[Federal Register Volume 65, Number 164 (Wednesday, August 23, 2000)]
[Notices]
[Pages 51333-51338]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-21482]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket Nos. 98-23, 98-32, 98-33]


January 17, 1998 Shipment of 10,000 Kilograms of Potassium 
Permanganate, December 16, 1997 Shipment of 20,000 Kilograms of 
Potassium Permanganate and November 17, 1997 Shipment of 20,000 
Kilograms of Potassium Permanganate; Suspension of Shipments

    On March 4, 1998, the then-Acting Deputy Administrator of the Drug 
Enforcement Administration (DEA) issued an Order to Suspend Shipment to 
Zhaoquing Chemicals Import & Export Company of Guandong, notifying it 
that pursuant to 21 U.S.C. 971, DEA had ordered the suspension of a 
shipment of 10,000 kilograms of potassium permanganate that was 
transshipped through Oakland, California on January 17, 1998, on its 
way to GMP Productos Quimicos, S.A. (GMP) in Medellin, Colombia. The 
Order to Suspend Shipment stated that DEA believed that the listed 
chemical may be diverted based on the failure to notify DEA of the 
transshipment in violation of 21 CFR 1313.31; associations between GMP 
and other violating chemical companies in Colombia; and other 
diversionary practices of GMP. On May 14, 1998, GMP requested a hearing 
and the matter was docketed before Administrative Law Judge Gail 
Randall.
    At some point this Order to Suspend Shipment was withdrawn and was 
reissued on May 20, 1998 to Eland Chemical Ltd. (Eland) of Hong Kong. 
Also on May 20, 1998, the then-Acting Deputy Administrator of DEA 
issued two other Orders to Suspend Shipment to Eland, notifying it that 
DEA had ordered the suspension of two shipments of 20,000 kilograms 
each of potassium permanganate on their way to GMP. One shipment was 
transshipped through Long Beach, California on November 17, 1997, and 
the other was transshipped through Oakland, California on December 16, 
1997. These Orders to Suspend Shipment asserted the same bases for the 
suspensions as the order regarding the January 17, 1998 shipment.
    On May 29, 1998, Judge Randall issued an order consolidating for 
hearing purposes only the proceedings involving the suspension by the 
United States of the three separate shipments of potassium permanganate 
en route to GMP. Following prehearing procedures, a hearing was held in 
Miami, Florida on February 8 through 12, 1999, and in Arlington, 
Virginia, on February 16 through 18, 1999. At the hearing, both parties 
called witnesses to testify and introduced documentary evidence. After 
the hearing, both parties filed proposed findings of fact, conclusions 
of law and argument.
    On November 4, 1999, Judge Randall issued separate Recommended 
Rulings, Findings of Fact, Conclusions of Law, and Decisions, regarding 
each of the three shipments, recommending that the suspended shipments 
be released to GMP. The Government and GMP both filed exceptions to 
Judge Randall's Recommended Rulings, Findings of Fact, Conclusion of 
Law, and Decisions, and on January 27, 2000, Judge Randall transmitted 
the record of these proceedings to the Deputy Administrator.
    The Administrator has considered the record in its entirety, and 
pursuant to 21 CFR 1313.57, hereby issues his final order regarding the 
suspension of all three of the shipments based upon findings of fact 
and conclusion of law as hereinafter set forth. The Administrator is 
issuing one final order regarding all three of the suspensions since 
the same findings of fact and conclusions of law apply to all three 
suspensions. The Administrator adopts the findings of fact and 
conclusions of law of the Administrator Law Judge except as noted below 
and rejects the recommended ruling of the Administrative Law Judge.
    The Administrator finds that based upon the evidence in the record, 
Colombia produces between 70-80% of the world's cocaine hydrochloride. 
Potassium permanganate and hydrochloric acid are List II chemicals that 
may be used for a variety of legitimate purposes, but are also used in 
the illicit manufacture of cocaine. Potassium permanganate is not 
produced in South America and therefore must be imported.
    GMP is a company founded in 1938 that distributes chemical 
products, with four locations throughout Colombia, South America. Its 
president, Pedro Juan Moreno Villa (Mr. Moreno), has served on the 
board of directors of other companies in Colombia. In addition, from 
1995 through 1997, Mr. Moreno served as the Secretary of the Government 
of Antioquia. An extensive security investigation of Mr. Moreno was 
conducted for this position. During his tenure, Mr. Moreno supported 
the Govenor's goal to fight narcotics traffic. According to Mr. Moreno, 
his life was endangered because of his duties against drug traffickers 
and guerillas, resulting in his taking extensive security precautions.
    Between 1994 and 1998, GMP was the largest importer of potassium 
permanganate into Colombia. Since approximately 1994, GMP conducted 
business with Eland, a Hong Kong company. From 1996 through 1998, 
Eland's sale of potassium permanganate to GMP had become consistent, 
with Eland selling GMP in excess of 200 metric tons during that time.
    Eland arranged for the sale and shipment of the potassium 
permanganate that is the subject of these proceedings. Eland purchased 
the potassium permanganate from two chemical suppliers in China. The 
first shipment from Eland of 20,000 kilograms of potassium permanganate 
was en route to GMP in Medellin, Colombia when it transited through the 
port of Long Beach, California on November 17, 1997. The second 
shipment of 20,000 kilograms from Hong Kong to GMP Medellin, Colombia 
transited through the port of Oakland, California on December 16, 1997, 
and the third shipment of 10,000 kilograms transited the port of 
Oakland, California on January 17, 1998.
    Evidence presented at the hearing indicates that ``transit'' or 
``in transit'' means that the vessel ``is just passing through'' a port 
without unloading cargo, whereas a ``transshipment'' is known within 
the shipping industry as cargo that goes from the point of origin to 
someplace other than the ultimate destination and is transferred from 
one conveyance to another for further transit.
    The bill of lading and manifest for these shipments clearly 
disclosed potassium permanganate as the chemical being shipped. The 
route of the shipments at issue had scheduled stops at Oakland, 
California and Long Beach, California, however none of the shipping 
documents provided advance notice to Eland or to GMP that the potassium 
permanganate shipments would transit through the United States. The 
scheduled route did not intend for the chemicals to be unloaded from 
the carrier ship in the United States. A representative of the shipping 
company stated that ``[t]he goods at issue in this case were not 
intended to be discharged in any port in the U.S. or transferred

[[Page 51334]]

from one vessel to another or to any other means of conveyance in any 
U.S. port.'' It is common practice in the international shipping 
industry for the shipping company to reserve the right to change the 
route.
    GMP maintained the requisite import documentation needed to import 
the shipments at issue in this proceeding into Colombia. GMP was 
legally authorized to import the potassium permanganate into Colombia.
    However, the United States Customs Service (USCS) seized each of 
these shipments as they transited the ports in California pursuant to 
its belief that it had the authority to do so under 18 U.S.C. 545. This 
action was taken by the USCS since no advance notice was filed with DEA 
that these shipments would be sent from Hong Kong, through the United 
States, to Colombia.
    Pursuant to 21 U.S.C. 971(a), each regulated person who imports or 
exports a listed chemical to or from the United States is required to 
file advance notification of the importation or exportation not later 
than 15 days before the transaction is to take place. One of the 
regulations implementing this provision 21 CFR 1313.31, states that a 
threshold quantity of a listed chemical ``may be imported into the 
United States for transshipment, or may be transferred or transshipped 
within the United States for immediate exportation, provided that 
advance notice is given     *  *  *.''
    There is no dispute that no advance notice of these shipments was 
provided to DEA by GMP or any other party. However, there is a dispute 
over whether such advance notice was required for these shipments. An 
expert in freight forwarding testified that in his opinion, since the 
goods were not to leave the ship at a United States port, then the DEA 
notification requirements would not apply. The Administrator disagrees 
and will address this issue in detail later in this order.
    On May 20, 1998, DEA issued the Orders to Suspend Shipment to Eland 
that are the subject of these proceedings. The Orders asserted as a 
basis for the suspensions that the potassium permanganate may be 
diverted.
    At the time the shipments at issue transited the United States, the 
President of the United States had decertified the Government of 
Colombia after determining that the controls utilized by the Government 
of Colombia to prevent the processing and trafficking of illicit drugs 
were inadequate. As a result, DEA issued a policy statement that 
declared that ``regular customer status'' was revoked for all Colombian 
customers under 21 U.S.C. 971(c)(1), thereby requiring advance 
notification of all shipments of listed chemicals over the threshold 
amount. The policy statement further indicated that a heightened review 
process would be used for shipments of listed chemicals to Colombia. 
See 61 FR 13,759 (1996).
    On February 26, 1998, the President of the United States determined 
that Colombia did meet the statutory standards for certification ``in 
the vital national interests of the United States.'' However, DEA's 
policy statement has not been revoked or amended.
    Evidence was presented at the hearing regarding GMP's compliance 
with Colombian law relating to controlled chemicals. Potassium 
permanganate and hydrochloric acid are controlled chemicals in 
Colombia.
    The Direccion Nacional de Estupefacientes (DNE) is the Colombia 
government agency that issues, revokes, and renews chemical permits for 
individuals or companies that handle controlled chemicals. The DNE also 
establishes the total quota of controlled chemicals to be imported per 
month by permit holders. A company may not import more than its quota 
in any given calendar month without the permission of the DNE.
    In general, a DNE permit is required if an individual or company 
wants to handle in excess of five kilograms or five liters of a 
controlled chemical per calendar month. Therefore, no permit is 
required if a person wishes to purchase less than five kilograms or 
five liters in a calendar month. However, multiple sales to an 
individual or company of less than five kilogram or liter quantities, 
that total more than the threshold in a calendar month, would require a 
permit.
    Evidence was presented by both the Government and GMP regarding 
whether multiple sales of less than five kilograms of a controlled 
chemical to multiple individuals listing the same address would violate 
Colombian law. Judge Randall noted that no evidence was presented that 
cited to a specific law or regulation making such sales illegal. 
Therefore, Judge Randall concluded, and the Administrator agrees, that 
a preponderance of the evidence in the record does not support a 
finding that sales of less than the threshold amount of controlled 
chemicals to multiple individuals at the same address is a violation of 
Colombian law.
    A Colombian distributor of a controlled chemical must maintain a 
control log that reflects receipt and distribution of the chemical. One 
log book must be maintained for each controlled chemical. For each 
transaction, the log must contain the name of the purchaser, the 
purchaser's address and identification number, and the purchaser's 
intended final use of the chemical.
    At the hearing, GMP indicated that its salesmen did not go out to 
sell quantities of listed chemicals below the threshold amount. 
Instead, buyers seeking to purchase below the threshold amounts would 
go to GMP's retail outlet facility in Medellin. This facility's 
security exceeds what is required by local law. In addition, GMP's 
employees were instructed to copy the identification document, called 
the cedula, of a buyer and to attach it to one of the copies of the 
sales invoice.
    According to evidence presented by GMP, in Colombia, if the seller 
of a controlled chemical knows that the buyer's presented 
identification document is false, then the seller may not lawfully sell 
controlled chemicals to that buyer. Howerver based upon the record in 
this proceeding, it does not appear that the buyer is prohibited by 
Colombian law from using the identification paperwork of another person 
to buy controlled chemicals. In an official report, a Colombian 
prosecutor found that GMP was ``not forced to by law to keep a follow 
up of its purchasers to find out the final destination of its 
products.''
    The Colombian National Police (CNP) is the enforcement entity of 
the DNE, and is authorized by the DNE to conduct investigations that 
could result in criminal or administrative penalties. In November 1992, 
the CNP seized a GMP vehicle which was transporting potassium 
permanganate from one GMP location to another. The CNP alleged that GMP 
did not possess the requisite permit to handle such a controlled 
chemical. However, a Colombian prosecutor chose not to prosecute and 
ordered the release of the potassium permanganate to GMP.
    On June 10, 1997, the CNP inspected one of GMP's facilities finding 
that on nine occasions between June 3, 1997 and June 6, 1997, GMP had 
failed to enter required information into its control logs concerning 
the sale of 2,450 kilograms of potassium permanganate. The CNP also 
discovered that in October 1997, GMP sold five gallons of hydrochloric 
acid to a company not registered to handle that amount of the chemical. 
Further in October 1997, GMP sold two gallons of hydrocholoric acid to 
a single individual who lacked a permit. Then in November 1997, GMP 
sold three gallons of hydrochloric acid to a company that was not 
registered to handle that chemical.

[[Page 51335]]

    On December 15, 1997, the CNP inspected GMP and found record 
keeping discrepancies. GMP kept its control log tracking its sales and 
purchases of controlled chemicals on a computer. GMP was not authorized 
to maintain its records in this manner. GMP's general manager at that 
time testified that he was confused by this allegation by the CNP since 
GMP had been keeping computerized records since 1991, and the company 
had never been told that this was not authorized. GMP nonetheless 
stopped maintaining computerized records after receiving the inspection 
notations from the CNP in 1998.
    On January 20, 1998, a follow-up inspection was conducted. The CNP 
took approximately 55 GMP sales invoices dated from October through 
December 1997, which reflected sales in less than the threshold 
quantity of controlled chemicals. During this time period, GMP 
generated approximately 4,490 invoices with the overall sales of both 
controlled and non-controlled chemicals of approximately $800,000. The 
55 questioned invoices totaled $635.48 in sales and accounted for .08% 
of GMP's total sales during this time period.
    It is in dispute as to whether the copies of the invoices given to 
the CNP had copies of cedulas attached. The Administrator finds that 
regardless of what was given to the CNP, GMP had copies of cedulas in 
the files for most of the invoices. However, in light of findings and 
conclusions made below, the Administrator does not find that the fact 
that GMP obtained and maintained copies of cedulas protected against 
the possible diversion of these chemicals.
    After obtaining these invoices, the CNP investigated the addresses 
and telephone numbers listed on GMP's seized invoices. This 
investigation revealed discrepancies including addresses that did not 
exist, telephone numbers that did not match the addresses listed on the 
invoices, and telephone numbers that did not exist.
    In addition, the CNP noted invoices issued on the same date to 
different named individuals listing the same address and telephone 
number. The invoices each reflected sales of 4.6 kilograms of potassium 
permanganate, below the threshold amount. The CNP discovered that the 
individuals listed on the invoices had not actually purchased the 
potassium permanganate, but their personal identification cards had 
been used by their employer to obtain the chemical.
    By letter dated January 22, 1998, CNP officials concluded that GMP, 
``may be guilty of selling controlled chemical substances, for which 
purpose it is using fictitious addresses, names of actual persons and 
is making sales of controlled chemicals in amounts greater than those 
stipulated by the Office of the National Director of Narcotics without 
receiving a license from the D.N.E.'' This report was updated on March 
5, 1998.
    Evidence was represented at the hearing that GMP representatives 
also investigated the questioned invoices to determine the identity and 
location of the purchasers listed on the invoices. While GMP 
representatives were able to locate some of the individuals and 
companies named on the invoices, many remained unknown. Many contained 
fictions addresses, and in some instances, no addresses were provided 
on the invoices.
    After reviewing this invoice information, a Columbian prosecutor 
determined that GMP had not violated Colombian law and that further 
investigation was not warranted. A DEA investigator testified that he 
had no information that any of the individuals named on these invoices 
were involved in the manufacturing of cocaine.
    The Administrator finds that evidence was presented regarding 
allegations by the Government that GMP sold potassium permanganate and 
hydrochloric acid from September 1997 through June 1998, to an 
individual whose chemical permit was ``annulled'' or revoked effective 
July 1997. Evidence was also presented regarding GMP's maintenance of 
two separate control log books for potassium permanganate. One book 
covered the period December 3, 1997 to June 17, 1998; and the other 
covered the period December 3, 1997 to July 10, 1998. Finally, evidence 
was presented as to whether GMP exceeded its importation quota in July 
1998.
    It was not until July 1998 that the CNP and DEA discovered the 
sales to the individual with the revoked permit, the two control logs, 
and the issue regarding GMP's importation quota, clearly after the 
suspension of the shipments in March 1998. In light of the 
Administrator's conclusion below regarding the scope of this 
proceeding, the Administrator is not reiterating the findings of fact 
of the Administrative Law Judge regarding these three areas.
    Effective August 25, 1998, DNE revoked GMP's chemical permit in 
Colombia. The DNE's order was affirmed by the Board of Justice and 
Rights, National Administration of Addictive Drugs on November 23, 
1998. The DNE's order was based, to a large extent, on the CNP's 
investigation of the invoices that are at issue in this proceeding.
    As of the hearing in this matter, GMP had appealed this order 
further, but no decision had been rendered. Therefore based upon the 
evidence in the record, GMP is unable to handle any controlled 
chemicals in quantities exceeding five kilograms or five liters. 
However, GMP was given permission to sell their in-stock controlled 
chemicals provided that they submit specific information to DNE in 
advance of the sale. According to GMP representatives, since 
approximately July 1998, GMP ceased selling controlled chemicals in 
quantities of less than five kilograms or five liters, choosing only to 
sell to customers with a chemical permit.
    GMP presented evidence from different Colombian government entities 
that GMP is a law-biding company. Mr. Moreno testified that he was 
unaware of any GMP controlled chemicals being diverted to the 
manufacture of cocaine or any other illicit drug.
    The issue before the Administrator is whether or not the record as 
a whole establishes by a preponderance of the evidence that DEA should 
suspend the three shipments; of potassium permanganate en route from 
Hong Kong, China, through the United States, to Medellin, Colombia 
pursuant to 21 U.S.C. 971(c)(1) and 21 CFR 1313.4(a).
    As a preliminary matter, GMP argued that the shipment were 
suspended illegally by the USCS. Specifically, GMP argued that the 
statutory authority cited by the USCS, 18 U.S.C., does not provide the 
USCS with the authority to detain shipments and therefore the 
suspensions were defective and the chemicals should be released.
    The Administrator agrees with Judge Randall that this issue is 
outside the scope of this proceeding. As Judge Randall stated, 
``[t]hisi forum is to determine the legality of the DEA's actions, not 
the actions of USCS officials.''
    The first issue to be determined by the Administrator is whether 
advance notification of the three shipments was required to be filed. 
Pursuant to 21 U.S.C. 971(a), each regulated person who imports or 
exports a listed chemical is required to notify DEA of the importation 
or exportation not later than 15 days before the transaction is to take 
place. A regulated person is defined in 21 U.S.C. 802(38) as ``a person 
who manufactures, distributes, imports or exports a listed chemical * * 
*.'' Further a chemical importer is defined in 21 CFR 1300.02(b)(8) as 
``a regulated person who, as the principal party in interest in the 
import transaction, has the power and responsibility for determining 
and controlling the bringing in or

[[Page 51336]]

introduction of the listed chemical into the United States.''
    The Administrator agrees with Judge Randall's conclusion that GMP 
is a regulated person. In a previous case, the Deputy Administrator 
determined that ``if the title to the potassium permanganate passed to 
(the customer) before the chemical entered the United States, then (the 
customer) is the principal party in interest.'' Yi Heng Enters. Dev. 
Co., 64 FR 2234 (1999). The invoices for these transactions contained 
the phrase ``FOB Huangpu,'' which means that the title to the goods 
passed to GMP as soon as the potassium permanganate was delivered to 
the carrier. Therefore, since title passed to GMP before the potassium 
permanganate entered the United States, GMP is considered the importer 
of the chemicals, and as such is a regulated person.
    The next question is whether advance notification is required for 
the type of shipments at issue in this matter. One of the regulations 
implementing 21 U.S.C. 971(a) requires that advance notice be filed 
with DEA if a threshold amount of a listed chemical is ``imported in 
the United States for transshipment, or * * * transferred to 
transshipped within the United States for immediate exportation * * 
*.'' 21 CFR 1313.31.
    There is no dispute that no advance notification was provided to 
DEA for these shipments. The parties also apparently agree that these 
shipments are considered ``in-transit'' transactions since the 
chemicals arrived in the United States with no intention of them being 
removed from the ships before departing the United States. However, the 
parties disagree as to whether these transactions are considered 
``importations'' which require advance notification.
    GMP argued that 21 CFR 1313.01 distinguishes between transshipments 
and in-transit shipments, yet in-transit shipments are not mentioned in 
21 CFR 1313.31, the section requiring advance notification. 
Consequently, GMP argued that no advance notice is required for in-
transit shipments.
    Judge Randall stated that:

(a)lthough the Respondent's argument, logically, may be compelling, 
I do not find that it is consistent with the plain language used in 
the statute and the implementing regulations. If the statutory 
provisions are irreconcilable with, even contradictory to, 
recognized international trade practices, the remedy is with 
Congress, not with this agency. I conclude that, pursuant to the 
plain meaning of the statute and its implementing regulations, an 
in-transit shipment, such as the one in question here, is an import 
and triggers the advance notice provision of 21 U.S.C. 971(a).

    Neither ``transshipment'' nor ``in-transit shipment'' are defined 
in the statute or regulations. Therefore, in arriving at her 
conclusion, Judge Randall considered the language contained in 21 
U.S.C. 954 relating to the shipment of controlled substances, wherein 
``transshipment'' refers to the industry recognized definitions of in-
transit shipments and transshipments. The title of this section is 
``Transshipment and in-transit shipment of controlled substances,'' and 
provides in relevant part that:

    (1) A controlled substance in schedule I may--
    (A) be imported into the United States for transshipment to 
another country, or
    (B) be transferred or transshipped from one vessel, vehicle, or 
aircraft to another vessel, vehicle, or aircraft within the United 
States for immediate exportation. * * *

    While 21 U.S.C. 954(1)(B) refers to the transfer of goods from one 
vessel to another, no such language is found in 954(1)(A). Instead, 
954(1)(A) refers to the importation of controlled substances into the 
United States ``(f)or transshipment to another country.'' Although both 
subsections use the word ``transshipment'' or ``transshipped,'' they 
are clearly not intended to describe the same transaction. Unlike 
954(1)(B), 954(1)(A) does not specifically refer to transferring of 
goods from one vessel to another and therefore it is reasonable to 
conclude that 954(1)(A) describes in-transit shipments, such as the 
ones at issue, as an importation. This conclusion is further supported 
by the title of section 954 which explicitly includes in-transit 
shipments.
    Similar language is used in 21 CFR 1313.01 and 1313.31 relating to 
the importation of listed chemicals. As Judge Randall found,

    Section 1313.01 describes the scope of the regulations under 
part 1313, ``Importation * * * of Precursors and Essential 
Chemicals,'' and explicitly states that these procedures apply to 
the ``importation, exportation, transshipment and in-transit 
shipment of listed chemicals.'' 21 CFR 1313.01. Next, within Part 
1313, the subtitle of the applicable regulations explicitly covers: 
``Transshipments, In-Transit Shipments and International 
Transactions Involving Listed Chemicals.'' Significantly, the 
language of sections 954(1)(A) and (1)(B) is essentially duplicated 
in 21 CFR 1313.31(a), which states in relevant part, that a listed 
chemical ``may be imported into the United States for transshipment, 
or may be transferred or transshipped within the United States for 
immediate exportation, provided that advance notice is given to the 
Administration.''

    Accordingly, Judge Randall concluded, and the Administrator agrees, 
that ``in light of the parallel language of statutory section 954 and 
regulatory Sec. 1313.31, the most logical conclusion is that the 
advance notification requirement applies to in-transit shipments.'' As 
a result, advance notice of these shipments was required to be filed 
under 21 U.S.C. 971 and 21 CFR 1313.31.
    As previously noted, there is no question that GMP did not file 
advance notice of these shipments. However failure to file, by itself, 
does not justify the suspension of the shipments. A shipment may be 
suspended upon a showing that the chemical may be diverted to the 
clandestine manufacture of a controlled substance. 21 U.S.C. 971(c).
    As Judge Randall noted, DEA previously held that failure to notify 
DEA of a shipment justified suspension of a shipment. See Yi Heng, 64 
FR at 2234. But, Judge Randall also correctly noted that this 
conclusion was based upon the fact that the Respondent in that 
proceeding conceded that ``the suspension orders can be sustained based 
on the absence of notice.'' Yi Heng, 64 FR at 2235. However in Yi Heng, 
the Deputy Administrator did not uphold the suspensions on that basis 
alone, but made additional findings that the chemicals may be diverted.
    In its exceptions to Judge Randall's recommended decision, GMP 
argued that the fact that a carrier can alter shipping routes without 
notice ``would expose the innocent shipper to the expense and delay of 
an administrative proceeding and the possible suspension of his 
shipment,'' since no advance notice would be filed. However as just 
noted, DEA would not suspend a shipment solely on the basis that no 
advance notice was filed. There would need to be evidence that the 
chemicals may be diverted to the clandestine manufacturer of a 
controlled substance.
    Following the suspension, a regulated person is entitled to a 
hearing. 21 U.S.C. 971(c)(2). While the statute and legislative history 
is silent as to what constitutes ``grounds'' to support a finding that 
the chemicals may be diverted, the Government has the burden of proof, 
21 CFR 1313.55. The government must prove by a preponderance of the 
evidence that the chemical may be diverted, not that it necessarily 
will be diverted.
    Judge Randall concluded that the initial suspensions of the 
chemicals were supported by the evidence. Judge Randall found that:

At the time the shipment transited the U.S. port, Colombia had been 
decertified by the

[[Page 51337]]

President and denied ``regular customer'' status by the DEA. * * * 
Lacking this status, (GMP) was required to provide notice to the DEA 
when over-the-threshold amounts of potassium permanganate transited 
a U.S. port; a requirement that (GMP) did not meet. * * * Further, 
at that time Colombia produced 70-80% of the world's cocaine 
hydrochloride. * * * and potassium permanganate is essential in this 
production process. * * * Thus, the preponderance of the evidence 
supported the DEA's initial suspension decision(s).

    However, Judge Randall then concluded that the chemicals should 
nonetheless be released to GMP in Colombia in light of ``the lawful 
nature of GMP's extensive and longstanding business activities in 
Colombia,'' the changes made by GMP regarding its sale of listed 
chemicals, and the oversight of its sales by the DNE.
    Before determining the ultimate outcome of these proceedings, the 
scope and purpose of the hearing must be determined. Pursuant to 21 CFR 
1313.52, the purpose of a hearing regarding suspended shipments if for 
``receiving factual evidence regarding the issues involved in the 
suspension.''
    Judge Randall found that while the statute does not reveal the type 
of remedy that such a hearing may provide, GMP clearly is entitled to 
due process of law. Judge Randall stated that, ``(m)erely offering 
(GMP) a post-detention opportunity to present evidence without the 
possibility of obtaining relief does not fulfill the `meaningful 
hearing' requirement of due process. See Armstrong v. Manzo, 380 U.S. 
545, 552 (1965). Therefore, I find that the hearing provision in 21 
U.S.C. 971(c)(2) allows the Administrator to review the action de novo 
and to provide a post-hearing remedy to (GMP).'' Consequently, Judge 
Randall concluded that the purpose of the hearing is to review DEA's 
initial suspension and to determine whether the continued detention of 
the chemicals is justified based upon the evidence presented at the 
hearing.
    The Administrator disagrees. Congress gave no specific guidance 
regarding the scope of a hearing regarding such suspensions. However, 
Congress clearly intended to treat these hearings differently from 
hearings regarding the suspension of a DEA registration. Pursuant to 21 
U.S.C. 824(d), a DEA registration can be immediately suspended, 
simultaneous with the institution of proceedings to revoke the 
registration, upon a finding that there is an imminent danger to the 
public health and safety. Then, 21 U.S.C. 824(a) gives specific grounds 
for the revocation fo a registration.
    There is no such similar language regarding the suspension of 
chemical shipments. Congress only stated that a chemical shipment may 
be suspended if it may be diverted to the clandestine manufacture of a 
controlled substance. There is no requirement in 21 U.S.C. 971 for the 
simultaneous intitution of proceedings to determine whether the 
chemicals should continue to be detained or forfeited based upon 
evidence adduced at the hearing. Therefore, it is reasonable to 
conclude that the purpose of a hearing regarding the suspension of a 
chemical shipment is to determine whether DEA had evidence at the time 
to support its finding that the chemical may be diverted, thereby 
warranting the suspension of the shipment.
    The Administrative Law Judge noted that for a hearing to be 
meaningful it must provide the requestor with the possibility of some 
sort of post-hearing relief. The Administrator concludes that even with 
a narrow interpretation of the scope of the hearing, a requestor could 
be entitled to post-hearing relief. If there is a finding that the 
initial suspension was not warranted, then the chemicals would be 
released.
    The Administrator next must determine whether evidence exists to 
support DEA's initial suspension based upon a finding that the 
chemicals may be diverted. Since the focus of these proceedings is 
whether the initial suspension was justified, the Administrator has 
confined his review to the evidence available to DEA at the time of the 
suspensions and to the evidence presented by GMP of its business 
practicews prior to the suspensions and its reputation as a law-abiding 
company.
    Judge Randall found that the government presented ``extensive 
evidence concerning what it viewed to be suspicious activity by GMP. * 
* *'' However, Judge Randall also found that ``the Government has 
failed to prove that it possessed any of this information prior to the 
seizure of these goods * * *.'' Judge Randall was concerned that the 
CNP report that was heavily relied upon by the Government was dated 
January 22, 1998, well after the seizure of the chemicals.
    As previously noted, Judge Randall concluded, and the Administrator 
agrees, that this proceeding is not to look at the legality of the 
seizures by the USCS, but rather to look at the actions of DEA. 
Therefore, the Administrator disagrees with Judge Randall and concludes 
that what is relevant is what evidence was possessed by DEA prior to 
the suspensions on May 20, 1998, not prior to the seizures. Further, 
the Administrator does not share Judge Randall's concern that the CNP's 
report was generated in close proximity to the suspension orders. The 
DEA investigator who testified worked closely with the CNP during this 
investigation, and was most likely aware of the information in the 
report before the report was actually written.
    Consequently, in determining whether the suspensions were 
justified, the Administrator has considered evidence of allegations 
that were known to DEA prior to the suspensions, as well as GMP's 
evidence of its practices prior to that time. Given that these 
proceedings are to determine whether the initial suspension was 
justified, the Government cannot conduct an investigation after the 
suspensions to acquire evidence to justify its actions. The Government 
cannot have it both ways. It cannot put in evidence discovered after 
the suspensions yet at the same time try to preclude consideration of 
GMP's change in practices, since the suspensions, that are designed to 
prevent diversion.
    Therefore, the Administrator has not considered evidence presented 
regarding the sales to the individual with the revoked permit, the two 
control logs, and GMP's July 1998 importation quota, since all were 
discovered well after the May 1998 suspension orders. Likewise, the 
Administrator has not considered GMP's changes in its practices since 
the suspensions. The Administrator has considered evidence of GMP's 
long-standing business activities, as well as evidence available to DEA 
at the time of the suspensions, to determine whether the suspensions 
were justified.
    The Administrator agrees with Judge Randall that the initial 
suspension was justified. However, the Administrator relies upon more 
evidence than Judge Randall did in arriving at the conclusion. Judge 
Randall found that the initial suspensions were justified based upon 
the President's decertification of Colombia at the time of the 
shipments, GMP's failure to file advance notification of the shipments, 
and the fact that potassium permanganate is essential in the production 
of cocaine and at that time Colombia produced 70-80% of the world's 
cocaine hydrochloride. In addition, the Administrator finds that on a 
number of occasions, GMP made multiple sales to the same address on the 
same day to individuals without permits for total amounts in excess of 
five kilograms. GMP also sold total amounts in excess of five kilograms 
or five liters to individuals or companies without a permit and in some 
instances

[[Page 51338]]

to individuals who presented identifications of other people. Also, 
evidence was presented that GMP's sales invoices reflected addresses 
that do not exist, telephone numbers that did not match the addresses 
listed on the invoices, and telephone numbers that did not exist.
    The Administrator recognizes that a Colombia prosecutor found that 
these practices did not violate Colombian law and no further action 
would be taken. However, the standard for criminal charges is far 
greater than what is required in this proceeding. Evidence of a 
violation of law is not necessary to demonstrate that the suspensions 
were lawful. The Government needs only to show by a preponderance of 
the evidence that the chemicals may be diverted. GMP's practice of 
selling above thresholds amounts to individuals presenting the 
identifications of others and of making multiple sales to the same 
address on the same day to individuals without permits, greatly 
increase the possibility of diversion of the chemicals. These practices 
circumvent the requirement of a permit for sales under five kilograms 
or five liters. Also, the invoices containing fraudulent and/or 
incorrect information are further evidence that the chemicals may be 
diverted. As a result of these practices, it is difficult, if not 
impossible, to ascertain the actual final destination of the chemicals 
sold by GMP.
    The Administrator recognizes that GMP is a well-respected company 
in Colombia and that several Colombian government entities asserted 
that there was no evidence of wrongdoing by GMP in their files. 
However, this does not negate the fact that the shipments at issue may 
be diverted based upon the large scale production of cocaine in 
Colombia and the sales practices of GMP.
    Judge Randall recommended that the chemicals at issue be released 
based in large part on GMP's subsequent change to its sales procedures 
where it no longer sells below five kilogram or five liter amounts to 
unregistered individuals or companies. The Administrator concludes that 
this evidence is not relevant to a determination as to whether DEA's 
initial suspension of the chemicals was justified. Such evidence would 
be relevant regarding any future shipments to GMP, should its Colombian 
chemical permit be reinstated.
    Judge Randall gave great weight to the fact that despite the 
revocation of GMP's chemical permit, the DNE has allowed it to continue 
to sell controlled chemicals under heightened review. Again, the 
Administrator concludes that this is not relevant to a determination as 
to whether evidence that the chemicals may be diverted existed at that 
time to justify the suspensions. Even if the Administrator did find it 
relevant that the DNE has allowed GMP to continue to sell its in-stock 
chemicals, there are no assurances in the record that this oversight by 
DNE would apply should these shipments be released to GMP.
    It should be noted that the Government argued in its exceptions 
that DEA is bound by the decision of the DNE revoking GMP's chemical 
permit. However since the DNE's action occurred in August 1998, the 
Administrator concludes that this cannot be considered as a basis for 
the suspension of the shipments in May 1998.
    Judge Randall concluded that the ``evidence shows that the 
suspended chemicals will not likely be used for illicit purposes,'' and 
recommended that the chemicals be released to GMP. Judge Randall found 
that ``GMP is a reputable company in business in Colombia for over 60 
years. Further, the company's president is knowledgeable of the 
country's drug producing and trafficking problems from his past 
government service. He credibly testified about the anti-drug efforts 
taken by his governmental office, and his commitment to these 
actions.''
    Both parties filed exceptions to Judge Randall's recommended 
decision. The Administrator has carefully considered these exceptions 
and concludes that they have been addressed throughout this final 
order. The Administrator disagrees with Judge Randall that the 
chemicals should be released to GMP.
    In arriving at his decision, the Administrator has considered GMP's 
stature in the business community and the anti-drug efforts of its 
president, however the chemicals should nonetheless not be released. 
The Administrator concludes that there is ample evidence to support 
DEA's finding at the time the shipments were suspended that the 
chemicals may be diverted. GMP's sales practices increased the chance 
of diversion of the chemicals. Some sales invoices contained fraudulent 
information. Colombia procedure 70-80% of the world's cocaine. The 
President of the United States had decertified Colombia and all 
shipments of listed chemicals were subjected to heightened scrutiny. 
Finally, GMP failed to file advance notification of these shipments. 
Therefore, the Administrator concludes that the suspensions of the 
November 17, 1997, December 16, 1997, and January 17, 1998 shipments of 
potassium permanganate to GMP were proper.
    Accordingly, the Administrator of the Drug Enforcement 
Administration, pursuant to the authority vested in him by 21 U.S.C. 
971 and 28 CFR 0.100(b), hereby orders that the suspensions of the 
above described shipments, be, and they hereby are, sustained, and that 
these proceedings are hereby concluded. This final order is effective 
immediately.

    Dated: August 3, 2000.
Donnie R. Marshall,
Administrator.
[FR Doc. 00-21482 Filed 8-22-00; 8:45 am]
BILLING CODE 4410-09-M