ii) A delivery of a listed chemical to or by a common or contract
carrier for carriage in the lawful and usual course of the business of
the common or contract carrier, or to or by a warehouseman for storage
in the lawful and usual course of the business of the warehouseman,
except that if the carriage or storage is in connection with the
distribution, importation, or exportation of a listed chemical to a
third person, this paragraph does not relieve a distributor, importer,
or exporter from compliance with this part or parts 1309 and 1310 of
this chapter;
(iii) Any category of transaction or any category of transaction
for a specific listed chemical or chemicals specified by regulation of
the Administrator as excluded from this definition as unnecessary for
enforcement of the Act;
(iv) Any transaction in a listed chemical that is contained in a
drug that may be marketed or distributed lawfully in the United States
under the Federal Food, Drug, and Cosmetic Act unless--
(A) The drug contains ephedrine or its salts, optical isomers, or
salts of optical isomers as the only active medicinal ingredient or
contains ephedrine or its salts, optical isomers or salts of optical
isomers and therapeutically insignificant quantities of another active
medicinal ingredient (for purposes of this paragraph, the term
``therapeutically insignificant quantities'' shall apply if the product
formulation (i.e., the qualitative and quantitative composition of
active ingredients within the product) is not listed in any of the
following compendiums:
(1) American Pharmaceutical Association (APhA) Handbook of
Nonprescription Drugs;
(2) Drug Facts and Comparisons (published by Wolters Kluwer
Company); or
(3) USP DI (published by authority of the United States
Pharmacopeial Convention, Inc.);
(4) Or the product is not listed in Sec. 1310.15 as an exempt drug
product. For drug products having formulations not found in the above
compendiums, the Administrator shall determine, pursuant to a written
request as specified in Sec. 1310.14, whether the active medicinal
ingredients are present in quantities considered therapeutically
significant for purposes of this paragraph.
(B) The Administrator has determined that the drug or group of
drugs is being diverted to obtain the listed chemical for use in the
illicit production of a controlled substance; and
(C) The quantity of ephedrine or other listed chemical contained in
the drug included in the transaction or multiple transactions equals or
exceeds the threshold established for that chemical by the
Administrator; or
(v) Any transaction in a chemical mixture listed in Sec. 1310.13 of
this chapter.
* * * * *
(h) The term regular importer means, with respect to a listed
chemical, a person that has an established record as an importer of
that listed chemical that is reported to the Administrator.
(i) The term established record as an importer means that the
regulated person has imported a listed chemical at least once within
the past six months, or twice within the past twelve months from a
foreign supplier. The term also means that the regulated person has
provided the Administration with the following information in
accordance with the waiver of the 15-day advance notice requirements of
Sec. 1313.15:
(1) The name, DEA registration number (where applicable), street
address, telephone number, telex number, and, where available, the
facsimile number of the regulated person and of each foreign supplier;
and
(2) The frequency and number of transaction occurring during the
preceding 12 month period.
* * * * *
(m) The terms broker and trader means any individual, corporation,
corporate division, partnership, association, or other legal entity
which assists in arranging an international transaction in a listed
chemical by--
(1) Negotiating contracts;
(2) Serving as an agent or intermediary; or
(3) Bringing together a buyer and seller, a buyer and transporter,
or a seller and transporter.
(n) The term international transaction means a transaction
involving the shipment of a listed chemical across an international
border (other than a United States border) in which a broker or trade
located in the United States participates.
* * * * *
3. Section 1313.12 is proposed to be amended by revising paragraph
(c) and adding new paragraphs (d), (e) and (f) to read as follows:

Sec. 1313.12 Requirement of authorization to import.

* * * * *
(c) The 15-day advance notification requirement for listed chemical
imports may be waived for:
(1) Any regulated person who has satisfied the requirement for
reporting to the Administration as a regular importer of such listed
chemicals.
(2) A specific listed chemical, as set forth in paragraph (f) of
the section, for which the Administrator determines that advance
notification is not necessary for effective chemical diversion control.
(d) For imports where advance notification is waived pursuant to
paragraph (c)(1) of this section, the DEA Form 486 must be received by
the Drug Enforcement Administration, Chemical Operations Section, on or
before the date of importation through use of the mailing address
listed in Sec. 1313.12(b) or through use of electronic facsimile media.
(e) For importations where advance notification is waived pursuant
to paragraph (c)(2) of this section no DEA Form 486 is required,
however, the regulated person shall file quarterly reports to the Drug
Enforcement Administration, Chemical Operations Section, P.O. Box
28346, Washington, DC 20038, by no later than the 15th day of the month
following the end of each quarter. The report shall contain the
following information regarding each individual importation:
(1) The name of the listed chemical;
(2) The quantity and date imported;
(3) The name and full business address of the supplier;
(4) The foreign port of embarkation; and
(5) The port of entry.
(f) The 15 day advance notification requirement set forth in
paragraph (a) of this section has been waived for imports of the
following listed chemicals:
(1)-(2) [Reserved]
4. Section 1313.15 is proposed to be revised to read as follows:

1313.15 Waiver of 15-day advance notice for regular importers.

(a) Each regulated person seeking designation as a ``regular
importer'' shall provide, by certified mail return receipt requested,
to the Administration such information as is required under
Sec. 1313.02(i), documenting their status as a regular importer.
(b) Each regulated person making application under paragraph (a) of
this section shall be considered a ``regular importer'' for purposes of
waiving the 15-days advance notice, 30 days after receipt of the
application by the Administration, as indicated on the return receipt,
unless the regulated person is otherwise notified in writing by the
Administration.
(c) The Administrator may, at any time, disqualify a regulated
person's status as a regular importer on the grounds that the chemical
being imported may be diverted to the clandestine manufacture of the
chemical substance.
(d) Unless the Administration notifies the chemical importer to the
contrary, the qualification of a regular importer of any one of these
three chemicals, acetone, 2-Butanone (MEK), or toluene, qualifies that
importer as a regular importer of all three of these chemicals.
(e) All chemical importer shall be required to file a DEA Form 486
as required by Sec. 1313.12.
5. Section 1313.21 is proposed to be amended by revising paragraph
(c), revising the text of and redesignating paragraph (d) as paragraph
(g) and adding new paragraphs (d), (e), (f) to read as follows:

Sec. 1313.21 Requirement of authorization to export.

* * * * *
(c) The 15-day advance notification requirement for listed chemical
exports may be waived for:
(1) any regulated person who has satisfied the requirements of
Sec. 1313.24 for reporting to the Administration an established
business relationship with a foreign customer as defined in
Sec. 1313.02(j).
(2) A specific listed chemical to a specified country, as set forth
in paragraph (f) of this section, for which the Administrator
determines that advance notification is not necessary for effective
chemical diversion control.
(d) For exports where advance notification is waived pursuant to
paragraph (c)(1) of this section, the DEA Form 486 must be received by
the Drug Enforcement Administration, Chemical Operations Section, on or
before the date of exportation through use of the mailing address
listed in Sec. 1313.12(b) or through use of electronic facsimile media.
(e) For exportations where advance notification is waived pursuant
to paragraph (c)(2) of this section, the regulated person shall file
quarterly reports to the Drug Enforcement Administration, Chemical
Operations Section, PO Box 28346, Washington, DC 20038, by no later
than the 15th day of the month following the end of the each quarter.
The report shall contain the following information regarding each
individual importation:
(1) The name of the listed chemical;
(2) The quantity and date exported;
(3) The name and full business address of the foreign customer;
(4) The port of embarkation; and
(5) The foreign port of entry.
(f) The 15 day advance notification requirement set forth in
paragraph (a) of this section has been waived for exports of the
following listed chemicals to the following countries:

------------------------------------------------------------------------
Name of Chemical Country
------------------------------------------------------------------------
[Reserved]
------------------------------------------------------------------------

(g) No person shall export or cause to be exported any listed
chemical, knowing or having reasonable cause to believe the export is
in violation of the laws of the country to which the chemical is
exported or the chemical will be used to manufacture a controlled
substance in violation of the Act or the laws of the country to which
the chemical is exported. The Administration will publish a notice of
foreign import restrictions for listed chemicals of which DEA has
knowledge as provided in Sec. 1313.25.
6. A new undesignated center heading and new Secs. 1313.32, 1313.33
and 1313.34 are proposed to be added to read as follows:

Transshipments, In-Transit Shipments, and International Transactions
Involving Listed Chemicals

1313.32 Requirement of Authorization for international
transactions.
1313.33 Contents of an international transaction declaration.
1313.34 Distribution of the international transaction declaration.

Transshipments, In-Transit Shipments, and International
Transactions Involving Listed Chemicals

Sec. 1313.32 Requirement of authorization for international
transactions.

(a) A broker or trader shall notify the Administrator prior to an
international transaction involving a listed chemical which meets or
exceeds the threshold amount identified in Sec. 1310.04 of this
chapter, in which the broker or trader participates. Notification must
be made no later than 15 days before the transaction is to take place.
In order to facilitate an international transaction involving listed
chemicals and implement the purpose of the Act, regulated persons may
wish to provide advance notification to the Administration as far in
advance of the 15 days as possible.
(b) A completed DEA Form 486 must be received at the following
address not later than 15 days prior to the international transaction:
Drug Enforcement Administration, PO Box 28346, Washington, DC
20038.
A copy of the DEA Form 486 may be transmitted directly to the Drug
Enforcement Administration, Chemical Operations Section, through
electronic facsimile media not later than 15 days prior to the
exportation.
(c) No person shall serve as a broker or trader for an
international transaction involving a listed chemical knowing or having
reasonable cause to believe that the transaction is in violation of the
laws of the country to which the chemical is exported or the chemical
will be used to manufacture a controlled substance in violation of the
laws of the country to which the chemical is exported. The
Administration will publish a notice of foreign import restrictions for
listed chemicals of which DEA has knowledge as provided in
Sec. 1313.25.

Sec. 1313.33 Contents of an international transaction declaration.

(a) An international transaction involving a chemical listed in
Sec. 1310.02 of this chapter which meets the threshold criteria
established in Sec. 1310.04 of this chapter may be arranged by a broker
or trader if the chemical is needed for medical, commercial,
scientific, or other legitimate uses.
(b) Any broker or trader who desires to arrange an international
transaction involving a listed chemical which meets the criteria set
forth in Sec. 1310.04 of this chapter shall notify the Administration
through the procedures outlined in Sec. 1313.32(b).
(c) The DEA Form 486 must be executed in triplicate and must
include all the following information:
(1) The name, address, telephone number, telex number, and, where
available, the facsimile number of the chemical exporter; the name,
address, telephone number, telex number, and, where available, the
facsimile number of the chemical importer;
(2) The name and description of each listed chemical as it appears
on the label or container, the name of each listed chemical as it is
designated in Sec. 1310.02 of this chapter, the size or weight of
container, the number of containers, the net weight of each listed
chemical given in kilograms or parts thereof, and the gross weight of
the shipment given in kilograms or parts thereof;
(3) The proposed export date, the port of exportation, and the port
of importation; and
(4) The name, address, telephone, telex, and where available, the
facsimile number, of the consignee in the country where the chemical
shipment is destined; the name(s) and address(es) of any intermediate
consignee(s).

Sec. 1313.34 Distribution of the international transaction
declaration.

The required three copies of the DEA Form 486 will be distributed
as follows:
(a) Copies 1 and 3 shall be retained on file by the broker or
trader as the official record of the international transaction.
Declaration forms involving List I chemicals shall be retained for four
years; declaration forms for List II chemicals shall be retained for
two years.
(b) Copy 2 is the Drug Enforcement Administration copy used to
fulfill the notification requirements of Sec. 1313.32.

8. In addition to the amendments set forth above, DEA proposes in
21 CFR part 1313 to remove the words ``Precursors and Essential
Chemicals'' and ``Precursor and Essential Chemical'' and add, in their
place, the words ``listed Chemicals'' in the following places:
(a) The table of contents of part 1313;
(b) Section 1313.01;
(c) The center heading after Section 1313.02;
(d) Section 1313.14;
(e) The center heading after Section 1313.15;
(f) Section 1313.23.
8. In Secs. 1313.13(a) and 1313.22(a) DEA proposes to remove the
words ``precursor or essential chemical'' and add, in their place, the
words ``List I or List II chemical''.
9. In Secs. 1313.14(a) and 1313.23(a) DEA proposes to remove the
words ``listed precursor chemical'' and ``listed essential chemical''
and add, in their place, the words ``List I chemical'' and ``List II
chemical'' respectively.
V. 21 CFR part 1316 is proposed to be amended as follows:

PART 1316--[AMENDED]

1. The authority citation for part 1316, Subpart A is proposed to
be revised to read as follows:

Authority: 21 U.S.C. 822(f), 830(a), 871(b), 880, 958(f), 965.

2. Section 1316.02 is proposed to be amended by revising paragraph
(c)(2) to read as follows:

Sec. 1316.02 Definitions.

* * * * *
(c) * * *
(2) Places, including factories, warehouses, or other
establishments and conveyances, where persons registered under the Act
or exempted from registration under the Act, or regulated persons may
lawfully hold, manufacture, or distribute, dispense, administer, or
otherwise dispose of controlled substances or listed chemicals or where
records relating to those activities are maintained.
* * * * *
3. Section 1316.03 is proposed to be amended by revising paragraphs
(b), (c), (d) and (e) to read as follows:

Sec. 1316.03 Authority to make inspections.

* * * * *
(b) Inspecting within reasonable limits and to a reasonable manner
all pertinent equipment, finished and unfinished controlled substances,
listed chemicals, and other substances or materials, containers, and
labeling found at the controlled premises relating to this Act;
(c) Making a physical inventory of all controlled substances and
listed chemicals on-hand at the premises;
(d) Collecting samples of controlled substances or listed chemicals
(in the event any samples are collected during an inspection, the
inspector shall issue a receipt for such samples on DEA Form 84 to the
owner, operator, or agent in charge of the premises);
(e) Checking of records and information on distribution of
controlled substances or listed chemicals by the registrant or
regulated person as they relate to total distribution of the registrant
or regulated person (i.e., has the distribution of controlled
substances or listed chemicals increased markedly within the past year,
and if so why);
* * * * *
4. Section 1316.09 is proposed to be amended by revising paragraph
(a)(3) to read as follows:

Sec. 1316.09 Application for administrative inspection warrant.

(a) * * *
(3) A statement relating to the nature and extent of the
administrative inspection, including, where necessary, a request to
seize specified items and/or to collect samples or finished or
unfinished controlled substances or listed chemicals;
* * * * *
Dated: August 30, 1994.
Stephen H. Greene,
Deputy Administrator, Drug Enforcement Administration.
[FR Doc. 94-25071 Filed 10-12-94; 8:45 am]
BILLING CODE 4410-09-M

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Document Information

Published:: 10/13/1994
Department:: Drug Enforcement Administration
Entry Type:: Uncategorized Document
Action:: Proposed rule.
Document Number:: 94-25071
Dates:: Written comments or objections must be received on or before December 12, 1994.
Pages:: 0-0 (1 pages)
Docket Numbers:: Federal Register: October 13, 1994
CFR: (90): 21 CFR 1310.02(b); 21 CFR 1310.01(f)(1)(iv); 21 CFR 1313.02(i); 21 CFR 1313.02(j); 21 CFR 1310.01(f)(1)(iv)(A); More ...