[Federal Register Volume 67, Number 60 (Thursday, March 28, 2002)]
[Rules and Regulations]
[Pages 14853-14862]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-7258]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Parts 1300, 1309, 1310

[DEA Number 163F]
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: Final rule.

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SUMMARY: DEA is 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 combination ephedrine drug products.
    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 pseudoephedrine, phenylpropanolamine, and ephedrine 
(including drug products containing those chemicals) by Postal Service 
or private or commercial carrier to nonregulated persons.
    This final rule amends the regulations to make them consistent with 
the language of the MCA and to establish specific procedures to be 
followed to satisfy the new reporting requirement. DEA has, where 
possible, taken action to limit the public impact of these new 
requirements while remaining consistent with the intent of the MCA to 
attack the diversion of regulated drug products to the clandestine 
manufacture of methamphetamine.

EFFECTIVE DATE: April 29, 2002.

FOR FURTHER INFORMATION CONTACT: Patricia M. Good, Chief, Liaison and 
Policy Section, Office of Diversion Control, Drug Enforcement 
Administration, Washington, DC 20537, Telephone (202) 307-7297.

SUPPLEMENTARY INFORMATION:

Special Notice Regarding Phenylpropanolamine

    On November 6, 2000, the Food and Drug Administration (FDA) issued 
a public advisory announcing that it is taking steps to remove 
phenylpropanolamine from all drug products and has requested that all 
drug companies discontinue marketing products containing 
phenylpropanolamine.

What Is the Basis for This Action?

    The Comprehensive Methamphetamine Control Act of 1996 was enacted 
on October 3, 1996, to provide a 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 
in regulated chemicals. The MCA retained the existing Controlled 
Substances Act (CSA) requirements for distributors of List I chemicals 
and made certain changes with respect to the regulation of drug 
products containing pseudoephedrine, phenylpropanolamine, and 
ephedrine.

What Are the Requirements of the MCA?

    Principal among the changes made by the MCA was amendment of the 
definition of regulated transaction (21 U.S.C. 802(39)) to remove the 
exemption for drug products that contain pseudoephedrine, 
phenylpropanolamine, or ephedrine and to establish a 24 gram threshold 
for the sale of pseudoephedrine or phenylpropanolamine products by a 
retail distributor or a distributor required to make reports by section 
310(b)(3) of the CSA (21 U.S.C. 830(b)(3)). The definition was also 
amended to provide that the sale of ordinary over-the-counter

[[Page 14854]]

pseudoephedrine or phenylpropanolamine products by retail distributors 
shall not be a regulated transaction.
    The MCA also added two new definitions:
    The term ordinary over-the-counter pseudoephedrine or 
phenylpropanolamine product is defined in section 102(45) of the CSA 
(21 U.S.C. 802(45)) as a product containing pseudoephedrine or 
phenylpropanolamine that is regulated pursuant to the CSA and, except 
for liquids, is packaged with not more than 3 grams of pseudoephedrine 
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 
per package.
    The term retail distributor is defined in section 102(46) of the 
CSA (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 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. 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.
    The MCA also defined combination ephedrine product and established 
a 24 gram single transaction limit, notwithstanding the form of product 
packaging, for sales by retail distributors and 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.
    Additionally, the MCA amended section 310(b)(3) of the CSA (21 
U.S.C. 830(b)(3)) to require that regulated persons who engage in 
transactions with pseudoephedrine, phenylpropanolamine, or ephedrine 
(including drug products containing those chemicals) to non-regulated 
persons (i.e., someone who does not further distribute the product) and 
use or attempt to use the Postal Service or any private or commercial 
carrier shall submit a report of all such transactions each month.
    The MCA also provided expanded opportunity for reinstatement of a 
product exemption, through amendment of section 204 of the CSA (21 
U.S.C. 814(e)), if it is determined that the product is manufactured 
and distributed in a manner that prevents diversion, and changed the 
record retention period for List I chemical transactions to 2 years 
from 4 years.
    The requirements with respect to the regulation of combination 
ephedrine drug products and reports of sales to nonregulated 
individuals went into effect on October 3, 1996. In order to allow 
uninterrupted availability of the products while companies applied for 
and received their registrations, DEA published interim and final rules 
in the Federal Register on February 10, 1997 and October 7, 1997 (62 FR 
5914 and 62 FR 52253) respectively, establishing a temporary waiver of 
the registration requirement for any person who submitted an 
application for registration prior to December 3, 1997. DEA also 
published a notice regarding the reporting requirement on February 7, 
1997 (62 FR 5851), which provided affected persons guidance regarding 
submission of the required reports to DEA and requested certain 
additional information be submitted with the reports.
    The requirements with respect to pseudoephedrine and 
phenylpropanolamine became effective on October 3, 1997.

What Regulatory Amendments Is DEA Making?

    This rule makes final the notice of proposed rulemaking (NPRM) that 
DEA published in the Federal Register on October 7, 1997 (62 FR 52294), 
which proposed to implement certain regulatory changes mandated by the 
MCA. The changes included conforming regulatory definitions to the 
language of the MCA; new record retention, threshold and reporting 
requirements; and expanding waivers of the registration requirement. 
These changes are discussed in greater detail in the following 
paragraphs.
    Because many of the requirements of the MCA were set out in such 
detail as to be self-implementing, many of the proposed regulatory 
changes are conforming amendments to make the language of the 
regulations consistent with that of the new law. The definitions of 
regulated transaction and retail distributor are updated and the 
definitions of ordinary over-the-counter pseudoephedrine or 
phenylpropanolamine product and combination ephedrine product are 
inserted. Additionally, 21 CFR 1310.04 was proposed to be amended to 
reflect the new List I chemical record retention period and new 
threshold requirements; 21 CFR 1310.04-06 were proposed to be updated 
to reflect the new reporting requirement; and 21 CFR 1309.71 was 
proposed to be amended to reflect that in retail settings open to the 
public ephedrine drug products, in both single-entity and combination 
form, must be stored behind a counter where only employees have access. 
Finally, 21 CFR part 1309 was proposed to be amended to consolidate the 
various waivers of the registration requirement into one section, 
expand the current waiver of registration for retail distributors of 
combination ephedrine products to include retail distributors of 
pseudoephedrine and phenylpropanolamine products, and to provide a 
temporary waiver of the registration requirement for persons who 
distribute, import, or export pseudoephedrine or phenylpropanolamine 
drug products provided they submitted an application on or before 
December 3, 1997.

What Comments Were Received?

    The comment period for the NPRM closed on December 8, 1997. Twenty 
comments were submitted which, while supportive of the efforts of the 
law and regulations to control the diversion of drug products and the 
illicit manufacture of methamphetamine, raised the following issues and 
concerns:

Registration Requirement

    A number of comments focused on the registration requirement, 
expressing concerns that the paperwork burden and cost of registration 
are not commensurate with the volume of business being conducted in the 
products or that the manner in which the products are packaged or 
distributed is not conducive to diversion. The commenters recommended 
that DEA adopt alternative registration requirements, allowing for:
    1. Exempting below threshold sales from the registration 
requirement;
    2. A related general recommendation was also made that the retail 
distribution exemption for ordinary over-the-counter products be 
extended to the wholesale level;
    3. Exempting distributors that purchase `2 pill packs' (presumably 
products that meet the definition of ordinary over-the-counter 
pseudoephedrine and phenylpropanolamine products) to manufacture retail 
displays and refills that contain 24 to 30 packs, for sale to 
distributors who, in turn, sell to retailers. This segment of the 
industry should not be subject to registration on

[[Page 14855]]

the grounds that clandestine laboratory operators are not interested in 
`2 pill packs' and the $595.00 cost of registration would be more than 
many of the distributors of these products would be willing to pay.
    4. Exempting any distributor that purchases less than the threshold 
amount in a calendar month; and
    5. Exempting vending machine sales from the registration 
requirement.
    The first two recommendations, exemption of below threshold sales 
and extension of the retail exemption for ordinary over-the-counter 
pseudoephedrine and phenylpropanolamine products to wholesale 
distributions of the products were discussed at length in DEA's final 
rule, published in the Federal Register on October 7, 1997 (62 FR 
52253) (DEA-154F, RIN 1117-AA42), entitled Implementation of the 
Comprehensive Methamphetamine Control Act of 1996; Possession of Listed 
Chemicals Definitions, Record Retention, and Temporary Exemption From 
Chemical Registration for Distributors of Combination Ephedrine 
Products. In summary, DEA noted with respect to below threshold sales 
that the chemical registration requirement was patterned after the 
system of registration required for controlled substances handlers. The 
controlled substances registration system, while providing exemptions 
for certain products that contain controlled substances, does not take 
into consideration the quantity of controlled substance involved when 
determining whether registration is required; either a product is 
exempt from registration or it is not, the amount of the product 
involved in the transaction is immaterial. To clarify the fact that it 
is product exemption, rather than transaction exemption, that applies, 
Sec. 1309.21 is being amended to clarify that the exemption in 
Sec. 1300.02(b)(28)(i)(D) is determined irrespective of the threshold 
provisions in Sec. 1300.02(b)(28)(i)(D)(2).
    With respect to the issue of extension of the retail distributor 
exemption for ordinary over-the-counter products to wholesale 
activities within the retail distribution chain, DEA noted that the MCA 
does not exempt retail distributors, it exempts sales by retail 
distributors, which sales are defined in section 401(b)(4) of the MCA 
as ``* * * either directly to walk-in customers or in face-to-face 
transactions by direct sales.'' The sales are further qualified in 
section 401(b)(4) of the MCA as involving ``* * * below threshold 
quantities in a single transaction to an individual for legitimate 
medical use.'' The specific language of the MCA in defining the type of 
transactions that are exempted from the requirements of the law makes 
it clear that only qualifying retail transactions are to be exempted; 
the language does not contemplate the exemption of a major class of 
wholesale distributions.
    In connection with the first two recommendations, certain 
commenters also raised the concern that, based on their sales, the 
initial registration fee of $595.00 was too high. It should be noted 
that on October 17, 1997, DEA published a notice in the Federal 
Register (62 FR 53958) waiving a substantial portion of the 
registration fee, reducing it from $595.00 to $116.00. The reduction of 
the fee should address those concerns.
    With respect to the issue of `2 packs', the assertion of the 
commenter that such products would not be of interest to clandestine 
laboratory operators at the retail level given their pricing and the 24 
gram transaction limit may be true. However, at the wholesale level, 
with its much higher thresholds and size of transactions, 2 packs, 
while not the most convenient, would still represent a worthwhile 
source of material. The reduction of the fee should address the 
principal concern of this industry with respect to registration.
    The fourth recommendation, exempting distributors from registration 
if they purchase less than a threshold amount in a calendar month, 
while appearing to be reasonable on the surface, would pose a 
potentially fatal flaw in the chemical control system. The basic 
premise of the registration system is to require identification of the 
participants in the system to DEA and give DEA the opportunity to 
review their credentials and background. Allowing an entire class of 
distributors to engage in general distribution outside of this system 
would provide an opportunity for illicit manufacturers to obtain the 
supplies they need. The current thresholds for pseudoephedrine and 
phenylpropanolamine at the wholesale level are 1 kilogram (2.2 pounds) 
and 2.5 kilograms (5.5 pounds) respectively. Under the proposed 
scenario, anyone could obtain drug products containing 2 pounds of 
pseudoephedrine and 5 pounds of phenylpropanolamine per month without 
being identified to DEA or subject to any background checks to confirm 
their legitimacy. This volume of product would allow, at the currently 
estimated conversion ratio of 50% to 70% in clandestine laboratories, 
the manufacture of between 1 and 1.4 pounds of methamphetamine and 2.5 
to 3.5 pounds of amphetamine per month. In light of the opportunistic 
nature of the clandestine laboratory operators, providing such an 
unregulated source of supply would be a golden opportunity. Further, 
the reduction of the new application fee minimizes the economic burden 
associated with registration for this class of distributor.
    The fifth issue, vending machine sales, is apparently based on the 
mistaken assumption that vending machine sales and the supplying of 
vending machines is a form of wholesale distribution. DEA considers the 
sale of regulated drug products via vending machines to be retail 
sales. The sales are made in 'face-to-face' transactions to individual 
users for their personal medical use in amounts less than the 24 gram 
threshold. In a related issue, an individual owner of vending machines 
may receive and distribute regulated drug products to his/her machines 
without obtaining a registration as a distributor. DEA recognizes that, 
as a rule, vending machines are placed in locations that are not under 
the control of the machine owner and to which the owner cannot usually 
have supplies delivered. Under such circumstances, the owner of the 
machines may receive regulated drug products at another location for 
the purpose of resupplying the machines, without having to be 
registered as a distributor.
    After careful review of the comments, DEA has concluded that its 
current waivers of the registration requirement constitute an 
appropriate balance between minimizing regulatory burden and preventing 
diversion. DEA believes that expanding the registration waivers as 
suggested in the above comments could result in an appreciable increase 
in the potential for diversion.

Security Requirements

    Three commenters expressed concerns regarding the proposed 
requirement that combination ephedrine drug products be maintained 
behind the counter, noting that such a requirement appears to be 
inconsistent with the waiver of registration for retail distributors of 
these products. The diversion of ephedrine products at the retail level 
has been a significant problem in the past and remains an issue today. 
DEA is aware that there is some level of retail diversion and is 
concerned that, as controls at higher levels in the distribution system 
become more effective, the pressure to divert from retail sources will 
increase. However, in lieu of requiring that combination ephedrine 
products be maintained behind the counter, DEA will continue to monitor 
diversion from this level and, if circumstances require,

[[Page 14856]]

will consider additional controls, including removing the exemption 
from registration for retail distributors of non-ordinary over-the-
counter drug products as well as imposition of additional security 
requirements. The existing requirement that single-entity ephedrine 
drug products be stocked behind the counter, where only employees have 
access, remains in effect.

Mail Order Reporting Requirement

    A number of comments were received regarding the mail order 
reporting requirement. The comments focused on the following issues:
    1. In addition to requiring that all distributions (regardless of 
amount) of ephedrine, pseudoephedrine, or phenylpropanolamine to non-
regulated persons be reported under the mail order reporting 
requirement, the MCA also establishes a general distribution threshold 
of 24 grams in a single transaction, rather than the existing 
thresholds set forth in Sec. 1310.04, for persons required to submit 
mail order reports. Some commenters expressed the position that the 24 
gram threshold applies only to those transactions that must be reported 
and not to all transactions of the distributor;
    2. The reporting requirement should be amended to exclude 
pharmacies that deliver or mail prescriptions to patients and to 
exclude mail order transactions that are below established thresholds;
    3. The reporting requirement is in conflict with patient 
confidentiality requirements; and
    4. The additional information required by DEA adds to an already 
burdensome requirement, especially the requirement for the date of 
transaction and the lot number, which should be stricken from the 
requirement.
    The first of the commenters' concerns relates to specific 
requirements of the MCA with respect to reporting mail order 
transactions over which DEA has no discretion. The MCA requires, at 
Section 402 (codified at 21 U.S.C. 830(b)(3)), that all distributions 
(regardless of quantity) of ephedrine, pseudoephedrine, or 
phenylpropanolamine to non-regulated persons be reported to DEA monthly 
in a format determined by the Attorney General (delegated to DEA). In 
section 401 (codified at 21 U.S.C. 802(39)(A)(iv)(II), the MCA also 
defines a ``regulated transaction,'' which is subject to various other 
regulatory requirements of Section 830 and elsewhere, to be any single 
transaction of 24 grams or more by a mail order distributor (the 
statute refers to ``distributors required to submit reports by section 
830(b)(3) of this title''). For this business sector, the higher 
distribution thresholds set forth in Sec. 1310.04 (e.g., 1 kilogram for 
pseudoephedrine and 2.5 kilograms for phenylpropanolamine) are not 
applicable. Therefore, the position expressed by the commenters that 
the 24 gram threshold applies only to those transactions that must be 
reported under the mail order reporting requirement, and not to all 
transactions of a mail order distributor, runs contrary to the law as 
interpreted by the agency.
    One commenter noted that the proposed amendment to 
Sec. 1310.04(f)(ii) should be amended to reflect that the single 
transaction threshold also applies to distributions by persons required 
to report mail order transactions. This correction has been made to the 
final regulations.
    As to the issue of waiving the reporting requirement for pharmacies 
for delivering or mailing regulated drug products to patients, the law 
provides no discretion to waive the reporting requirement for any 
categories of transactions; all described transactions must be 
reported. A legislative amendment is being considered to address this 
issue.
    Amending the mail order requirement to exclude the delivery or 
mailing of prescriptions would also address the issue of patient 
confidentiality. Pending such an amendment, it must be noted that DEA 
often reviews prescription information, including the names and 
addresses of patients, in the course of investigations and audits. 
Disclosure of such information from DEA's files is made only to other 
law enforcement and regulatory agencies engaged in the enforcement of 
controlled substances or chemical control laws; when relevant in any 
investigation or proceeding for the enforcement of controlled 
substances or chemical control laws; and when necessary for compliance 
by the United States under treaty or other international agreement. 
Other requests for disclosure of such information must be made under 
the Freedom of Information Act and are subject to the full requirements 
and protections of the Privacy Act. Further, section 310 of the CSA (21 
U.S.C. 830), which requires chemical records and reports, including the 
mail order reports, also contains protections against the disclosure of 
confidential business information collected by DEA pursuant to the 
section. DEA is amending Sec. 1310.06 to add a paragraph clarifying 
that the protections set forth in 21 U.S.C. 830(c) for confidential 
business information will also apply to information collected in the 
mail order reports.
    With respect to the additional information (name of recipient, if 
different from the purchaser; address of purchaser, if different from 
address delivered to; shipping date; and lot number, if drug products) 
that DEA is requesting in the reports, such information is important in 
helping to identify efforts to divert the chemicals, especially where 
orders are being placed with a number of different mail order 
providers. It is not unusual for traffickers to attempt to circumvent 
the chemical controls by ordering small, apparently innocuous amounts 
of product from a variety of different sources or having a number of 
individuals place orders for delivery to the same location. The 
availability of the additional information is critical for 
identification of such efforts. The lot numbers for drug products are 
important in allowing DEA to track and identify the source of products 
that are found at clandestine laboratory sites. Finally, to reflect 
organizational changes within DEA, references to ``Chemical Operations 
Section'' have been changed to ``Chemical Control Section''.
    One commenter requested clarification of the shipment date, package 
type, and package quantity. Shipment date refers to the date the 
product is shipped by the regulated person to the non-regulated person. 
Package type refers to the specific form of packaging of the product, 
i.e., bottle, blister pack, etc., and package quantity refers to the 
number of packages shipped. Section 1310.06 has been amended to include 
examples for items, where appropriate, for clarification.
    One commenter expressed concern that with the mail order reporting 
requirement ``* * * DEA is unfairly creating an `unlevel' playing field 
between retail distributors and mail order distributors.''
    The statutory language enacting the mail order reporting 
requirement is clear and unequivocal and allows DEA no discretion to 
limit the requirement or exclude any categories of mail order 
transactions; all mail order transactions by a regulated person with a 
non-regulated person must be reported. As noted earlier, DEA is 
considering a legislative amendment to allow some discretion in the 
enforcement of this requirement of the MCA. However, until such an 
amendment is passed by Congress and signed into law, DEA must enforce 
the requirement as written.
    In a related issue, two commenters that distribute ephedrine and 
pseudoephedrine products to Occupational Health Clinics requested that 
proposed Sec. 1310.04(f)(1)(i)(B)(2) and (D)(2) be amended to increase 
the

[[Page 14857]]

threshold from 24 grams to 160 grams for products packaged in unit dose 
form. DEA has responded directly to each of the commenters clarifying 
the fact that distributions to Occupational Health Clinics would not be 
subject to the mail order reporting requirement. If the commenters' 
activities are restricted to such sales they would be subject to the 
appropriate wholesale thresholds for ephedrine and pseudoephedrine and 
not to the threshold that applies to persons required to submit mail 
order reports.

Waiver of the Registration Requirement for Retail Distributors

    One commenter objected to DEA's waiver of registration, contained 
in Sec. 1309.24(e), for retail distributors of regulated drug products 
``* * * irrespective of the form of packaging * * *. The commenter 
argued that Congress intended that the exemption apply only to 
`ordinary over-the-counter products' and that the commenter was unaware 
of * * * any authority that DEA has to determine that `minimizing the 
burden on industry' is more important than implementing public law.''
    The implementation of any law that has an impact on legitimate 
commerce is a balancing act between the specific requirements of the 
law and the impact that the law will have on the industry engaged in 
such commerce. The Regulatory Flexibility Act (5 U.S.C. 601 et seq.), 
Executive Order 12866, and the Small Business Regulatory Enforcement 
Fairness Act of 1996 all require that implementation of regulatory 
requirements be accomplished in such a manner as to minimize the burden 
on the public to the greatest possible extent while remaining 
consistent with the requirements of the law. DEA has, in implementing 
the requirements of the MCA, acted consistently with those principles.
    The definition of `retail distributor' established by Congress is 
sufficiently restrictive that, as noted in the proposed rule, * * * 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 of 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.'' This 
fact, coupled with the widespread concern that these regulations have 
the smallest necessary impact on public access to the products at the 
retail level led DEA to exercise its authority under section 302(d) of 
the CSA (21 U.S.C. 822(d)) to exempt retail distributors from the 
registration requirement.
    It should be noted that waiver of registration for retail 
distributors does not confer `ordinary over-the-counter' status on 
products not meeting the definition of that category. Retail 
distributors whose transactions in listed chemicals consist solely of 
`ordinary over-the-counter' products are exempt from the registration, 
recordkeeping, and reporting requirements of Sec. 1310.05, but not the 
reporting requirements of Sec. 1310.03(c). Retail distributions of 
products not meeting the definition of that category that exceed the 
retail threshold of 24 grams in a single transaction are subject to the 
registration, recordkeeping, and reporting requirements.
    In granting the waiver of registration for retail distributors of 
regulated drug products irrespective of the form of packaging, DEA has 
acted within the bounds of responsible rulemaking without jeopardizing 
the requirements or intent of the MCA. Two commenters, representing 
elements of the manufacturing and retail distribution industry, 
recognized the waiver as * * * a rational interpretation of the MCA'' 
and commended DEA for the action.

Miscellaneous

    One commenter, while acknowledging the analysis of regulatory 
alternatives in the proposed rule, expressed concern that DEA has 
overlooked a class of affected entities that deserves additional 
consideration: wholesalers that distribute their products to small 
independent retailers. The commenter suggested that DEA consider less 
frequent reporting or waive the registration requirement for such small 
wholesalers.
    DEA is familiar with the independent wholesale industry, having 
worked with the national trade associations representing this segment 
of the industry on a number of occasions since the passage of the MCA 
regarding its requirements and impact on the industry. As a result of 
requests from this part of the industry, DEA waived a substantial 
portion of the registration fee in order to reduce the economic impact 
of registration on the wholesalers. However, as noted earlier, waiving 
the registration requirement altogether is not an acceptable 
alternative; to do so would establish an unregulated portion of the 
industry that could become a source of supply for clandestine 
laboratory operators. This segment of the industry has been the subject 
of a substantial portion of DEA's enforcement efforts. Since October, 
1997, there have been at least 33 criminal convictions and 23 civil 
fines obtained against wholesalers, all for violations of the CSA 
involving sales of regulated drug products. Additionally, at least 4 
wholesalers have surrendered their registrations for violations 
involving regulated drug products, 6 have had their registrations 
suspended, and 13 companies are the subject of administrative actions 
to deny an application or revoke a registration. A recent national 
enforcement action directed at this segment of the industry resulted in 
over 170 arrests and seizure of sufficient product to provide over 12 
tons of pseudoephedrine to the methamphetamine traffickers. Thus, it is 
clear that some level of regulation and oversight of this sector of the 
industry is necessary.
    With respect to the issue of reporting, the only reports that must 
be made periodically are mail order reports, which are mandated by 
Congress. DEA has no discretion to modify the required reporting 
period. All other reports are to be submitted on an as-needed basis 
using the guidance of Sec. 1310.05. In total, DEA has taken action 
where possible to limit the burden on industry without compromising the 
legislative efforts to attack the problem of diversion of regulated 
drug products to clandestine laboratories.
    In a related issue, two commenters objected to the characterization 
of the wholesale industry as the source of choice for the clandestine 
laboratory operators. It has never been the intent of DEA to cast the 
wholesale industry in a negative light. The majority of the industry is 
honest and reputable and has worked with DEA and Congress in an effort 
to address the diversion problem. However, there are the few proverbial 
`bad apples' whose activities reflect poorly on the industry as a 
whole. These individuals, who are the focus of DEA's enforcement 
efforts, have taken advantage of their position within the wholesale 
industry to sell their products to clandestine laboratory operators or 
those who supply them, in order to gain illicit profits. DEA recognizes 
that while the clandestine laboratory operators have been able to 
obtain their supplies through this route, the actions of the few 
corrupt wholesalers are in no way a reflection of the industry as a 
whole. DEA looks forward to working with the legitimate industry in 
dealing with the problem of

[[Page 14858]]

diversion of regulated drug products to clandestine laboratories.
    One commenter requested clarification regarding the status of a 
variety of activities, such as contract processors, vending machine 
sales, and samples and donations. The commenter also proposed that DEA 
should more clearly define the evidentiary standards for reinstatement 
of the drug product exemption.
    DEA recognizes that there are within the chemical and drug product 
industry certain activities of which regulation is not necessary for 
effective enforcement of the law. In that regard, DEA is preparing a 
separate proposed rule regarding the waiver for certain activities, 
including those listed in the previous paragraph, from either the 
registration requirement or the fee requirement. Until such waivers are 
finalized, however, the full requirements of the law and regulations 
apply.
    With respect to the exemption criteria, DEA understands the desire 
on the part of industry for concrete, objective evidentiary guidelines 
to be satisfied in requesting reinstatement of the exemptions for 
certain drug products. However, the variety of circumstances that could 
affect a decision to grant such a reinstatement for any product is so 
great that the establishment of a concise and exclusive standard is not 
possible. As an alternative, DEA maintains a policy of open discussion 
with applicants for reinstatement. If there are any questions regarding 
an application or is a need for additional information, DEA will work 
with the applicant in an effort to address the issues.
    One commenter objected that during the course of pre-registration 
investigations, DEA investigators were requesting information to which 
DEA is not entitled. This concern was also brought directly to DEA's 
attention by the commenter and has been resolved through a modification 
of the pre-registration investigation information collection 
procedures.
    One commenter noted that the difficulties and burdens experienced 
by small distributors in complying with the recordkeeping requirement 
reinforce the need to establish waivers from the regulations where 
possible. DEA is committed to ensuring that the requirements of the 
chemical control program are applied with the least possible public 
burden while remaining consistent with the intent of the law. As noted 
earlier, DEA is preparing a proposal to exempt certain activities from 
the registration or fee requirement. DEA will continue to review the 
chemical control requirements to try and identify further waivers that 
might be possible.

Note Regarding Amendments to the Regulations

    On October 17, 2001, DEA published a final rule in the Federal 
Register entitled ``Control of Red Phosphorus, White Phosphorus, and 
Hypophosphorous Acid (and its salts) as List I Chemicals''. That final 
rule added new text to 21 CFR 1309.29. This final rule removes 21 CFR 
1309.29 and incorporates its text into 21 CFR 1309.24. The amendments 
made in the October 17, 2001, final rule have been incorporated into 
new 21 CFR 1309.24, where appropriate.

Regulatory Flexibility Act

    The Administrator in accordance with the Regulatory Flexibility Act 
(5 U.S.C. 605(b)), has reviewed this regulation and by approving it 
hereby certifies that this rulemaking will not have a significant 
economic impact upon a substantial number of small entities for the 
following reasons. As discussed in the NPRM, in the section regarding 
SMALL BUSINESS IMPACT AND REGULATORY FLEXIBILITY CONCERNS, 
consideration was given to the population that would be impacted, the 
potential impact of varying levels of regulation, and the nature of the 
problem to be addressed by the regulations.
    As noted in the NPRM, there are two distinct, but related, groups 
within the industry: retail distributors and wholesalers. There are an 
estimated 750,000 retail distributors who distribute the regulated drug 
products directly to the public. Their activities are, by law, limited 
almost exclusively to sales of 24 grams or less directly to walk-in 
customers or in face-to-face sales for personal medical use. 
Wholesalers, while far fewer in number (approximately 3,500) and 
engaging in fewer transactions, account for as great a level of 
commerce as retail distributors through significantly larger 
transaction sizes.
    There were three basic enforcement options available to DEA in 
applying the requirements of the MCA:
    1. Apply the requirements to both the retail and wholesale 
distributor industries;
    2. Regulate only the retail distributors; or
    3. Regulate only the wholesale distributors.
    In reviewing the options, it became clear that the burdens 
associated with regulation of retail distributors would potentially be 
enormous. As detailed in the NPRM, the initial registration cost for 
750,000 retail distributors at $255.00 each would be over $190 million, 
with a subsequent annual reregistration cost, at $116.00 each, of 
approximately $87 million. Additionally, there would be a 150,000 hour 
annual paperwork burden associated with the registration requirement. 
For DEA, the administrative burden of handling 750,000 applications per 
year would be enormous. Further, the new requirements of the MCA with 
respect to retail distributors should reduce the potential for 
significant diversion, provided that retailers comply with the 
requirements of the law and are alert to attempts to circumvent the 
controls. Because of the limited amount of product permitted to be 
distributed in a single transaction, attempts to divert the products at 
the retail level 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. Under the circumstances, the 
monetary and administrative burdens associated with registration and 
regulation of the retail industry would be out of proportion with the 
benefits to be derived and might unnecessarily interfere with 
legitimate public access to the products.
    Registration and regulation of the wholesale industry would have a 
much lesser impact. With respect to registration, the cost for initial 
registration would be slightly more than $2 million (3,500 
registrations at $595.00 each) and annual reregistration costs would be 
approximately $1.7 million (3,500 at $477.00 each). The annual 
paperwork burden associated with registration would be 700 hours per 
year. With respect to regulation, the recordkeeping requirement would 
be minimal, since the transaction information DEA requires would 
generally be maintained by a business as a matter of good business 
practice, and the reporting requirements (except for the mail order 
reporting requirement which is non-discretionary) are limited to an 
``as-needed'' basis using the guidance of Sec. 1310.05. Weighing these 
much lower economic and administrative costs against the larger 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 regulatory 
controls at this level of the industry.
    Therefore, to best achieve the intended results of the MCA, while 
minimizing the burden on the industry, DEA has determined that the 
registration and regulatory controls will

[[Page 14859]]

apply to the manufacturer/wholesale level, while retail distributors 
will be exempt from the registration and recordkeeping requirements 
provided that the requirements of the law and regulations with respect 
to retail distributions are met.
    These regulations 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 3000 to 4000 wholesale 
distributors, importers, and exporters that became subject to 
registration and regulation, DEA reduced the initial registration fee 
from $595.00 to $116.00, thus minimizing the financial impact. With 
respect to the other requirements, DEA has traditionally based the 
recordkeeping requirement on standard business practices, thus 
minimizing the impact. Further, the MCA reduced the record retention 
period from 4 years to 2 years. As for reports, the MCA is absolute in 
the requirement that mail order reports be submitted monthly; DEA has 
no discretion to modify that requirement. For other reports, the 
requirement is limited to reporting only those transactions that are 
suspicious or unusual; it is not necessary for the regulated persons to 
report all their transactions.
    DEA has not restricted its consideration of the impact of the MCA 
to this rulemaking only. DEA continues to work with the industry in 
identifying areas in which regulation is not necessary for effective 
enforcement of the chemical controls. As noted earlier, DEA is drafting 
a separate proposed rule to exempt certain other activities from either 
registration or registration fees. As the chemical program matures, DEA 
will continue to work to focus the controls where they are necessary. A 
copy of this rulemaking has been provided to the Chief Counsel for 
Advocacy at the Small Business Administration.

Executive Order 12866

    This rulemaking has been drafted and reviewed in accordance with 
Executive Order 12866. This rulemaking has been determined to be a 
significant action and, therefore, this rulemaking has been reviewed 
and approved by the Office of Management and Budget.

Executive Order 12988

    This regulation meets the applicable standards set forth in 
Sections 3(a) and 3(b)(2) of Executive Order 12988.

Executive Order 13132

    This rulemaking does not preempt or modify any provision of state 
law; nor does it impose enforcement responsibilities on any state; nor 
does it diminish the power of any state to enforce its own laws. 
Accordingly, this rulemaking does not have federalism implications 
warranting the application of Executive Order 13132.

Unfunded Mandates Reform Act of 1995

    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.

Small Business Regulatory Enforcement Fairness Act of 1996

    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.

Paperwork Reduction Act

    This rule contains a new reporting requirement, Report of Mail 
Order Transactions, that has been reviewed and approved by the Office 
of Management and Budget and issued OMB approval number 1117-0033.

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 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 amended by revising paragraph (b)(28)(i)(D) 
and by adding new paragraphs (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. For combination ephedrine products the threshold for any 
sale by retail distributors or by distributors required to submit 
reports by Sec. 1310.03(c) shall be 24 grams of ephedrine 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 
not more than two dosage units, or where the use of

[[Page 14860]]

blister packs is technically infeasible, that is packaged in unit dose 
packets or pouches, and
    (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 combination 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 1309.21 is revised to read as follows:


Sec. 1309.21  Persons required to register.

    (a) Every person who distributes, imports, or exports any List I 
chemical, other than those List I chemicals contained in a product 
exempted under Sec. 1300.02(b)(28)(i)(D) of this chapter (irrespective 
of the threshold provisions under Sec. 1300.02(b)(28)(i)(D)(2) of this 
chapter), or who proposes to engage in the distribution, importation, 
or exportation of any List I chemical, shall obtain annually a 
registration specific to the List I chemicals to be handled, unless 
exempted by law or pursuant to Secs. 1309.24 through 1309.26 of this 
part. Only persons actually engaged in such activities are required to 
obtain a registration; related or affiliated persons who are not 
engaged in such activities are not required to be registered. (For 
example, a stockholder or parent corporation of a corporation 
distributing List I chemicals is not required to obtain a 
registration.)
    (b) Every person who distributes or exports a List I chemical they 
have manufactured, other than a List I chemical contained in a product 
exempted under Sec. 1300.02(b)(28)(i)(D) of this chapter, or proposes 
to distribute or export a List I chemical they have manufactured, shall 
obtain annually a registration specific to the List I chemicals to be 
handled, unless exempted by law or pursuant to Secs. 1309.24 through 
1309.26 of this part.

    3. Section 1309.22 is 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.
    4. Section 1309.24 is 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 person whose 
activities with respect to List I chemicals are limited to the 
distribution of red phosphorus, white phosphorus, or hypophosphorous 
acid (and its salts) to: another location operated by the same firm 
solely for internal end-use; or an EPA or State licensed waste 
treatment or disposal firm for the purpose of waste disposal.
    (g) The requirement of registration is waived for any person whose 
distribution of red phosphorus or white phosphorus is limited solely to 
residual quantities of chemical returned to the producer, in reusable 
rail cars and isotainers (with capacities greater than or equal to 2500 
gallons in a single container).
    (h) 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.
    (i) If any person exempted under paragraph (b), (c), (d), (e), (f) 
or (g) 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 of this part.
    (j) 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), (e), (f) or (g) of this section 
pursuant to the procedures set forth in Secs. 1309.43 through 1309.46 
and 1309.51 through 1309.55 of this part. 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.
    (k) Any person exempted from the registration requirement under 
this section shall comply with the security requirements set forth in 
Secs. 1309.71-1309.73 of this part and the recordkeeping and reporting 
requirements set forth under parts 1310 and 1313 of this chapter.

    5. Section 1309.25 is revised to read as follows:


Sec. 1309.25  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

[[Page 14861]]

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 this part 1309 and parts 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 October 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 this part 1309 and parts 
1310 and 1313 of this chapter remain in full force and effect.
    6. Sections 1309.27, 1309.28 and 1309.29 are removed.
    7. Section 1309.71 is 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 drugs containing 
ephedrine as the sole active medicinal ingredient are distributed, such 
drugs will be stocked behind a 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 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 
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 of this part.
    3. Section 1310.04 is 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          No threshold. All
 isomers, 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,         2.5 kilograms.
 optical isomers, and salts of optical
 isomers.
(H) Phenylacetic acid, its esters, and     1 kilogram.
 its salts.
(I) Phenylpropanolamine, its salts,        2.5 kilograms.
 optical 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 kilograms (or 1 liter by
                                            volume).
(V) Benzaldehyde.........................  4 kilograms.
(W) Nitroethane..........................  2.5 kilograms.
------------------------------------------------------------------------

    (ii) Notwithstanding the thresholds established in paragraph 
(f)(1)(i) of this section, 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) of this chapter 
(thresholds for retail distributors and distributors required to report 
under Sec. 1310.03(c) of this part 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 weight
------------------------------------------------------------------------
(A) Ephedrine, its salts, optical          No threshold. All
 isomers, and salts of optical isomers as   transactions regulated.
 the sole 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.

[[Page 14862]]

 
    (2) Distributions by persons required  24 grams.
     to report under Sec.  1310.03(c) of
     this part.
    (3) All other domestic distributions   1 kilogram.
     (other than paragraphs (f)(1)(ii)(B)
     (1) and (2) of this section).
    (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 persons required  24 grams.
     to report under Sec. 1310.03(c) of
     this part.
    (3) All other domestic distributions,  1 kilogram.
     (other than paragraphs (f)(1)(ii)(C)
     (1) and (2) of this section).
    (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 persons required  24 grams.
     to report under Sec. 1310.03(c) of
     this part.
    (3) All other domestic distributions   1 kilogram.
     (other than paragraphs (f)(1)(ii)(D)
     (1) and (2) of this section).
    (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 persons required  24 grams.
     to report under Sec.  1310.03(c) of
     this part.
    (3) All other domestic distributions   2.5 kilograms.
     (other than paragraphs (f)(1)(ii)(E)
     (1) and (2) of this section).
    (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.
    (2) Distributions by persons required  24 grams.
     to report under Sec. 1310.03(c) of
     this part.
    (3) All other domestic distributions   2.5 kilograms.
     (other than paragraphs (f)(1)(ii)(F)
     (1) and (2) of this section).
    (4) Imports and Exports..............  2.5 kilograms.
------------------------------------------------------------------------


    4. Section 1310.05 is 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) of this part shall either:
    (1) Submit a written report, containing the information set forth 
in Sec. 1310.06(i) of this part, 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 Control Section, Office of Diversion 
Control, Drug Enforcement Administration, Washington, DC 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 Control Section, Office of Diversion Control, 
Drug Enforcement Administration, Washington, DC 20537, ATTN: Electronic 
Reporting.
    5. Section 1310.06 is amended by adding new paragraphs (i) and (j) 
to read as follows:


Sec. 1310.06  Content of records and reports.

* * * * *
    (i) Each monthly report required by Sec. 1310.05(e) of this part 
shall provide the following information for each distribution:
    (1) Supplier 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 (i.e. 
Pseudoephedrine, 250 grams).
    (5) Date of shipment.
    (6) Product name (if drug product).
    (7) Dosage form (if drug product) (i.e., pill, tablet, liquid).
    (8) Dosage strength (if drug product) (i.e., 30mg, 60mg, per dose 
etc.).
    (9) Number of dosage units (if drug product) (100 doses per 
package).
    (10) Package type (if drug product) (bottle, blister pack, etc.).
    (11) Number of packages (if drug product) (10 bottles).
    (12) Lot number (if drug product).
    (j) Information provided in reports required by Sec. 1310.05(e) of 
this part which is exempt from disclosure under section 552(a) of Title 
5, by reason of section 552(b)(6) of Title 5, will be provided the same 
protections from disclosure as are provided in section 310(c) of the 
Act (21 U.S.C. 830(c)) for confidential business information.

    6. Section 1310.10 is amended by revising the introductory text of 
paragraph (d) 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: March 18, 2002.
Asa Hutchinson,
Administrator.
[FR Doc. 02-7258 Filed 3-27-02; 8:45 am]
BILLING CODE 4410-09-U