[Federal Register Volume 62, Number 194 (Tuesday, October 7, 1997)]
[Rules and Regulations]
[Pages 52253-52256]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26177]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
21 CFR Parts 1309, 1310 and 1313
[DEA Number 154F]
RIN 1117-AA42
Implementation of the Comprehensive Methamphetamine Control Act
of 1996; Possession of List I Chemicals Definitions, Record Retention,
and Temporary Exemption From Chemical Registration for Distributors of
Combination Ephedrine Products
AGENCY: Drug Enforcement Administration (DEA), Justice.
ACTION: Final rule.
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SUMMARY: DEA is finalizing the Interim Rule, which included a request
for comment, published in the Federal Register on February 10, 1997,
(62 FR 5914). The Interim Rule amended the regulations to incorporate
certain amendments to the Controlled Substances Act (CSA) made by the
Comprehensive Methamphetamine Control Act of 1996 (MCA) and to provide
temporary exemption from registration for persons who distribute
combination ephedrine products. Comments were received regarding
industry interpretation of certain requirements of both the CSA and the
MCA. This notice responds to those comments and clarifies the
requirements of the CSA and MCA with respect to the distribution of
combination ephedrine products.
EFFECTIVE DATE: October 7, 1997.
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) 307-7297.
SUPPLEMENTARY INFORMATION: On February 10, 1997, DEA published an
interim rule, with request for comment, in the Federal Register (62 FR
5914) to implement certain regulatory changes mandated by the MCA and
to provide temporary exemption from registration pending promulgation
of final regulations to implement the MCA.
Five comments were received regarding the interim rule. Three
separate issues were raised in the comments:
(1) Two comments expressed support for the temporary exemptions and
urged that the exemption from registration for retail distributors as
described in the MCA be made permanent. DEA agrees and will make the
exemption permanent.
(2) Three comments asserted that DEA's interpretation of the MCA is
incorrect and that the registration requirement does not apply to
wholesale distributors that engage in only sub-threshold transactions
of combination ephedrine products.
Specifically, the commentors assert that while Section 302(a)(1) of
the CSA (21 U.S.C. 822(a)(1)) requires that any person who distributes
a List I chemical must register, that requirement is tempered by
Section 303(h) of the CSA (21 U.S.C. 823(h)), which provides, in part,
that registration shall not be required for the distribution of a drug
product that is exempted under section 102(39)(A)(iv). Section 102(39)
of the CSA (21 U.S.C. 802(39)) defines the term ``regulated
transaction''. The definition provides in paragraph (A)(iv) that a
transaction in a listed chemical contained in a drug product that may
be marketed or distributed under the Food, Drug, and Cosmetic Act (FDC
Act) is not a regulated transaction, unless the drug contains
ephedrine, pseudoephedrine, or phenylpropanolamine, and the quantity of
ephedrine, pseudoephedrine, or phenylpropanolamine equals or exceeds
the threshold established for the chemical. These provisions are echoed
in DEA's regulations; Title 21, Code of Federal Regulations (CFR),
Section 1309.21(a) requires registration for the distribution of a List
I chemical, other than a List I chemical contained in a drug product
that is exempted under 21 CFR section 1310.01(f)(1)(iv). The commentors
assert the definition of regulated transaction provides that a
[[Page 52254]]
drug product remains exempt if the amount of List I chemical involved
in the transaction is less than the threshold established for that
chemical. Under the circumstances, the commentors argue that persons
who engage only in sub-threshold distributions of List I chemicals
contained in drug products are exempt from the registration
requirement.
The commentors analysis of the referenced portions of the law fails
to acknowledge certain points of law that must be considered in
determining who must register.
First, the MCA amends existing language to remove the exemption for
combination ephedrine products. The specific language that is subject
to the commentors analysis (21 U.S.C. 802(39)(A)(iv) (I) and (II) and
21 U.S.C. 823(h)) was added to the CSA by the Domestic Chemical
Diversion Control Act of 1993 (DCDCA).
A review of the legislative history of the DCDCA reveals that, as
described in a letter of support for the DCDCA from the then Acting
Administrator of DEA to the Chairman of the House Committee on Energy
and Commerce, the registration system established under that act was
``* * * precisely patterned after the system which we have successfully
employed for handlers of controlled substances since 1971.'' (U.S.
Congressional and Administrative News, 103rd Congress, Vol. 4, Page
2986) The registration system for handlers of controlled substances,
while providing for the exemption of certain products that contain
controlled substances, does not consider the quantity involved in a
distribution when determining whether registration is required; either
the product is exempt or non-exempt. Thus, 21 U.S.C. 823(h) provides
that the exemption from registration applies to exempted products, and
not, as the commentor apparently reads it, to selective exempted
distributions. In addition, the House Report No. 103-379, relating to
the bill (H.R. 3216) which subsequently was enacted as the DCDCA,
states ``This provision removes the exemption from record-keeping and
reporting requirements of the Controlled Substances Act (CSA) for drugs
containing ephedrine as the only active medicinal ingredient * * * It
also removes the exemption for ephedrine products containing
therapeutically insignificant quantities of other active ingredients.''
[emphasis added] At the time the DCDCA was enacted, the established
threshold for ephedrine in any form was one kilogram. As Congress did
not mention thresholds in its discussion of the exemption from
registration created by the 1993 amendments, it follows that in
enacting 21 U.S.C. 823(h), it meant the exemption from registration to
apply to drug products themselves, rather than to transactions in drug
products. Exempt products are not subject to the CSA's system of
thresholds; therefore, thresholds had no relevance to the discussion.
Therefore, a distributor who distributes any amount of a List I
chemical, including a drug product that is not exempt, is subject to
the registration requirement.
Two additional points were raised in this matter by the commentors.
The first dealt with the claimed inconsistency in DEA's determination
to exempt retail distributors from the registration requirement and not
exempt wholesale distributors if they engage solely in sub-threshold
sales. These commentors stated that since retail distributors, by
definition, limit sales to sub-threshold levels, wholesale distributors
who limit sales to the substantially higher thresholds for wholesalers
should also be exempt from registration.
There is no inconsistency in DEA's decision. The United States
Congress, with the substantial participation of the affected
industries, developed the MCA with the intent of providing controls to
prevent the diversion of products to the illicit manufacture of
methamphetamine, while not unnecessarily interfering with legitimate
public access to the products at the retail level.
The MCA does not make any pretense of amending the existing
chemical registration and recordkeeping requirements under the CSA, as
amended by the CDTA and DCDCA. The principal effect of the MCA is the
removal of the exemption for pseudoephedrine, phenylpropanolamine, and
combination ephedrine drug products, making these products subject to
the controls under the CSA that apply to all List I chemicals. Thus, as
with any other List I chemical, any person who distributes, imports, or
exports any amount of these products will be subject to the chemical
registration requirement and, to the extent that the transaction(s)
meet the threshold criteria, the chemical recordkeeping and reporting
requirements.
Within this framework, the MCA specifically establishes in the CSA
the unique category of `retail distributor' which is distinct from all
other distributors of List I chemicals. A retail distributor is defined
as a ``* * * person whose activities as a distributor relating to
pseudoephedrine or phenylpropanolamine products are limited almost
exclusively to sales for personal use, both in number of sales and
volume of sales, either directly to walk-in customers or in face-to-
face transactions by direct sales.'' The MCA further provides that the
``* * * sale of ordinary over-the-counter pseudoephedrine or
phenylpropanolamine products by retail distributors shall not be a
regulated transaction * * *'' [emphasis added]. These provisions
clearly establish Congress' intent that public access to the products
at the retail level be protected and that the protection applies only
to one specific type of activity carried out by one specific type of
distributor. It is equally clear, given the absence of any
corresponding provisions in the MCA for other distributors, that the
existing chemical controls, including registration, apply to the
activities of all other distributors.
DEA recognized that the threat of diversion from the retail level
would be minimized by adherence to the 24 gram per transaction
threshold and that this reduced threat does not now justify the
potential impact that the chemical controls might have on legitimate
public access to the products at the retail level. Thus, DEA determined
that an exemption from the registration requirement for retail
distributors of combination ephedrine products who engage exclusively
in sub-threshold transactions was consistent with the intent of the MCA
that legitimate public access to drug products at the retail level be
protected.
The absence of any exceptions in the MCA for non-retail
distributors, coupled with the much larger thresholds (1 kilogram for
combination ephedrine products and pseudoephedrine and 2.5 kilograms
for phenylpropanolamine); the need to balance the lack of controls over
transactions at the retail level with controls at the wholesale level;
and the fact that it has been DEA's experience that the most efficient
and effective means to identify and control diversion from the retail
and wholesale levels is through application of the controls at the
wholesale level, all pointed to the need to maintain the registration
requirement envisioned by the MCA at the wholesale level.
The second concern dealt with the lack of a comprehensive listing
identifying all of the products that contain ephedrine, and the
difficulties that distributors could encounter in terms of identifying
regulated products and complying with the chemical control
requirements. DEA recognizes that in the absence of a `closed system'
of distribution as exists for controlled
[[Page 52255]]
substances, the identification of products that may be subject to
regulation is more difficult. DEA will, where possible, work with the
industry to assist in identification of such products. Further, the MCA
makes all products containing ephedrine subject to regulation.
Manufacturers of such products will have to obtain their distributor
customers DEA registration numbers prior to distributing the products,
which should assist in identifying products that are subject to
regulation.
(3) Two comments asserted that the MCA exemption for sales of
ordinary over-the-counter pseudoephedrine and phenylpropanolamine
products by retail distributors and EAS's general exemption for retail
distributors (21 CFR 1309.29) should also apply to distributions to the
retail distributors by warehouses that are owned or operated by the
owner of a retail chain. The commentors argue that the definition of
retail distributors should encompass the entire retail distribution
system, which includes both the retail outlets and the warehouses or
storage facilities which are owned or operated by the same corporate
entity that owns the retail outlets. They state that the distributions
from the warehouses or storage facilities are not sales but transfers
or intracompany sales within the retail distributor operation that are
related to the retail sales of the products. One commentor last noted
that within their industry warehouses and storage facilities are
classified within the same Standard Industrial Classification (SIC)
code that the MCA references in the definition for the retail outlets.
The MCA provides that the ``* * * sale of ordinary over-the-counter
pseudoephedrine or phenylpropanolamine products by retail distributors
shall not be a regulated transaction * * *''. MCA, Section 401(b)(1);
21 U.S.C. 802(39) (A)(iv)(I)(aa). The MCA defines `retail distributor'
as ``* * * a grocery store, general merchandise store, drug store, or
other entity or person whose activities as a distributor relating to
pseudoephedrine or phenylpropanolamine products are limited almost
exclusively to sales for personal use, both in number of sales and
volume of sales, either directly to walk-in customers or in face-to-
face transactions by direct sales.'' (emphasis added] MCA Section
401(b)(4); 21 U.S.C. 802(46). `Sales for personal use' is defined as
``* * * the sale of below-threshold quantities in a single transaction
to an individual for legitimate medical use.'' MCA 401(b)(4); 21 U.S.C.
802(46)(B).
The definitions printed above describe the activities that a retail
distributor may engage in with sufficient detail to establish the type
of transactions that are to be exempted from regulation. The MCA
provides that the exemption shall apply to sales by persons whose
activities are limited almost exclusively to sales to individuals for
legitimate medical use, both in number of sales and volume of sales,
either directly to walk-in customers or in face-to-face transactions by
direct sales. This language clearly does not contemplate an exception
for a major class of wholesale distributions.
Further, the assertion that retail distributor should be defined as
the corporate entity that is engaged in the process of retail
distribution fails to acknowledge the requirements of the CSA with
respect to separate registration for separate locations. The chemical
registration requirements parallel the registration requirements
established for controlled substances handlers; under such
requirements, each location at which List I chemicals are distributed,
imported, or exported must be viewed individually, as a separate
person, for purposes of application of the chemical controls under the
CSA.
Under the circumstances, the MCA cannot be read as providing an
exemption for warehouses or storage facilities that operate within a
retail distribution system. The MCA recognizes, quite logically, that
if one portion of the distribution chain is to be granted exemption
from regulation, then the other portion of the chain must be subject to
control to insure that the distribution chain does not become a source
of supply for the methamphetamine traffickers.
DEA does wish to note that in addition to receiving comments
regarding registration for distributors of sub-threshold amounts of
product and registration for distributors within retail distribution
chains, the agency was also approached directly by the commentors for
clarification of the requirements in each case. At the same time that
this notice was drafted, individual responses were also provided
directly to the commentors in response to their requests for
clarification. While it may appear unusual for DEA to respond directly
to persons regarding issues that have been raised in formal comments
submitted in response to a rulemaking notice, it should be noted that
neither concern has a direct bearing on the substance of the interim
rule. The question of registration of distributors of sub-threshold
amounts of product involves interpretation of the registration
requirements established under the DCDCA in 1993; the MCA is only
peripherally involved through its removal of the exemption from
regulation for pseudoephedrine, phenylpropanolamine, and combination
ephedrine products, subjecting them to the existing registration
requirements. The question of registration for distributors within the
retail distribution system involves clarification of a specific
provision of the law which does not require any additional regulatory
provisions to implement beyond technical amendments to make the
language of the regulations consistent with the language of the law.
Further, it was necessary that the requestors be given clarification of
these points as quickly as possible to insure that the affected
distributors could be advised as to the need to submit applications for
registration prior to the deadline.
Following the close of the comment period of April 11, 1997, DEA
received a written request, dated April 17, 1997, for an extension of
the filing deadline for the temporary exemption in 21 CFR 1310.09. The
requestor, a representative of a segment of industry heretofore not
subject to DEA's chemical controls, cited industry misunderstandings
regarding the registration requirements of the CSA and DEA's
administration of the chemical control program in justifying the need
for an extension of the deadline. DEA recognized that there had been
confusion in the industry regarding the application of certain
requirements under the MCA; therefore, the application deadline for
temporary exemption was extended to July 12, 1997.
Accordingly, DEA's interim rule, published on February 10, 1997 (62
FR 5914), and amended on May 21, 1997 (62 FR 27693), is being adopted
as a final rule.
The Deputy Assistant Administrator for the Office of Diversion
Control hereby certifies that this rulemaking will not have a
significant economic impact upon a substantial number of entities whose
interests must be considered under the Regulatory Flexibility Act, 5
U.S.C. 601 et seq. This rulemaking is an administrative action to make
the regulations consistent with the law and to avoid interruption of
legitimate commerce by granting temporary exemptions from registration
pending promulgation, through notice and comment, of the regulations
necessary to implement the provisions of the MCA pertaining to
combination ephedrine products. Further, since this is a temporary
action which provides affected persons with a means to
[[Page 52256]]
comply with the law pending promulgation of regulations implementing
the MCA, this action is not a significant regulatory action and
therefore has not been reviewed by the Office of Management and Budget
pursuant to Executive Order 12866. Consideration of the significant and
impact of the new requirements of the MCA will be addressed as part of
a future notice by DEA proposing regulations to implement the MCA.
This action has been analyzed in accordance with the principles and
criteria in Executive Order 12612, and it has been determined that this
rule does not have sufficient federalism implications to warrant the
preparation of Federalism Assessment.
This rule will not resulting the expenditure by State, local, and
tribal governments, in the aggregate, or by the private sector, of
$100,000,000 or more in any one year, and will not significantly or
uniquely affect small governments.
Therefore, no actions were deemed necessary under the provisions of
the Unfunded Mandates Reform Act of 1995.
This rule is not a major rule as defined by Section 804 of the
Small Business Regulatory Enforcement Fairness Act of 1996. This rule
will not result in an annual effect on the economy of $100,000,000 or
more; a major increase in costs or prices; or significant adverse
effects on competition, employment, investment, productivity,
innovation, or on the ability of United States-based companies to
compete with foreign-based companies in domestic and export markets.
Accordingly, the interim rule amending 21 CFR parts 1309, 1310, and
1313, which was published at 62 FR 5914 on February 10, 1997, and
amended at 62 FR 27693 on May 21, 1997, is adopted as a final rule.
Dated: September 29, 1997.
John H. King,
Deputy Assistant Administrator, Office of Diversion Control.
[FR Doc. 97-26177 Filed 10-6-97; 8:45 am]
BILLING CODE 4410-09-M
