[Federal Register Volume 62, Number 194 (Tuesday, October 7, 1997)]
[Proposed Rules]
[Pages 52294-52304]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26150]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Parts 1300, 1309, 1310

[DEA Number 163P]
RIN 1117-AA44


Implementation of the Comprehensive Methamphetamine Control Act 
of 1996; Regulation of Pseudoephedrine, Phenylpropanolamine, and 
Combination Ephedrine Drug Products and Reports of Certain Transactions 
to Nonregulated Persons

AGENCY: Drug Enforcement Administration (DEA), Justice.

ACTION: Proposed rule.

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SUMMARY: DEA is proposing amending its regulations to implement the 
requirements of the Comprehensive Methamphetamine Control Act of 1996 
(MCA) with respect to the regulation of pseudoephedrine, 
phenylpropanolamine, and combination ephedrine drug products as List I 
chemicals and the reporting of certain transactions involving 
pseudoephedrine, phenylpropanolamine, and ephedrine.
    The MCA removed the previous exemption from regulation as List I 
chemicals which had applied to pseudoephedrine, phenylpropanolamine, 
and combination ephedrine drug products.
    This action makes persons who distribute the products subject to 
the registration requirement. Also, distributions, importations, and 
exportations of the products became subject to the existing chemical 
controls relating to regulated transactions, except in certain 
circumstances specified in the MCA. The MCA also requires that reports 
be submitted for certain distributions involving ephedrine, 
pseudoephedrine, and phenylpropanolamine (including drug products 
containing those chemicals) by Postal Service or private or commercial 
carrier to nonregulated persons. This proposed rule amends the 
regulations to make them consistent with the language of the MCA and to 
establish the specific procedures to be followed to satisfy the new 
reporting requirement.

DATES: Written comments or objections should be submitted by no later 
than December 8, 1997.

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


[[Page 52295]]


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: 

Introduction

    The Chemical Diversion and Trafficking Act of 1988 (CDTA) provided 
the framework for DEA's programs to control the diversion of the 
chemicals that are used in the illegal manufacture of controlled 
substances. The chemical control activities under the CDTA focused 
primarily on two areas: (1) the export of certain chemicals, mainly 
solvents, that are used in the illegal manufacture of cocaine and 
heroin, and (2) the domestic distribution of certain chemicals, 
principally precursors, that are used in the illegal manufacture of 
other dangerous drugs, such as methamphetamine, LSD, PCP, etc.
    While the controls under the CDTA were successful in denying the 
cocaine traffickers access to U.S. sources of chemicals, a loophole was 
exploited by the methamphetamine traffickers. The CDTA contained a 
provision that ``. . .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. . .'' was 
not subject to the controls of the CDTA. Thus, while the traffickers 
found their access to supplies of bulk ephedrine, pseudoephedrine, and 
other chemicals restricted by the new chemical controls, they were able 
to circumvent the controls and obtain the necessary source material for 
manufacturing methamphetamine through the purchase of ephedrine in drug 
product form, which remained exempt from the chemical controls.
    Since passage of the CDTA, the principal focus of Federal and State 
legislative/regulatory activities with respect to domestic chemical 
control has been on closing the ``drug product'' loophole that 
clandestine methamphetamine manufacturers and traffickers have 
exploited.
    As noted earlier, with the establishment of controls over 
transactions involving bulk pseudoephedrine, ephedrine, and other 
chemicals, the methamphetamine traffickers turned to single-entity 
ephedrine drug products for their source material. In the years 
following the implementation of the CDTA, ephedrine, in drug product 
form, became the principal source of methamphetamine precursor 
material. By 1993, domestic clandestine laboratory seizure data showed 
that 79 percent of the laboratories seized were using ephedrine. During 
the same period, the use of phenyl-2-propanone (P2P), also a popular 
source material in early laboratories, declined from a high of 31 
percent in 1990 to 16 percent in 1993, and the use of pseudoephedrine 
as a precursor was virtually non-existent.
    The primary source of supply of ephedrine for the traffickers was 
from mail order and wholesale distributions of single-entity ephedrine 
tablets. One manufacturer of a popular brand of single-entity ephedrine 
drug products indicated in interviews with DEA personnel that from 
January 1991 through September 1992, the company purchased 35 metric 
tons of ephedrine for the manufacture of its drug products. The company 
reported that it was producing 40 million 25mg ephedrine tablets per 
ton of ephedrine. Based on that figure, the company could manufacture 
1.4 billion 25mg ephedrine tablets from the 35 tons of ephedrine 
purchased between the beginning of 1991 and September 1992. During the 
same period, a rival company purchased 27.5 metric tons of ephedrine, 
also for the manufacture of ephedrine tablets. The enormous volume of 
product and the lack of controls over its distribution provided the 
traffickers with a convenient source of supply.
    DEA's initial domestic chemical control efforts focused on stemming 
the flow of material from the wholesale/mail order industry to the 
traffickers. While some investigations ultimately resulted in 
conviction of some of the more eregious violators of the law, DEA and 
State efforts were hampered by the exemption from regulation granted to 
the drug products, the lack of other controls under the CDTA, such as 
registration, and the increasing knowledge of the traffickers and their 
suppliers in how to shelter themselves from the criminal sanctions of 
the CDTA.
    The Domestic Chemical Diversion Control Act of 1993 (DCDCA) was 
enacted, in part, to address these shortcomings in the CDTA. Two major 
elements in the DCDCA were the removal of the exemption from List I 
controls for single-entity ephedrine drug products and establishment of 
the registration requirement for distributors, importers, and exporters 
of List I chemicals. The DCDCA did establish control of the diversion 
of single-entity ephedrine drug products to clandestine laboratories 
(combination ephedrine products remained exempt); however, the 
traffickers switched to pseudoephedrine drug products, which remained 
exempt from chemical controls and are directly interchangeable with 
ephedrine drug products in the manufacture of methamphetamine. 
Companies that had previously been identified as distributors of large 
volumes of single-entity ephedrine drug products became distributors of 
large volumes of pseudoephedrine drug products, which has become the 
primary source material of choice in clandestine laboratories.
    In 1993, the year the DCDCA was passed, ephedrine was identified as 
the source material in 79 percent of the methamphetamine laboratories 
seized and pseudoephedrine was identified as the source material in 
less than 2 percent of the seized laboratories. As is shown in the 
following chart, both the number of clandestine laboratories seized and 
number of laboratories using pseudoephedrine increased significantly 
between 1993 and 1996. In 1996, DEA seized 879 methamphetamine 
laboratories, of which 422 were positively identified as using 
pseudoephedrine. Of the remainder, there are 246 laboratories for which 
analysis of the source material has not yet been received, however it 
is anticipated that most, if not all, were using pseudoephedrine. In 
all of the identified cases, pseudoephedrine drug products were the 
source material.
    For 1997, 392 clandestine methamphetamine laboratories have been 
seized as of April 30th, as compared to the 327 laboratories that were 
seized in all of 1995. At that rate, the total seizures for 1997 could 
exceed 1300 methamphetamine laboratories. The dramatic increase in 
seizures is due, in part, to the expansion of the methamphetamine 
laboratories into the Midwest.

BILLING CODE 4410-09-M

[[Page 52296]]

[GRAPHIC] [TIFF OMITTED] TP07OC97.023



BILLING CODE 4410-09-C

Pseudoephedrine Regulations

    By 1995, it had become clear that action would have to be taken to 
stem the flow of pseudoephedrine drug products to the clandestine 
laboratories. DEA proposed regulations to control certain types of 
pseudoephedrine drug products on October 31, 1995 (60 FR 55348), 
including reduction of the threshold for pseudoephedrine from 1 
kilogram to 24 grams and removal of the exemption from the chemical 
controls for certain drug products containing pseudoephedrine. DEA's 
proposal limited the controls to those products which could be readily 
used for the clandestine manufacture of methamphetamine. The exemption 
remained in place for gel capsules, liquids, and solid dosage form 
products containing pseudoephedrine in combination with acetaminophen, 
aspirin, or ibuprofen in therapeutically significant quantities. 
Further, DEA proposed to exempt retail distributors from the 
registration requirement if their activities were restricted to sub-
threshold (24 grams) sales of pseudoephedrine drug products. Following 
comment, DEA published a Final Rule in the Federal Register on August 
7, 1996 (61 FR 40981). In response to comments, the threshold for 
pseudoephedrine was raised from the proposed 24 grams to 48 grams and, 
for retail distributors, application of the cumulative transaction 
provision was lifted.
    The Final Rule was scheduled to become effective on October 7, 
1996, however, as discussed below, the rule did not go into effect and 
was superseded by the provisions of the MCA.

Comprehensive Methamphetamine Control Act of 1996

    Paralleling DEA's rulemaking process, the United States Congress, 
also concerned with the illicit traffic in methamphetamine, introduced 
legislation to control the diversion of chemicals to clandestine 
laboratories. The result was the Comprehensive Methamphetamine Control 
Act of 1996 (Pub. L. 104-237) (MCA), which was enacted on October 3, 
1996. The MCA superseded DEA's Final Rule, discussed above, declaring 
that the regulations were ``* * * null and void, and of no force and 
effect.'' (MCA, Section 210.)
    The MCA legislatively replaced DEA's proposed rulemaking action 
with a more comprehensive system of controls relating to the 
distribution, importation, and exportation of pseudoephedrine, 
phenylpropanolamine, and combination ephedrine drug products, along 
with other strong tools to attack the illicit traffic. The MCA retained 
the existing Controlled Substances Act (CSA) requirements for 
distributors of List I chemicals and added the following changes to the 
CSA with respect to regulation of drug products containing these three 
chemicals:

Removal of Certain Drug Product Exemptions

    The definition of ``regulated transaction'' (21 U.S.C. 802(39)) is 
amended in paragraph (A)(iv)(I)(aa) to provide that the exemption for 
drug products that contain ephedrine, pseudoephedrine, or 
phenylporpanolamine is removed. The new definition also provides that 
the sale of ``ordinary over-the-counter

[[Page 52297]]

pseudoephedrine or phenylproanolamine'' products by ``retail 
distributors'' shall not be a regulated transaction. The definition is 
also amended in paragraph (A)(iv)(II) to provide that the threshold for 
the sale of pseudoephedrine or phenylpropanolamine products by a retail 
distributor or a distributor required to submit reports by section 
310(b)(3) of the CSA (21 U.S.C. 830(b)(3)) shall be 24 grams of 
pseudoephedrine base or 24 grams of phenylporpanolamine base in a 
single transaction. This threshold does not affect the reports required 
to be filed under 21 U.S.C. 830(b)(3) and 21 CFR 1310.03(c), 
1310.05(e), and 1310.06(i), as amended herein.

Creation of a New Category of Distributor and Category of Product To 
Which Certain Exceptions Apply

    Two new definitions are added under section 102 of the CSA (21 
U.S.C. 802), as follows:
    The term ordinary over-the-counter pseudoephedrine or 
phenylpropanolamine product is defined in section 102(45) of the Act 
(21 U.S.C. 802(45)) as a product containing pseudoephedrine or 
phenylpropanolamine that is regulated pursuant to the CSA and, except 
for liquids, packaged with not more than 3 grams of pseudoephedirne or 
phenylpropanolamine base per package, contained in blister packs, with 
not more than two dosage units per blister, or where the use of blister 
packs is not technically feasible, packaged in unit dose packets or 
pouches. For liquids, the product is sold in package sizes of not more 
than 3 grams of pseudoephedrine or phenylpropanolamine base. In the 
context of sales by retail distributors, this has been referred to as 
the ``safe harbor'' provision, because of the exemption from the 
definition of ``regulated transaction'' in section 102(39) of the Act 
(21 U.S.C. 802(39)).
    The term retail distributor is defined in section 102(46) of the 
Act (21 U.S.C. 802(46)) as a grocery store, general merchandise store, 
drug store, or other entity or person whose activities as a distributor 
relating to pseudoephefrine 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. Sale for personal use is defined 
by the MCA as the sale of below-threshold quantities in a single 
transaction to an individual for legitimate medical use. Further, 
certain entities are defined by reference to the following Standard 
Industrial Classification (SIC) codes: a grocery store is an entity 
within SIC code 5411, a general merchandise store is an entity within 
SIC codes 5300 through 5399 and 5499, and a drug store is an entity 
within SIC code 5912.
    It is worth noting at this point that while the definition of 
``retail distributor'' specifically references general merchandise 
stores, grocery stores, and drug stores and their respective SIC codes, 
it also refers to ``* * * or other entity or person * * *'' who engages 
in the described activities. As a result, a retail distributor is any 
person (not just a general merchandise store, grocery store, or drug 
store) 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.

Expands the Opportunities for Product Specific Exemptions

    The MCA amends the CSA to provide that the exemption with respect 
to a particular ephedrine, pseudoephedrine or phenylpropanolamine drug 
product shall be reinstated if it is determined that the drug product 
is manufactured and distributed in a manner that prevents diversion.

Defines Specific Controls for ``Combination Ephedrine Products''

    The MCA defines combination ephedrine product as a drug product 
containing ephedrine or its salts, optical isomers, or salts of optical 
isomers and therapeutically significant quantities of another active 
medicinal ingredient; and establishes a 24-gram single transaction 
limit, notwithstanding the form in which the product is packaged, for 
sales by retail distributors and by distributors required to submit a 
report under section 310(b)(3) of the CSA (21 U.S.C. 830(b)(3)), and a 
1-kilogram threshold for transactions by other distributors, importers 
and exporters.

Requires Reporting of Certain Distributions by Mail or Carrier

    The MCA amends section 310 of the CSA (21 U.S.C. 830) to add a new 
paragraph (b)(3), which requires that each regulated person who engages 
in a transaction with a nonregulated person (that is, someone who does 
not further distribute the product) which involves ephedrine, 
pseudoephedrine or phenylpropanolamine, including drug products, and 
uses or attempts to use the Postal Service or any private or commercial 
carrier shall submit a report of all such transactions each month. The 
reports shall reflect the name of the purchaser, the quantity and form 
of the ephedrine, pseudoephedrine or phenylpropanolamine purchased, the 
address to which the chemicals were shipped, and such other information 
as is established by regulation.

Effective Dates

    The MCA provides that the requirements with respect to the 
regulation of combination ephedrine products and the reporting 
requirement became effective on October 3, 1996. The requirements with 
respect to pseudoephedrine and phenylpropanolamine products become 
effective on October 3, 1997.

Regulatory Changes To Implement the MCA

    Many of the legislative details of the MCA are provided in 
sufficient detail to be self-implementing without additional 
regulation. Thus, many of the regulatory amendments to implement the 
MCA are conforming amendments by which the definitions of ``regulated 
transaction'' and ``retail distributor'' are updated to parallel the 
new language in the MCA and the definitions of 1 ``ordinary over-the-
counter pseudoephedrine or phenylpropanolamine product'' and 
``combination ephedrine product'' are inserted in the regulations; 21 
CFR 1310.04 is updated to reflect the new record retention period of 
two years for List I chemical transactions and the thresholds for 
transactions involving regulated drug products; and 21 CFR 1310.04-06 
are updated to reflect the new reporting requirement. Finally, 21 CFR 
1309.71 is being amended to reflect that in retail settings open to the 
public only ephedrine drug products, in both single-entity and 
combination form, just be stored behind a counter where only employees 
will have access; pseudoephedrine and phenylpropanolamine products are 
not required to be kept behind the counter.
    In addition to the above amendments, DEA is proposing to amend 21 
CFR Part 1309 to consolidate the various exemptions from the 
registration requirement into one section, expand the current exemption 
for retail distributors of combination ephedrine products to include 
retail distributors of pseudoephedrine and phenylpropanolamine 
products, and to add a temporary exemption from the registration 
requirement for persons who distribute, import, or export 
pseudoephedrine or phenylpropanolamine drug products, provided that 
they submit an

[[Page 52298]]

application for registration on or before December 3, 1997. Any person 
who engages in such activities and is not subject to an existing or 
proposed exemption from the registration requirement should submit an 
application for registration at the earliest possible time, to ensure 
that they may continue to distribute these products pending issuance of 
their registration.

Effect of the MCA

    While the regulatory changes necessary to implement the MCA are 
primarily conforming regulations, the scope of the effect of the MCA's 
requirements is quite broad. The removal of the exemption for 
pseudoephedrine, phenylpropanolamine, and combination ephedrine drug 
products makes any person who distributes, imports, or exports them 
subject to the established chemical registration, recordkeeping, and 
reporting requirements already in effect for List I chemical handlers, 
as set out in 21 CFR parts 1309, 1310, and 1313. The MCA, however, 
created an exemption from the existing chemical controls for sales of 
ordinary over-the-counter pseudoephedrine and phenylpropanolamine 
products by retail distributors. Additionally, following the MCA's 
creation within the law of the category of ``retail distributor'', DEA 
has provided an exemption from registration for retail distributors 
whose activities are limited to the activities provided for by the MCA.
    With respect to no-retail distributors, various segments of the 
affected distribution industry have offered varying interpretations of 
the law, proposing that distributors that only engage in sub-threshold 
transactions, or distributors that only supply corporately owned retail 
outlets are not subject to registration and concomitant controls. The 
CSA requires a registration for activities as a distributor. These two 
issues are addressed in the final rulemaking entitled ``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'', 
which will by published in the Federal Register on or about October 3, 
1997. Interest persons are encouraged to obtain a copy of the final 
rule, which contains a detailed discussion of the issues.
    Within this framework, importers, exporters, and distributors 
(other than retail distributors) of pseudoephedrine and 
phenylpropanolamine drug products (including ordinary over-the-counter 
pseudoephedrine and phenylpropanolamine products) become subject to the 
registration requirement of the MCA on October 3, 1997, and also the 
recordkeeping requirements for those transactions that either singly or 
cumulatively meet the threshold requirements in a calendar month. 
However, the allow for implementation of these regulations and issuance 
of the registrations, DEA is providing a temporary exemption from the 
registration requirement for persons who submit their applications on 
or before December 3, 1997. For combination ephedrine products, the 
requirements became effective on October 3, 1996.
    Retail distributors of ordinary over-the-counter products are not 
subject to the registration, recordkeeping and reporting requirements.
    For retail distributors whose sales of other pseudoephedrine and 
phenylpropanolamine products, or combination ephedrine products remain 
exclusively below the single transaction limit, DEA has established an 
exemption from the registration requirement in 21 CFR 1309.29. However, 
retail distributors are subject to the registration, recordkeeping, and 
reporting requirements to the extent that their transactions equal or 
exceed the single transaction limit of 24 grams. Additionally, the 
existing provision that any person who is registered with DEA to 
distribute or dispense controlled substances is not required to obtain 
a separate chemical registration applies to distributions of 
pseudoephedrine, phenylpropanolamine, or combination ephedrine 
products, as set forth in 21 CFR 1309.25.
    They are, however, still subject to the recordkeeping requirements.

Reports of `Mail Order' Transactions

    The MCA requires that a regulated person must report, on a monthly 
basis, all transactions with non-regulated persons (those persons who 
do not redistribute the product) that involve ephedrine, 
pseudoephedrine, or phenylpropanolamine (including drug products that 
contain these chemicals), and who use or attempt to use the Postal 
Service or any private or commercial carrier. Each report must contain 
the name of the purchaser, the quantity and form of the material 
purchased, and the address to which the material was sent, as well as 
such other data as may be established by regulation. MCA, Section 401, 
21 U.S.C. 830(b)(3). The language of the requirement clearly 
establishes that all persons engaging in any such transactions must 
report them. There is no statutory provision for exclusion of any class 
of person or transaction from the requirement.
    DEA is proposing to amend 21 CFR 1310.03, 1310.05, and 1310.06 to 
incorporate the new reporting requirement. Section 1310.03 reflects who 
must file, Section 1310.05 reflects when and where the reports shall be 
filed, and Section 1310.06 reflects the information the report must 
contain.
    The MCA requires monthly reports. DEA is proposing that the reports 
shall be submitted on or before the 15th day of the month following the 
month in which the reportable transaction took place; shall be 
submitted to the Drug Enforcement Administration, Office of Diversion 
Control, Chemical Operations Section, Washington, D.C. 20537; and shall 
contain the following information.

1. Supplier's Name and Registration Number
2. Purchaser's Name and Address
3. Name/Address Shipped To (if different from purchaser's name/
address)
4. Name of the Chemical Shipped
5. Product Name
6. Dosage Form (if any)
7. Dosage Strength (if any)
8. Number of Dosage Units (if applicable)
9. Package Type
10. Package Quantity
11. Lot Number (for drug products)
12. Date of Shipment

    As noted earlier, the MCA requires the name of the purchaser (item 
2), the quantity and form of the material (items 4-10), and the address 
to which the material was shipped (item 3). In addition to the required 
information, DEA is proposing to include the supplier name and 
registration number (item 1), to identify the person making the report 
and their authority to distribute the material; the address of the 
purchaser (item 2), to assist in identifying the party; the name of the 
person to which the material is shipped (item 3), if different from the 
purchaser, to identify the actual recipient of the material in 
instances where drop-shipment is requested; the lot number of the 
product (item 11), if a drug product, to assist DEA in tracking 
products that are diverted; and, the date of the shipment (item 12) to 
identify when the specific transaction occurred.
    While submission of a hard copy report will be adequate to satisfy 
the requirement, DEA is proposing that electronic reporting, initially 
via computer disk, also be allowed. Electronic reporting would minimize 
the burden by eliminating the time and expense necessary to print, 
package, and mail hard copy reports and would allow for more efficient 
processing of the data reported. DEA is proposing that persons 
interested in submitting reports by

[[Page 52299]]

electronic means contact the Chemical Operations Section, Office of 
Diversion Control, DEA at (202) 307-7204 to arrange for submission of 
electronic reports.
    It is important to keep in mind that the reporting requirement 
applies only to distributions of ephedrine, pseudoephedrine, and 
phenylpropanolamine via the postal service or private or commercial 
carrier to nonregulated persons. A distributor does not have to report 
distributions to regulated persons. In this regard, it is critical that 
distributors take the appropriate steps to ascertain whether their 
customers are regulated or nonregulated persons. The failure of a 
distributor to report a transaction based on a customer's mere 
representation that they are a regulated person, without further 
inquiry to confirm that status, may be grounds for administrative, 
civil, or criminal action. Therefore, the distributor should take 
appropriate steps to confirm the customer's status as a regulated 
person. Steps may include verification of the customer's DEA 
registration status or, if they are not a registrant, inquiry as to 
whether the products are being obtained solely for use by the customer 
or whether they will be distributed to others.

Clarification of MCA and CSA Chemical Control Requirements

    The MCA's removal of the exemption for pseudoephedrine, 
phenylpropanolamine, and combination ephedrine products makes a new 
segment of industry, which is not familiar with DEA's programs and 
requirements, subject to the chemical controls under the CSA. DEA has 
received numerous contacts from, and engaged in substantial discussions 
with, both individual companies and associations regarding the 
requirements of the MCA and of the chemical controls under the CSA with 
respect to combination ephedrine products. The upcoming control of 
pseudoephedrine and phenylpropanolamine products on October 3, 1997, 
will probably result in further questions and need for clarification of 
the requirements. DEA remains, as always, available to affected persons 
to clarify the requirements of the MCA and of the existing chemical 
controls. Inquiries should be addressed to DEA in writing to the 
attention of: G. Thomas Gitchel, Chief, Liaison and Policy Section, 
Office of Diversion Control, Drug Enforcement Administration, 
Washington, D.C. 20537.

Small Business Impact and Regulatory Flexibility Concerns

    The MCA mandates a system of controls (including registration, 
recordkeeping, and reporting) over the distribution, importation, and 
exportation of pseudoephedrine, phenylpropanolamine, and combination 
ephedrine products. Within this system of controls, the MCA does 
provide an exemption for retail sales of ordinary over-the-counter 
pseudoephedrine and phenylpropanolamine products; however, wholesale 
distributions, importations, and exportations of these products are 
subject to the controls.
    The specific mandates of the MCA, if applied as written, would have 
a far-reaching and significant impact. Pseudoephedrine and 
phenylpropanolamine over-the-counter products are a common part of 
every-day life, available in most supermarkets, drug stores, 
convenience stores, and other retail outlets. Combination ephedrine 
products are somewhat less common, due to their limited use as a 
bronchodilator for the treatment of asthma.
    DEA consulted with industry organizations associated with over-the-
counter drug manufacture and marketing in an effort to determine the 
potential size of the impacted industry. According to industry sources 
there are approximately 750,000 retail distributors of pseudoephedrine, 
phenylpropanolamine, and combination ephedrine products. Accurate 
identification of the number of wholesale distributors has been 
somewhat more difficult; however, following consultations with 
representatives of the food marketing, drug wholesale, and retail 
supplier industries, DEA estimates that there are approximately 3,000 
to 3,500 wholesale locations distributing the products.
    In considering the implementation of the MCA, DEA considered the 
impact of applying various levels of controls, from no application 
through full application of the requirements of the law, from the 
perspective of their impact on the industry, on the public health and 
safety,and on the ability of both industry and the government to 
administer the controls.
    Of the available options, it is readily apparent that imposition of 
either no controls or the full level of controls would be unrealistic. 
With respect to no controls, the simple fact that the legislation was 
deemed necessary is recognition enough of the threat to the public 
health and safety that the diversion of pseudoephedrine, 
phenylpropanolamine, and combination ephedrine products to the illicit 
manufacture of methamphetamine represents and the intent to impose 
restrictions and monitoring controls on the distribution. At the same 
time, full application of the controls of the MCA would result in 
monetary and administrative burdens on the industry and DEA that would 
be out of proportion with the benefits to be derived and may 
unnecessarily interfere with legitimate public access to the products. 
Therefore, alternatives that avoided unnecessary burdens while still 
accomplishing the mandate of the MCA were explored.
    Exploring the alternatives and exceptions required consideration of 
the scope of commerce, business practices, and capabilities of the 
different segments of the industry; the scope of diversion from each 
segment of industry; the activities of the traffickers; and the 
relative impact of different controls, both on the industry and DEA.
    The MCA recognizes two distinct segments within industry: retail 
distributors, who, by definition, sell small amounts of product in 
face-to-face transactions to individuals for their personal use; and 
manufacturers/wholesalers (including importers/exporters), who 
introduce generally larger quantities of the products into commerce and 
distribute to other commercial concerns for further distribution, and 
some of whom also distribute larger quantities to non-commercial 
concerns without regard or consideration of the intended use.
    Collectively, retail distributors are responsible for as great a 
scope of distribution as manufacturers/wholesalers, serving as they do 
as the principal source of supply for the individual consumers of the 
products. Individually, however, their scope of commerce, by 
definition, is very small, due to the fact that their activities are 
restricted to sales to individuals of small, personal use quantities of 
the products. Despite the collective volume of commerce at the retail 
level, the new controls of the MCA should, as a practical matter, 
significantly reduce the potential for major diversion from this level 
(provided retailers comply with the law and are alert to attempts to 
circumvent the controls). Because to the limited amount of product 
permitted to be distributed in an individual transaction, attempts to 
divert the products by the retail distributors should be noticeable, 
given that the volume of material required is out of proportion with 
any reasonable amount that might be purchased for personal use. 
However, traffickers have, on occasion, succeeded in obtaining tens of

[[Page 52300]]

thousands of dosage units of products by preying upon unsophisticated 
or negligent owners or employees of retail establishments who are not 
aware of, or are unconcerned with, the illicit use to which the 
products can be put. In addition, there are those unscrupulous 
individuals who will always be eager to profit from a transaction, 
capitalizing on the fact that, even with a 24 gram threshold for retail 
distributors, many of the smaller clandestine laboratories which DEA 
and state and local authorities are encountering could adequately 
satisfy their needs for precursor material be obtaining legal drug 
products at the retail level. This is a situation in which voluntary 
industry programs to prevent diversion at the retail level will be an 
important factor in achieving the goals of the MCA.
    While far fewer in number (est. 3,000-3,500) and engaging in a 
lesser number of transactions, manufacturer/wholesalers account for as 
great a part of the distributions as retail distributors through the 
volume of products moved in each transaction. The significantly larger 
transaction sizes, which would be cause for concern at the retail level 
but are commonplace at the wholesale level, coupled with the relative 
anonymity of the transaction, have resulted in this segment of industry 
becoming the source of choice for the traffickers. Through conspiracy 
and deception, as well as carelessness on the part of some wholesalers, 
traffickers have been able to obtain large volumes of product without 
having their transactions stand out against the normal commerce.
    Against this backdrop, and in recognition of the effectiveness of 
the new controls provided by the MCA, chemical controls for the 
consumer drug products should be focused on the wholesale level, and 
the retail level should be granted additional exemption as long as they 
operate within the new limits of the MCA. However, given the 
opportunistic nature of the traffickers and their preference for an 
unregulated source of supply, there exists the potential that, with the 
control of the wholesale distributors, traffickers may intensely focus 
on the retail level as a source of supply. Therefore, the exemption 
from the registration requirement applies to retail distributors that 
limit their activities exclusively to sales below the 24 gram threshold 
established by the MCA for those products. Retail distributors that 
engage in the distribution of ordinary over-the-counter pseudoephedrine 
and phenylpropanolamine products are also exempt from the registration 
requirement. Thus, it is likely that most, if not all, of the estimated 
750,000 retail distributor will qualify and be exempt from 
registration.
    The final element to be addressed was the impact that the controls 
would have on the industry and DEA. The determining factor in this 
assessment proved to be the types of transactions conducted and the 
business practices in the different segments of the industry.
    The principal controls required under the MCA are recordkeeping and 
registration. The recordkeeping requirement applies to any person who 
engages in a regulated transaction involving a pseudoephedrine, 
phenylpropanolamine, or combination ephedrine product, other than a 
retail distribution of an ordinary over-the-counter pseudoephedrine or 
phenylpropanolamine product. The registration requirement applies to 
any person who distributes imports, or exports a pseudophedrine, 
phenylpropanolamine, or combination ephedrine product, except for the 
exemptions previously discussed.
    The recordkeeping requirement would represent a minimal burden for 
both segments of industry. While retail distributors do not keep 
records of their sales to individuals as a matter of business practice, 
their sales are almost exclusively sub-threshold; therefore, the 
recordkeeping requirement would not apply for their distributions. 
Wholesale distributors, on the other hand, often engage in transactions 
that would be subject to the recordkeeping requirement. However, such 
distributors generally do keep detailed records of their transactions 
as a matter of good business practice. Such records can be made readily 
retrievable through the marking of the transactions involving regulated 
products with an asterisk or other unique code. Further, under the MCA, 
the record retention period for List I records has been reduced from 
four years to two years, thus reducing the regulatory burden of List I 
chemical controls. Additionally, recordkeeping at the wholesale level 
is further mitigated by a threshold of one kilogram for ephedrine 
combination and pseudoephedrine products, and 2.5 kilograms for 
phenylpropanolamine products. Transactions below these thresholds do 
not require records.
    The registration requirement, on the other hand, would have a 
significant financial impact if applied across the board. The cost of 
initial registration (at $255.00 each) for 750,000 retail distributors 
would be over $190 million; annual reregistration (at $116.00 each) 
would cost approximately $87 million. For the estimated 3,500 
manufacturers/wholesalers the cost for initial registration (at $595.00 
each) would be slightly more than $2 million; annual reregistration (at 
$477.00 each) would cost approximately $1.7 million. The respective 
annual paperwork burdens associated with filing the applications for 
registration would be 150,000 hours for all retail distributors and 700 
hours for all manufacturers/wholesalers. Further, the administrative 
burden for DEA of having to receive and process over 750,000 
applications per year would be enormous.
    The cost and administrative burden of requiring registration at the 
retail level, which is predominantly small business, would be 
significant, while the potential of large scale diversion at the retail 
level following implementation of the MCA is greatly reduced given the 
limited amounts of products being distributed in face-to-face sales to 
individuals.
    Therefore, to best achieve the intended results of the MCA, while 
minimizing the burden on industry, DEA has determined to propose that: 
(a) the registration and recordkeeping provisions will apply at the 
manufacturer/wholesale level, and (b) the exemptions will apply to 
retail distributors who operate exclusively within the retail quantity 
limits established by the MCA, irrespective of whether the form of 
packaging meets the definition of ``ordinary over-the-counter 
pseudoephedrine or phenylpropanolamine product'' under Section 102(45) 
of the Act (21 U.S.C. 802(45)). The large volumes of products per 
transaction at wholesale, the opportunity for relatively anonymous 
transactions, and the existing history of diversion point to the need 
for adequate registration and recordkeeping at this level of industry. 
As noted earlier, the cost of imposing the full controls of the MCA on 
this segment of the industry will consist of slightly more than $2 
million for initial registration, approximately $1.7 million for annual 
reregistration, and an estimated 700 burden hours per year. The 
recordkeeping requirement will not result in substantial additional 
burden due to the fact that the information required can be found in 
the normal business records (provided they are marked in such a way as 
to make them readily retrievable) that would be maintained as part of 
good business practice.
    With respect to retail distributors, the determination was made to 
provide a waiver from the registration, and, thus, recordkeeping, 
requirement due to the small size and face-to-face nature of the 
transactions and the limited future potential of diversion from this 
segment of the industry. The waiver of the registration applies, 
regardless of the

[[Page 52301]]

form of packaging of the drug product, only to those retail 
distributors whose activities are restricted to below threshold 
transactions, to ensure that this segment of industry does not become 
the source of supply for the traffickers. If a retail distributor 
intends to engage in above-threshold transactions in the course of 
business, then a registration should be obtained. However, it is 
understood that unintentional sales which exceed the threshold are 
possible. In that regard, DEA wishes to note that the chemical control 
program is focused on preventing the diversion of chemicals to 
clandestine laboratories and not on identification of an action against 
the rare, inadvertent, non-egregious above-threshold sale of drug 
products by a checkout clerk or similar employee of an unregistered 
retail distributor in the normal course of legitimate business. Firms 
should, however, to protect their registration exemption, maintain 
programs to guard against such inadvertent sales.
    In total, the proposed regulations, coupled with the existing 
exemption from chemical registration for controlled substances 
registrants and the exception from the regulations provided for 
distributors of prescription drug products that contain List I 
chemicals, provide a system of controls that minimize the financial and 
administrative burden on the industry while still allowing effective 
enforcement of the requirements of the MCA.
    The Acting Deputy Administrator hereby certifies that this proposed 
rulemaking has been drafted in a manner consistent with the principles 
of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). As discussed 
in the preceding section regarding Small Business Impact And Regulatory 
Flexibility Concerns, consideration was given to the potential impact 
of varying levels of regulation, the population that would be impacted, 
and the nature of the problem to be addressed by the regulations. These 
proposed regulations will provide a system of controls to prevent the 
diversion of the drug products to clandestine laboratories that is 
consistent with the intent of the MCA, while providing regulatory 
relief for the approximately 750,000 retail distributors, most of whom 
are small businesses. For the remaining 3,000 to 4,000 wholesale 
distributors, importers, and exporters that will be subject to 
regulation, the primary impact will be the requirement that they obtain 
an annual registration from DEA and make occasional reports. A copy of 
this proposed rulemaking has been provided to the Chief Counsel for 
Advocacy at the Small Business Administration.
    This proposed rulemaking has been drafted and reviewed in 
accordance with Executive Order 12866. This proposed rulemaking has 
been determined to be a significant action because the requirements of 
the MCA affect a broad spectrum of businesses distributing widely used 
products to the public. This proposed rule would establish specific 
exemptions to significantly reduce that impact. Therefore, this 
proposed rulemaking has been reviewed and approved 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 this 
rule does not have sufficient federalism implications to warrant the 
preparation of a Federalism Assessment.
    This rule will not result in 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.

List of Subjects

21 CFR Part 1300

    Definitions, Drug traffic control.

21 CFR Part 1309

    Administrative practice and procedure, Drug traffic control, List I 
and II chemicals, Security measures. 21 CFR Part 1310

    Drug traffic control, List I and II chemicals, Reporting and 
recordkeeping requirements.
    For the reasons set out above, 21 CFR Parts 1300, 1309, and 1310 
are proposed to be amended as follows:

PART 1300--[AMENDED]

    1. The authority citation for Part 1300 continues to read as 
follows:

    Authority: 21 U.S.C. 802, 871(b), 951, 958(f).

    2. Section 1300.02 is proposed to be amended by revising paragraphs 
1300.2(b)(28)(i)(D)(1) and (2) and by adding new paragraphs 1300.02(b) 
(31) and (32) to read as follows:


Sec. 1300.02  Definitions relating to listed chemicals.

* * * * *
    (b) * * *
    (28) * * *
    (i) * * *
    (D) * * *
    (1)(i) The drug contains ephedrine or its salts, optical isomers, 
or salts of optical isomers, pseudoephedrine or its salts, optical 
isomers, or salts of optical isomers, or phenylpropanolamine or its 
salts, optical isomers, or salts of optical isomers unless otherwise 
exempted under Sec. 1310.11 of this chapter, except that any sale of 
ordinary over-the-counter pseudoephedrine or phenylpropanolamine 
products by retail distributors shall not be a regulated transaction; 
or
    (ii) The Administrator has determined pursuant to the criteria in 
Sec. 1310.10 of this chapter 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
    (2) The quantity of ephedrine, pseudoephedrine, 
phenylpropanolamine, or other listed chemical contained in the drug 
included in the transaction or multiple transactions equals or exceeds 
the threshold established for that chemical, except that the threshold 
for any sale of products containing pseudoephedrine or 
phenylpropanolamine by retail distributors or by distributors required 
to submit reports by Sec. 1310.03(c) shall be 24 grams of 
pseudoephedrine or 24 grams of phenylpropanolamine in a single 
transaction.
* * * * *
    (31) The term ordinary over-the-counter pseudoephedrine or 
phenylpropanolamine product means any product containing 
pseudoephedrine or phenylpropanolamine that is--
    (i) Regulated pursuant to the Act; and
    (ii)(A) Except for liquids, sold in package sizes of not more than 
3.0 grams of pseudoephedrine base or 3.0 grams of phenylpropanolamine 
base, and that is packaged in blister packs, each blister containing no 
more than two dosage units, or where the use of blister packs is 
technically infeasible, that is packaged in unit dose packets or 
pouches, and

[[Page 52302]]

    (B) For liquids, sold in package sizes of not more than 3.0 grams 
of pseudoephedrine base or 3.0 grams of phenylpropanolamine base.
    (32) The term combinaiton ephedrine product means a drug product 
containing ephedrine or its salts, optical isomers, or salts of optical 
isomers, and therapeutically significant quantities of another active 
medicinal ingredient.

PART 1309--[AMENDED]

    1. The authority citation for part 1309 continues to read as 
follows:

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

    2. Section 1309.22 is proposed to be amended by revising paragraph 
(b) to read as follows:


Sec. 1309.22  Separate registration for independent activities.

* * * * *
    (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 
through 1309.26, except that a person registered to import any List I 
chemical shall be authorized to distribute that List I chemical after 
importation, but no other chemical that the person is not registered to 
import.
    3. Section 1309.24 is proposed to be revised to read as follows:


Sec. 1309.24  Waiver of registration requirement for certain 
activities.

    (a) 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.
    (b) The requirement of registration is waived for any person who 
distributes a product containing a List I chemical that is regulated 
pursuant to Sec. 1300.02(b)(28)(i)(D), if that person is registered 
with the Administration to manufacture, distribute or dispense a 
controlled substance.
    (c) 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. 1300.02(b)(28)(i)(D), if that person is 
registered with the Administration to engage in the same activity with 
a controlled substance.
    (d) The requirement of registration is waived for any person who 
distributes a prescription drug product containing a List I chemical 
that is regulated pursuant to Sec. 1300.02(b)(28)(i)(D) of this 
chapter.
    (e) The requirement of registration is waived for any retail 
distributor whose activities with respect to List I chemicals are 
limited to the distribution of below-threshold quantities of a 
pseudoephedrine, phenylpropanolamine, or combination ephedrine product 
that is regulated pursuant to Sec. 1300.02(b)(28)(i)(D) of this 
chapter, in a single transaction to an individual for legitimate 
medical use, irrespective of whether the form of packaging of the 
product meets the definition of ``ordinary over-the-counter 
pseudoephedrine or phenylpropanolamine product'' under 
Sec. 1300.02(b)(31) of this chapter. The threshold for a distribution 
of a product in a single transaction to an individual for legitimate 
medical use is 24 grams of pseudoephedrine, phenylpropanolamine, or 
ephedrine base.
    (f) 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.
    (g) If any person exempted under paragraph (b), (c), (d), or (e) of 
this section also engages in the distribution, importation or 
exportation of a List I chemical, other than as described in such 
paragraph, the person shall obtain a registration for such activities, 
as required by Sec. 1309.21.
    (h) The Administrator may, upon finding that continuation of the 
waiver would not be in the public interest, suspend or revoke a waiver 
granted under paragraph (b), (c), (d), or (e) of this section pursuant 
to the procedures set forth in Secs. 1309.43 through 1309.46 and 
1309.51 through 1309.57. In considering the revocation or suspension of 
a person's waiver granted pursuant to paragraph (b) or (c) of this 
section, 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.
    (i) Any person exempted from the registration requirement under 
this section shall comply with the security requirements set forth in 
Secs. 1309.71 through 1309.73 and the recordkeeping and reporting 
requirements set forth under parts 1310 and 1313 of this chapter.
    4. Section 1309.25 is proposed to be revised to read as follows:


Sec. 1309.  Temporary exemption from registration for chemical 
registration applicants.

    (a) Each person required by section 302 of the Act (21 U.S.C. 822) 
to obtain a registration to distribute, import, or export a combination 
ephedrine product is temporarily exempted from the registration 
requirement, provided that the person submits a proper application for 
registration on or before July 12, 1997. The exemption will remain in 
effect for each person who has made such application until the 
Administration has approved or denied that application. This exemption 
applies only to registration; all other chemical control requirements 
set forth in parts 1309, 1310, and 1313 of this chapter remain in full 
force and effect.
    (b) Each person required by section 302 of the Act (21 U.S.C. 822) 
to obtain a registration to distribute, import, or export a 
pseudoephedrine or phenylpropanolamine drug product is temporarily 
exempted from the registration requirement, provided that the person 
submits a proper application for registration on or before December 3, 
1997. The exemption will remain in effect for each person who has made 
such application until the Administration has approved or denied that 
application. This exemption applies only to registration; all other 
chemical control requirements set forth in parts 1309, 1310, and 1313 
of this chapter remain in full force and effect.
    5. Sections 1309.27, 1309.28 and 1309.29 are proposed to be 
removed.
    6. Section 1309.71 is proposed to be amended by revising paragraph 
(a)(2) to read as follows:


Sec. 1309.71  General security requirements.

    (a)* * *
    (2) In retail settings open to the public where drug products 
containing ephedrine or its salts, optical isomers, or salts of optical 
isomers are distributed, such drugs will be stocked behind the counter 
where only employees have access.
* * * * *

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 1310.03 is proposed to be amended by adding a new 
paragraph (c) to read as follows:


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

* * * * *
    (c) Each regulated person who engages in a transaction with a

[[Page 52303]]

nonregulated person which involves ephedrine, pseudoephedrine, or 
phenylpropanolamine (including drug products containing these 
chemicals), and uses or attempts to use the Postal Service or any 
private or commercial carrier shall file monthly reports of each such 
transaction as specified in Sec. 1310.05.
    3. Section 1310.04 is proposed to be amended by removing paragraph 
(g) and revising paragraph (f)(1) to read as follows:


Sec. 1310.04  Maintenance of records.

* * * * *
    (f) * * *
    (1) List I chemicals:
    (i) Except as provided in paragraph (f)(1)(ii) of this section, the 
following thresholds have been established for List I chemicals:

------------------------------------------------------------------------
                  Chemical                     Threshold by base weight 
------------------------------------------------------------------------
(A) Anthranilic acid, its esters, and its    30 kilograms.              
 salts.                                                                 
(B) Benzyl cyanide.........................  1 kilogram.                
(C) Ephedrine, its salts, optical insomers,  No threshold-All           
 and salts of optical isomers.                transactions Regulated.   
(D) Ergonovine and its salts...............  10 grams.                  
(E) Ergotamine and its salts...............  20 grams.                  
(F) N-Acetylanthranilic acid, its esters,    40 kilograms.              
 and its salts.                                                         
(G) Norpseudoephedrine, its salts, optical   2.5 kilograms.             
 isomers, and salts of optical isomers.                                 
(H) Phenylacetic acid, its esters, and its   1 kilogram.                
 salts.                                                                 
(I) Phenlpropanolamine, its salts, optical   2.5 kilograms.             
 isomers, and salts of optical isomers.                                 
(J) Piperidine and its salts...............  500 grams.                 
(K) Pseudoephedrine, its salts, optical      1 kilogram.                
 isomers, and salts of optical isomers.                                 
(L) 3, 4-Methylenedioxyphenyl-2-propanone..  4 kilograms.               
(M) Methylamine and its salts..............  1 kilogram.                
(N) Ethylamine and its salts...............  1 kilogram.                
(O) Propionic anhydride....................  1 gram.                    
(P) Isosafrole.............................  4 kilograms.               
(Q) Safrole................................  4 kilograms.               
(R) Piperonal..............................  4 kilograms.               
(S) N-Methylephedrine, its salts, optical    1 kilogram.                
 isomers, and salts of optical isomers (N-                              
 Methylephedrine.                                                       
(T) N-Methylpseudoephedrine, its salts,      1 kilogram.                
 optical isomers, and salts of optical                                  
 isomers.                                                               
(U) Hydriodic Acid.........................  1.7 kilogrmas (or 1 liter  
                                              by volume.                
(V) Benzaldehyde...........................  4 kilograms.               
(W) Nitroethane............................  2.5 kilograms.             
------------------------------------------------------------------------

    (ii) Notwithstanding the thresholds established in paragraph 
(f)(1)(i), the following thresholds will apply for the following List I 
chemicals that are contained in drug products that are regulated 
pursuant to Sec. 1300.02(b)(28)(i)(D) (Retail distribution thresholds 
are for a single transaction; the cumulative threshold provision does 
not apply. All other distributions are subject to the cumulative 
threshold provision.):

------------------------------------------------------------------------
                  Chemical                     Threshold by base weight 
------------------------------------------------------------------------
(A) Ephedrine, its salts, optical isomers,   No threshold-All           
 and salts of optical isomers as the sole     transactions Regulated.   
 therapeutically significant medicinal                                  
 ingredient.                                                            
(B) Ephedrine, its salts, optical isomers,                              
 and salts of optical isomers in                                        
 combination with therapeutically                                       
 significant amounts of another medicinal                               
 ingredient:                                                            
    (1) Distributions by retail              24 grams.                  
     distributors.                                                      
    (2) Distributions by person required to  24 grams.                  
     report under Sec.  1310.03(c).                                     
    (3) All other domestic distributions     1 kilogram.                
     (other than (B) (1) and (2)).                                      
    (4) Imports and Exports................  1 kilogram.                
(C) Pseudoephedrine, its salts, optical                                 
 isomers, and salts of optical isomers                                  
 (other than ordinary over-the-counter                                  
 products):                                                             
    (1) Distributions by retail              24 grams.                  
     distributors.                                                      
    (2) Distributions by person required to  24 grams.                  
     report under Sec.  1310.03(c).                                     
    (3) All other domestic distributions     1 kilogram.                
     (other than (C) (1) and (2)).                                      
    (4) Imports and Exports................  1 kilogram.                
(D) Pseudoephedrine, its salts, optical                                 
 isomers, and salts of optical isomers                                  
 (Ordinary over-the-counter products):                                  
    (1) Distributions by retail              Exempt.                    
     distributors.                                                      
    (2) Distributions by person required to  24 grams.                  
     report under Sec.  1310.03(c).                                     
    (3) All other domestic distributions     1 kilogram.                
     (other than (D) (1) and (2)).                                      
    (4) Imports and Exports................  1 kilogram.                
(E) Phenylpropanolamine, its salts, optical                             
 isomers, and salts of optical isomers                                  
 (other than ordinary over-the-counter                                  
 products):                                                             
    (1) Distributions by retail              24 grams.                  
     distributors.                                                      
    (2) Distributions by person required to  24 grams.                  
     report under Sec.  1310.03(c).                                     
    (3) All other domestic distributions     2.5 kilograms.             
     (other than (E) (1) and (2)).                                      
    (4) Imports and Exports................  2.5 kilograms.             
(F) Phenylpropanolamine, its salts, optical                             
 isomers, and salts of optical isomers                                  
 (Ordinary over-the-counter products):                                  
    (1) Distributions by retail              Exempt.                    
     distributors.                                                      

[[Page 52304]]

                                                                        
    (2) Distributions by person required to  24 grams.                  
     report under Sec.  1310.03(c).                                     
    (3) All other domestic distributions     2.5 kilograms.             
     (other than (F) (1) and (2)).                                      
    (4) Imports and Exports................  2.5 kilograms.             
------------------------------------------------------------------------

    4. Section 1310.05 is proposed to be amended by adding a new 
paragraph (e) to read as follows:


Sec. 1310.05  Reports.

* * * * *
    (e) Each regulated person required to report pursuant to 
Sec. 1310.03(c) shall either:
    (1) Submit a written report, containing the information set forth 
in Sec. 1310.06(i), on or before the 15th day of each month following 
the month in which the distributions took place. The report shall be 
submitted under company letterhead, signed by the person authorized to 
sign the registration application forms on behalf of the registrant, to 
the Chemical Operations Section, Office of Diversion Control, Drug 
Enforcement Administration, Washington, D.C. 20537; or
    (2) Upon request to and approval by the Administration, submit the 
report in electronic form, either via computer disk or direct 
electronic data transmission, in such form as the Administration shall 
direct. Requests to submit reports in electronic form should be 
submitted to the Chemical Operations Section, Office of Diversion 
Control, Drug Enforcement Administration, Washington, D.C. 20537, ATTN: 
Electronic Reporting.
    5. Section 1310.06 is proposed to be amended by adding a new 
paragraph (i) to read as follows:


Sec. 13.10.06  Content of records and reports.

* * * * *
    (i) Each monthly report required by Sec. 1310.05(e) shall provide 
the following information for each distribution:
    (1) Supplier's name and registration number;
    (2) Purchaser's name and address;
    (3) Name/address shipped to (if different from purchaser's name/
address);
    (4) Name of the Chemical and total amount shipped;
    (5) Date of shipment;
    (6) Product name (if drug product);
    (7) Dosage form (if drug product);
    (8) Dosage strength (if drug product);
    (9) Number of dosage units (if drug product);
    (10) Package type (if drug product);
    (11) Package quantity (if drug product);
    (12) Lot number (if drug product).
    6. Section 1310.10 is proposed to be amended by revising paragraph 
(d) introductory text to read as follows:


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

* * * * *
    (d) Any manufacturer seeking reinstatement of a particular drug 
product that has been removed from an exemption 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:
* * * * *
    Dated: September 26, 1997.
James S. Milford,
Acting Deputy Administrator.
[FR Doc. 97-26150 Filed 10-6-97; 8:45 am]
BILLING CODE 4410-09-M