[Federal Register Volume 67, Number 116 (Monday, June 17, 2002)]
[Notices]
[Pages 41256-41264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15193]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket No. 00-41]


Mediplas Innovations; Suspension of Shipments

    By Orders dated August 14, 2000, the Administrator of the Drug 
Enforcement Administration (DEA) suspended two shipments, one for 518.5 
kilograms of ephedrine, and another for 798.55 kilograms of 
pseudoephedrine, from Getz Pharma, Karachi, Pakistan, to Mediplas 
Innovations, Inc. of San Antonio, Texas. According to the two Orders To 
Suspend Shipment (OTSS), the suspension was based on the facts that: 
(1) Mediplas was disqualified as a regular importer pursuant to 21 
U.S.C. 971(b)(2) on December 22, 1999, requiring it to provide the DEA 
with a 15-day advance notification for each import of listed chemicals; 
(2) Mediplas failed to timely notify DEA of these shipments, in 
violation of 21 CFR 1313.31 (2000); (3) Mediplas's pseudoephedrine 
products have been found at clandestine laboratories, and at laboratory 
dumpsites; and (4) Mediplas's only customer for this product, Wholesale 
Outlet, is the current subject of an active DEA investigation as a 
possible source of diversion.

[[Page 41257]]

    By letter dated September 8, 2000, Mediplas Innovations, Inc. 
requested a hearing in this matter. A hearing was held before 
Administrative Law Judge Gail A. Randall in Arlington, Virginia, on 
December 20-21, 2000, and on January 31 and February 1, 2001, in 
Houston, Texas. 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 October 4, 2001, Judge Randall issued her Recommended 
Rulings, Findings of Fact, Conclusion of Law, and Decision, 
recommending that the Administrator find DEA was not justified in 
issuing the OTSS and that said OTSS should be terminated and the 
chemicals released to Mediplas. On October 24, 2001, the Government 
filed Exceptions to the Administrative Law Judge's Opinion and 
Recommended Ruling (Exceptions). Thereafter, on November 20, 2001, 
Judge Randall transmitted the record of these proceedings to the Deputy 
Administrator for final decision.
    The Deputy Administrator has considered the record in its entirety, 
and pursuant to 21 CFR 1316.67, hereby issues his final order based 
upon findings of fact and conclusions of law as hereinafter set forth. 
The Deputy Administrator adopts in full the Findings of Fact of the 
Administrative Law Judge, and rejects the Conclusions of Law, except as 
hereinafter set forth. Furthermore, the Deputy Administrator rejects 
the recommendation of the Administrative Law Judge.
    Mr. Laeeq Ahmed is the proprietor of Mediplas Innovations, Inc. 
(Mediplas). After a military career in the Pakistani Air Force, Mr. 
Ahmed worked for two years as a consulting project manager in Pakistan. 
In 1991, he came to the United States. Initially, he worked for his 
brother in restaurant management in Texas. After approximately one and 
one-half years, he established his own retail store, a convenience 
store. While operating this convenience store, he began importing 
novelty items. He also sold groceries, novelties, office supplies, and 
over-the-counter medicines, to include an ephedrine product, ``Mini 
Thins,'' in 60 count bottles. He only purchased Mini Thins from a 
wholesaler in small quantities, however, usually one to two dozen 
bottles at a time.
    Mr. Ahmed has been an importer for approximately four or five 
years. He wanted to enter the pharmaceutical manufacturing market. 
After investigating the manufacturing process in Pakistan from Getz 
Pharmaceutical. Prior to arranging the exportation of ephedrine or 
pseudoephedrine from Pakistan, Mr. Ahmed obtained approval from the 
Health Ministry, the Narcotics Division, the Customs Division, and the 
Ministry of Exports in Pakistan. He also received approval from the 
World Health Organization.
    Mr. Ahmed worked closely with the San Antonio office of the DEA as 
he created his new business. On December 12, 1998, Mediplas submitted 
an application to the DEA for registration as an importer of ephedrine. 
In March of 1999, the DEA conducted a pre-registration investigation, 
inspecting Mediplas's proposed registered location, and providing Mr. 
Ahmed with copies of the applicable provisions from the Code of Federal 
Regulations. Mr. Ahmed was reminded by DEA personnel to report 
suspicious orders of listed chemicals to the DEA. Mr. Ahmed was also 
provided information regarding the illicit use of List I chemicals as 
precursor chemicals in the illicit manufacture of methamphetamine. 
Specifically, Mr. Ahmed was provided a ``Red Warning Notice'' that 
advised him about the seizure at clandestine methamphetamine 
laboratories of combination ephedrine and pseudoephedrine products. The 
DEA subsequently identified the parent company of Getz Pharma, 
identified its corporate officers, located its web site, and located 
its Pakistan, U.S., and other overseas offices. On August 4, 1999, 
representatives from the DEA again visited Mediplas's location to 
obtain additional information. Mr. Ahmed fully cooperated with the 
representatives.
    Judge Randall found Mr. Ahmed credibly concurred in his testimony 
that, prior to registered with the DEA, Mediplas had received 
information about the importer registration process, the DEA rules, 
regulations, and procedures pertaining to the importation and handling 
of ephedrine and pseudoephedrine, and the procedures DEA used to 
communicate with licensed importers. Also as part of the pre-
registration inspection of Mediplas, the DEA conducted criminal record 
checks and state and local agency checks, with negative results.
    Mr. Ahmed informed the DEA that Mediplas's entire business was 
handling List I chemicals. Mediplas intended to import finished tablets 
packaged in sealed bottles, shrink wrapped, boxed, and in cartons.
    Mr. Ahmed also agreed to provide the DEA with a list of prospective 
customers, and to keep this list accurate. Mr. Ahmed agreed not to 
distribute any Mediplas products to entities not registered with the 
DEA to handle listed chemicals. The record contains no evidence that 
Mr. Ahmed has failed to adhere to his agreement.
    On April 29, 1999, the DEA issued Mediplas DEA Certificate of 
Registration number 004230MNX, that granted Mediplas authorization to 
import ephedrine. Mediplas also obtained a permit from the State of 
Texas to handle precursor chemicals.
    Mediplas imported its first ephedrine products after April of 1999. 
Initially, Mediplas's ephedrine product was labeled ``Mini Twin,'' but 
this name was later changed to ``Min Twin.'' Mr. Ahmed credibly 
testified that he had seen Mediplas products on display at convenience 
stores and gas stations located in Houston, Texas and between Houston 
and San Antonio, Texas.
    On October 25, 1999, Mr. Ahmed submitted a letter to the DEA, 
indicating his desire to add pseudoephedrine to his DEA registration. 
Mr. Ahmed requested DEA provide guidance on the procedures he should 
follow to add pseudoephedrine to his registration. Subsequently, in the 
early part of 2000, Mr. Ahmed also spoke to a DEA representative at the 
DEA Headquarters about modifying the Certificate of Registration so 
that Mediplas could import pseudoephedrine. By letter dated January 4, 
2000, Mr. Ahmed informed a DEA Diversion Investigator (DI) that 
Mediplas's application for registration to handle pseudoephedrine had 
been approved by the FDA.
    Mediplas named its pseudoephedrine product Twin Pseudo. Mediplas 
imported Twin Pseudo in 120 count bottles. Mediplas did not distributed 
this product to retail outlets; it only sold this product to its sole 
distributor, Wholesale Outlet, On April 10, 2000, DEA Report of 
Investigation was prepared noting that Mediplas's registration was 
modified to authorize it to import pseudoephedrine. By letter dated 
February 15, 2000, however Mr. Ahmed informed the DI of the arrival of 
an importation of pseudoephedrine and the subsequent sale of that 
shipment to Wholesale Outlet. Mr. Ahmed enclosed a copy of the sales of 
that shipment to Wholesale Outlet. Mr. Ahmed enclosed a copy of the 
sales report concerning this shipment.
    Further, from DEA reports of investigation, and based on Mediplas 
invoices dated between November 1999, to April 6, 2000, the DEA 
reported that, (1) on January 13, 2000, Mediplas purchased its first 
shipment of Twin Pseudo, and the report noted the 11 batch numbers and 
quantities purchased; (2) on January 25, 2000, Mediplas purchased its 
second shipment of Twin Pseudo, and the

[[Page 41258]]

report noted the quantities and the 7 batch numbers of the product 
purchased; (3) on February 7, 2000, Mediplas sold its first shipment of 
Twin Pseudo to Wholesale Outlet; (4) on March 1, 2000, Mediplas sold 
its second shipment of Twin Pseudo to Wholesale Outlet. On April 6, 
2000, the DEA served an administrative subpoena upon Mediplas. DEA 
representatives reviewed receiving and distribution records, and 
conducted an on-site inspection. An inventory was also conducted and an 
accountability audit was performed. Mr. Ahmed was advised that there 
were no discrepancies found during this investigation.
    Pseudoephedrine is a List I chemical pursuant to 21 CFR 
1310.02(a)(11). A transaction involving more than one kilogram of 
pseudoephedrine in a month requires a fifteen day advance notification 
to the DEA. Pseudoephedrine is a legitimately imported and distributed 
product used in the manufacture of nasal decongestants. Pseudoephedrine 
is also a precursor chemical used in the illicit manufacture of 
methamphetamine.
    Ephedrine is a List I chemical pursuant to 21 CFR 1310.02(a)(3). 
Any entity importing any quantity of ephedrine must notify the DEA 
fifteen days in advance of the importation. Ephedrine is a legitimately 
imported and distributed product used in the production of bronchial 
dilators and asthma relief medication. Ephedrine is also a precursor 
chemical used in the illicit manufacture of methamphetamine.
    Methamphetamine is a Schedule II controlled substance having 
approved uses when taken under a physician's supervision as an FDA-
approved treatment for attention deficit disorder with hyperactivity, 
as a treatment for obesity as a short term adjunct in a regimen of 
weight reduction, and as a treatment for narcolepsy. Methamphetamine 
also has a high abuse potential, however, being ranked among the top 
five controlled substances for abuse. Illicit methamphetamine is often 
manufactured in clandestine laboratories, often organized by crime 
groups. The record shows the majority of illicit methamphetamine 
laboratories currently utilize tablets of ephedrine and pseudoephedrine 
in the production process. These substances are interchangeable with 
respect to the manufacture of methamphetamine.
    Prior to importing ephedrine and over-the-threshold amounts of 
pseudoephedrine products, each importer is required to provide the DEA 
with notice 15 days prior to the importation of the product into the 
U.S. The purpose of the 15-day notice is to allow the DEA time to 
evaluate the proposed import and to determine whether there exits 
grounds to believe that the proposed import may be diverted.
    To accomplish this notification the importer must use the DEA Form 
486 (Form 486). The DEA considers notification has occurred when the 
agency physically receives the Form 486, as indicated by the agency 
date stamp on the form. The importer may submit the form by mail or by 
electronic facsimile, and approximately 99 percent of Form 486s are 
received by the DEA via facsimile. In the event that the actual date of 
the import does not match the date projected on the Form 486, the 
importer is requested to file an amended Form 486, showing the actual 
date of importation. Mediplas has filed such amended Form 486s.
    When an importer fails to file the Form 486 in a timely manner, a 
record is created and maintained by DEA. If these violations become 
repetitive, then the local DEA office is notified, so that 
representatives from the local office can address these violations with 
the registrant.
    On December 22, 1999, the DEA sent a notice to Mediplas, informing 
Mediplas that it was required to provide 15-day advanced notice prior 
to the importation of ephedrine, regardless of quantity, and 
pseudophedrine, for all imports exceeding one kilogram.
    The record contains fourteen Form 486s filed by Mediplas between 
January and June of 2000. Six of these forms were filed in compliance 
with the 15-day rule. Eight were not filed in compliance with the rule. 
Judge Randall found Mr. Ahmed credibly testified that he had retained a 
customs house broker, whom he had authorized to file the Form 486s with 
DEA. The broker both faxed and mailed the forms to the DEA. Mr. Ahmed 
credibly testified that he first learned that the DEA had not timely 
received the faxed Form 486s from Mediplas's customs broker at this 
suspension hearing. For the shipment of 518.5 kilograms of ephedrine, 
the Form 486 was received by the DEA on June 5, 2000, noting that the 
shipment was due to arrive in the U.S. on June 16, 2000. For the 
shipment of 798.55 kilograms of pseudophedrine, the Form 486 was 
received by the DEA on June 5, 2000, noting that the shipment was due 
to arrive in the U.S. on June 16, 2000. For the shipment of 798.55 
kilograms of pseudophedrine, the Form 486 was received by the DEA on 
June 5, 2000, noting that the shipment was due to arrive in the U.S. on 
June 16, 2000. Thus, the forms were not timely filed, because both 
forms were received by the DEA 11 days in advance of the projected 
import date, rather than the required 15 days.
    The record contains no evidence that the DEA, prior to the OTSS, 
had rejected or returned to Mediplas for errors, any of Mediplas's Form 
486s, or had notified Mediplas of any untimely filings.
    Wholesale Outlet is located in Beaumont, Texas. At the time of the 
hearing, Wholesale Outlet held DEA Certificate of Registration, 
001664WEY, valid until May 31, 2001, as a distributor of the List I 
chemicals pseudoephedrine, ephedrine, and phenylpropanolamine. Mr. 
Ahmed decided to distribute Mediplas ephedrine products to a single 
distributor, Wholesale Outlet. In October of 1999, Mediplas and 
Wholesale Outlet entered into a ``Distribution Contract,'' (Contract) 
giving Wholesale Outlet the exclusive rights to buy and sell Mediplas 
product brands. As of the date of the OTSS, the Contract was still in 
effect between Mediplas and Wholesale Outlet. In November of 1999, 
Mediplas and Wholesale Outlet agreed that Mediplas would also see 
Wholesale Outlet pseudoephedrine products. Originally, the order was 
500 cases of pseudoephedrine products a month.
    In October of 1999, Mediplas sold Wholesale Outlet 432 bottles of 
ephedrine 12.5 mg, totaling 25,290 tablets at a total price of $527.04. 
In November of 1999, Mediplas sold Wholesale Outlet 72,000 bottles of 
ephedrine 12.5 mg, totaling 4,320,000 tablets at a total price of 
$90,000. In December of 1999, Mediplas sold Wholesale Outlet 5,760 
bottles of ephedrine 12.5 mg, totaling 345,600 tablets at a price of 
$7,200, and 36,000 bottles of ephedrine 25 mg, totaling 2,160,000 
tablets at a price of $45,000. In January of 2000, Mediplas sold 
Wholesale Outlet 21,600 bottles of ephedrine 12.5 mg, totaling 
1,296,000 tablets at a price of $27,000, and 7,200 bottles of ephedrine 
25 mg, totaling 432,000 tablets at a price of $9,000. In February of 
2000, Mediplas sold Wholesale Outlet 43,200 bottles of ephedrine 12.5 
mg, totaling 2,592,000 tablets at a price of $54,000, and 72,022 
bottles of pseudophedrine 60 mg, totaling 8,642,640 tablets at a price 
of $185,040. Finally, in March of 2000, Mediplas sold Wholesale Outlet 
36,000 bottles of ephedrine 12.5 mg, totaling 2,160,000 tablets at a 
price of $45,000, and 63,072 bottles of pseudophedrine 60 mg, totaling 
7,568,640 tablets at a price of $162,095.04. Judge Randall found no 
evidence that the lot numbers represented by these sales, or that any

[[Page 41259]]

of this product from these batch numbers, had been seized at illicit 
laboratories or dump sites.
    In a review of Mediplas's sales figures for a three-week period 
from February 7, 2000, to March 1, 2000, a DEA DI with experience in 
listed chemical investigations testified that the found such total 
sales ``suspicious,'' and the highest totals he had ever seen for a 
three-week period. Specifically, the DI noted that Mediplas had sold 
16,211,280 pseudoephedrine tablets between February 7, 2000, and March 
1, 2000. He noted that, for the entire year of 1997, Warner Lambert, a 
national distributor of such products, sold 38,287,089 tablets of 
product containing pseudoephedrine. The DI noted that Mediplas's sales 
in an approximately three-week time period in the year 2000, 
represented 42 percent of the amount of pseudoephedrine product Warner 
Lambert distributed for the entire calendar year of 1997.
    The DI also testified that he found Mediplas's packaging of 
pseudoephedrine 60 mg single-entity product suspicious, because he had 
never seen a 120-count bottle in any retail business establishment. Mr. 
Ahmed agreed that he had not seen such bottles of 120-count 
pseudophedrine tablets in a store. The Deputy Administrator concurs 
with Judge Randall's finding that the record contains no evidence that 
any DEA personnel communicated these specific packaging concerns to any 
representatives of Mediplas prior to this hearing, however.
    In May of 2000, DEA asked Mr. Ahmed to provide a customer list for 
Wholesale Outlet. Mr. Ahmed complied with the DEA's request. The list 
consists of fifteen pages. Specifically, for the ephedrine product, 
``Mintwin,'' Wholesale Outlet lists 119 customers from Texas, 
Louisiana, Michigan, Minnesota, and California. For the ephedrine 
product, ``Twincare,'' Wholesale Outlet lists 8 customers, all in 
Texas. For the ephedrine product, ``Minitwin,'' Wholesale Outlet lists 
20 customers from Louisiana, Georgia, Michigan, Colorado, Texas, 
Florida, and Washington.
    For the pseudoephedrine product, ``Twin-Pseudo,'' Wholesale Outlet 
lists 53 customers from Utah, Washington, Arkansas, Missouri, Nevada, 
Oregon, Michigan, Colorado, Texas, Arizona, Montana, Ohio, Oklahoma, 
and Florida. Wholesale Outlet's customer list is a mixture of wholesale 
and retail establishments, including convenience stores, gasoline 
stations, supermarkets, and wholesale grocers and distributors.
    On August 3, 2000, the DEA obtained a criminal search warrant for 
Wholesale Outlet. During the execution of this warrant, DEA 
representatives obtained information for Wholesale Outlet's receiving 
records indicating that, aside from Mediplas, Wholesale Outlet 
purchased List I chemicals from at least six additional suppliers. This 
warrant was the result of an ongoing DEA investigation into Wholesale 
Outlet's listed chemical handling practices, as testified to by a 
number of Government witnesses.
    The DEA has implemented a Warning Letter program in response to 
input provided by the chemical industry. The DEA Warning Letter program 
is designed to notify manufacturers, distributors, and other handlers 
of List I Chemicals of the diversion of their products to 
methamphetamine laboratories or dump sites. Each Warning Letter 
provides approximately the same information: the date and location of 
the discovery, the name of the product discovered, the quantity of 
product discovered, and the lot numbers of the product discovered, if 
available. In addition, each Warning Letter is accompanied by an 
attachment setting forth applicable statutes and regulations concerning 
various aspects of handling listed chemicals. At least nine Warning 
Letters were delivered by representatives from the DEA's San Antonio 
office to Mr. Ahmed between approximately June through October, 2000, 
regarding seizures of the company's imported listed chemical products 
found ``involved in activities related to the illegal manufacturing 
process of methamphetamine.'' The nine Warning Letters document the 
diversion of over eleven thousand bottles of Mediplas's List I 
chemicals products to the illicit manufacture of controlled substances. 
In addition, four Warning Letters were delivered to Wholesale Outlet, 
documenting the diversion of additional List I chemical products.
    By letters dated June 13, 2000, and July 10, 2000, Mr. Ahmed 
informed Wholesale Outlet of the products found in clandestine 
laboratories as listed in the Warning Letters. In each letter, Mr. 
Ahmed also requested that Wholesale Outlet ``stop sale to the above 
locations immediately.'' Wholesale Outlet responded at least once, 
stating that it would stop selling to those locations.
    By letters dated November 11, 1999, December 7, 1999, February 15, 
2000, March 15, 2000, March 28, 2000, April 28, 2000, and June 5, 2000, 
Mr. Ahmed informed the DEA of shipments of listed chemicals, both 
ephedrine and pseudoephedrine, he had received and subsequently sold to 
Wholesale Outlet, and of the samples he had provided the DEA, as 
requested. He noted that he had no shortages and no remaining stock of 
listed chemicals.
    Pursuant to 21 U.S.C. 971(c)(1), and delegations of authority 
thereunder at 28 CFR 0.100(b) and 0.104, the Deputy Administrator ``may 
order the suspension of any importation * * * of a listed chemical * * 
* on the ground that the chemical may be diverted to the clandestine 
manufacture of a controlled substance.'' To suspend a shipment pursuant 
to 21 U.S.C. 971(c)(1), the DEA must provide written notice to the 
regulated person, and include the legal and factual basis for the 
suspension order.
    According to 21 U.S.C. 971(a) and 21 CFR 1313.12(a), each 
``regulated person'' who imports or exports a threshold quantity of a 
listed chemical must notify the Attorney General ``not later than 15 
days before the transaction is to take place.'' A ``regulated person'' 
is ``any * * * corporation * * * who manufactures, distributes, 
imports, or exports a listed chemical[.]'' 21 CFR 1300.02(b)(27); see 
also 21 U.S.C. 802(38). A ``chemical importer'' is a ``regulated 
person'' responsible ``for determining and controlling the bringing in 
or introduction of the listed chemical into the United States.'' See 21 
CFR 1300.02(b)(8).
    Further, pursuant to 21 U.S.C. 830(b)(1)(A) and 21 CFR 
1310.05(a)(1), a regulated person is required to report to the DEA 
``[a]ny regulated transaction involving an extraordinary quantity of a 
listed chemical * * * or any other circumstance that the regulated 
person believes may indicate that the listed chemical will be used in 
violation of this part.''
    The regulations also provide that ``the Agency shall have the 
burden of proving that the requirements * * * for such suspension are 
satisfied.'' 21 CFR 1313.55. The regulations state that the purpose of 
a hearing regarding suspended shipments is for ``receiving factual 
evidence regarding the issues involved in the suspension.'' 21 CFR 
1313.52. Thus, the Government must prove by a preponderance of the 
evidence that grounds exist to conclude that ``the chemical may be 
diverted to the clandestine manufacture of a controlled substance.'' 21 
U.S.C. 971(c)(1); see also 21 CFR 1313.41(a) (2000); Suspension of 
Shipment Cases 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

[[Page 41260]]

Permanganate [hereinafter Suspension of Shipment Cases], 65 FR 51,333, 
51,336-337 (2000). The test is whether or not the listed chemicals may 
be diverted, not whether the listed chemicals actually will be 
diverted.
    The applicable statutory provisions and legislative history are 
silent concerning what constitutes ``grounds'' for the Government to 
believe a listed chemical may be diverted to clandestine manufacturing. 
Likewise, the statute and the regulations are also silent as to the 
factors to be considered to determine if ``grounds'' exist to conclude 
that the shipment ``may be diverted.''
    To date, past Deputy Administrators have decided three cases 
concerning this issue. Suspension of Shipment Cases, 65 FR 51,333 
(2000); Yi Heng Enters. Dev. Co., [hereinafter Yi Heng] 64 FR 2,234 
(1999); Neil Laboratories, Inc., 64 FR 30,063 (1999). In each case, the 
then-Deputy Administrator concluded that ``ample'' and ``substantial'' 
evidence existed to suspend the shipments at issue. In so concluding, 
Judge Randall found past Deputy Administrators evaluated the following 
six factors in determining whether a shipment may be diverted: (1) The 
status of the shipper to ensure the requesting party is entitled to the 
hearing, (2) the regulated person's compliance history as a handler of 
listed chemicals, to include whether the advance notification 
regulations had been fulfilled, (3) the regulated person's sales 
practices, including the legitimacy of the names and addresses of each 
proposed recipient of the shipment, (4) the quantities of chemical sold 
by the regulated person to its immediate customers, (5) the legitimacy 
of the proposed importation through consultation with the regulated 
person's government to ensure the regulated person was authorized to 
receive the proposed shipment, and (6) any relevant law enforcement 
records concerning the regulated person.
    The Deputy Administrator concurs with Judge Randall's finding that 
these were factors considered in the previous suspension order cases. 
The Deputy Administrator finds, however, that these factors are only 
illustrative of the types of evidence relevant to justifying a 
suspension order, and the enumeration of these factors herein does not 
exhaust the range of evidence or factors that can be used to justify a 
suspension order pursuant to 21 U.S.C. 971(c)(1). The Deputy 
Administrator finds that a totality of the circumstances test is 
appropriate in determining whether a suspension order is justified.
    The DEA provided notice for these suspended shipments by way of the 
Orders to Suspend Shipment. The Orders outlines several grounds for the 
DEA's belief that the two shipments, one of ephedrine, and one of 
pseudoephedrine, would be diverted to the clandestine manufacture of 
controlled substances. Thus, the 21 U.S.C. 971(c)(1) notice requirement 
has been met.
    A second preliminary determination is whether the requesting party 
is entitled to a hearing, 21 U.S.C. 971(c)(2) and 21 CFR 1313.52. The 
DEA previously has held that a principal party in interest of a 
shipment of a listed chemical would be the ``importer'' for purposes of 
21 U.S.C. 971. Essentially, ``if the title to the [listed chemical] 
passed to [the regulated person] before the chemical entered the United 
States, then the regulated person] is the principal party in 
interest.'' Suspension of Shipment Cases, 65 FR at 51,336; Yi Heng, 64 
FR at 2,235.
    In this proceeding, there was no dispute that as the DEA-registered 
importer with title to the chemicals, Mediplas was the principal party 
in interest in the suspended chemicals. Thus, the Deputy Administrator 
concurs with Judge Randall's conclusion that Mediplas is considered the 
regulated person for the purposes of 21 U.S.C. 971, and is entitled to 
this hearing.
    As a further preliminary matter, a past Administrator previously 
has ruled 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.'' Suspension of Shipment 
Cases, 65 FR at 51,337. In addressing the scope of the hearing, 
however, the then-Administrator found relevant evidence justifying an 
order to suspend a chemical shipment must be limited to ``the evidence 
available to DEA at the time of the suspensions and to the evidence 
presented by [the regulated person] of its business practices prior to 
the suspensions and its reputation as a law-abiding company.'' Id.
    Likewise, in the present case, both the Government and Mediplas 
were limited to evidence acquired or generated prior to the date of the 
OTSS. At the hearing in this matter, both the Government and counsel 
for Mediplas sought to introduce into evidence various exhibits that 
were either discovered or generated subsequent to the date of the OTSS. 
Judge Randall adhered to the Suspension of Shipment Cases, evidentiary 
ruling, and did not accept into evidence any proposed exhibit 
discovered or generated subsequent to the date of the OTSS, as being 
beyond the scope of the hearing. Pursuant to the requests of the 
parties, however, Judge Randall appended the rejected exhibits to the 
record for consideration by the Deputy Administrator, should he choose 
to reconsider the evidentiary ruling. Subsequently, the Government in 
its Exceptions specifically requested such reconsideration. For the 
reasons stated below, the Deputy Administrator hereby reconsiders the 
evidentiary ruling rendered in the Suspension of Shipment Cases, and 
finds instead that relevant evidence is not limited to that discovered 
or generated prior to the date of issuance of the suspension order.
    In finding that the purpose and scope of the 21 U.S.C. 971(c)(2) 
hearing is to determine whether DEA had evidence at the time of the 
issuance of the suspension order to support its finding that the 
chemicals may be diverted, the then-Administrator compared the 
suspension of shipment hearing provisions with those regarding 
revocation of DEA registrations pursuant to 21 U.S.C. 824. The then-
Administrator found that since there was no provision in 21 U.S.C. 971 
for the institution of proceedings to determine disposition of the 
suspended chemicals, it was reasonable to conclude the focus of the 
hearing was whether the suspension order was justified. Since the then-
Administrator found the focus of the hearing was justification of the 
suspension order, he limited his review to the evidence available to 
the DEA at the time of issuance of the suspension order.
    The Deputy Administrator disagrees, and concludes as follows. 21 
U.S.C. 971(c)(2) states in relevant part that ``[u]pon written request 
to the [DEA], a regulated person to whom an [suspension] order applies 
is entitled to an agency hearing on the record[.]`` Such hearings, as 
set forth at 21 CFR 1313.52, are ``for the purpose of receiving factual 
evidence regarding the issues involved in the suspension of 
shipments[.]'' The Deputy Administrator finds the cited language does 
not serve to limit his review to any given stage in the proceedings. To 
the contrary, the plain language of 21 CFR 1313.52 permits review of 
``factual evidence regarding issues involved in the suspension[.]`` The 
Deputy Administrator finds the public interest, as well as the 
interests of both the DEA and regulated persons, are best served by 
consideration of evidence regarding the most current issues involved in 
the suspension, not just those frozen at the time of the issuance of 
the suspension order. The Deputy Administrator thus

[[Page 41261]]

finds the purpose of the 21 U.S.C. 971(c)(2) hearing is to address 
issues involved in the suspension as they stand at the time of the 
hearing. Therefore, factual evidence in the instant case regarding the 
issues involved in the suspension should not be limited only to that 
generated or discovered up to the time of issuance of the OTSS.
    Moreover, contrary to the Suspension of Shipments Cases ruling at 
issue, the Deputy Administrator finds 21 U.S.C. 971(c)(1) adequately 
addresses the disposition of the suspended shipments. In relevant part, 
that provision states ``[f]rom and after the time when the [DEA] 
provides written notice of the [suspension] order to the regulated 
person, the regulated person may not carry out the transaction.'' The 
Deputy Administrator finds the intent of 21 U.S.C. 971(c) is not to 
permanently deprive the regulated person of the suspended chemicals. 
Indeed, the very use of the word ``suspensions'' in that subsection 
indicates the intent for a temporary detention. This conclusion is 
strengthened by the lack of any language in 21 U.S.C. 971 concerning 
the availability of forfeiture proceedings allowing DEA to permanently 
dispose of the suspended chemicals. Forfeiture of List I chemicals is 
addressed at 21 U.S.C. 824(f), and can only take place in conjunction 
with proceedings to suspend or revoke a DEA registration. Forfeiture of 
other listed chemicals suspended pursuant to 21 U.S.C. 971 is available 
pursuant to 21 U.S.C. 881(a). The record indicates that as of the time 
of the hearing, Mediplas's DEA registration was neither suspended nor 
revoked.
    Therefore, if the suspension order is found to be justified, 
pursuant to the language of 21 U.S.C. 971(c)(1), ``the regulated person 
may not carry out the transaction.'' (Emphasis added). The focus of 
this language is upon the specific transaction underlying the 
suspension order. The Deputy Administrator finds this language permits 
the regulated person to carry out other transactions regarding the 
suspended chemicals, however, provided the regulated person complies 
with the requirements of 21 U.S.C. 971(a) by filing a substitute Form 
486, providing DEA 15 days notice of a proposed alternative 
transaction. If the DEA objects to the proposed alternative 
transaction, then the process can start over, and a new suspension 
order issued. If the suspension order is found not to be justified at 
the time of the hearing, however, then the suspended chemicals can 
immediately be released to the regulated person and the original 
transaction allowed to take place. The Deputy Administrator therefore 
finds disposition of the suspended chemical shipments is adequately 
addressed, and thus that the ultimate purpose and scope of the 21 
U.S.C. 971(c)(2) hearing is to determine whether the OTSS is justified 
at the time of the hearing.
    As a result of his reconsideration of the Suspension of Shipment 
Cases evidentiary ruling, the Deputy Administrator has considered the 
entire record, including the previously rejected but appended exhibits 
of both parties, in reaching the conclusions set forth herein.
    Judge Randall concluded that the Government had failed to carry its 
burden of proof in this matter, upon findings that the violations set 
forth by the Government did not support a conclusion that the shipments 
``may be diverted,'' and also considering Mediplas's ``extraordinary 
and voluntary efforts * * * to comply with DEA's regulations and 
guidance[.]'' The Deputy Administrator disagrees, and finds as follows.
    In interpreting 21 U.S.C. 971(c)(1), the Deputy Administrator finds 
that the plain language of the statute focuses solely upon whether the 
chemical shipment ``may be diverted[.]'' The culpability of any 
regulated person to whom a suspension order applies appears to be 
irrelevant to this determination. The Deputy Administrator notes that 
the Controlled Substances Act (CSA) distinguishes between regulatory 
actions involving DEA applicants and registrants that require a finding 
of culpability, such as the denial of an application for or the 
revocation of a DEA Certificate of Registration, in contrast to the 
issuance of a suspension order to a regulated person involving a 
temporary, limited detention that may be imposed without a finding of 
fault. Compare 21 U.S.C. 823 and 824 with 21 U.S.C. 971(c)(1). Only 
upon a finding of culpability can a DEA registrant permanently be 
deprived of controlled substances or List I chemicals, or a regulated 
person permanently be deprived of listed chemicals. 21 U.S.C. 824(f) 
and 881(a). The Deputy Administrator finds that in using such broadly 
drawn language, Congress has invited the use of the widest possible 
range of relevant evidence in determining whether a shipment ``may be 
diverted[.]''
    A broad interpretation of 21 U.S.C. 971(c)(1) is also supported by 
DEA precedent. The Deputy Administrator notes that, in one of the 
previously cited DEA suspension of shipment cases, the then-Deputy 
Administrator significantly relied upon evidence of misconduct in 
handling listed chemicals by the regulated person's customers in 
finding the suspension order justified. In Yi Heng, it was argued that 
evidence of the activities of the regulated person's customers was 
irrelevant to the administrative proceeding regarding suspended 
shipments of a listed chemical. Specifically, counsel for the regulated 
person argued in Yi Heng that the regulated person engaged in a 
legitimate business; that there was no evidence that the regulated 
person had knowledge of the improper conduct of its customers; that the 
regulated person could not be held responsible for the bad acts of its 
customers; and that the regulated person had no control over the 
chemical once it was sold to its customers. The then-Deputy 
Administrator rejected these arguments, and considered evidence 
regarding the activities of both the regulated person and its 
customers. Specifically, the then-Deputy Administrator found that 
``[t]he prior conduct of [the regulated person's] customers regarding 
[the chemicals] is clearly relevant in determining whether the 
shipments may be diverted.'' 64 FR at 2,235-6.
    Such an interpretation is further supported by the policy behind 
the enactment of the Controlled Substances Act: ``The Congress makes 
the following findings and declarations * * * (2) The illegal 
importation, manufacture, distribution, and possession and improper use 
of controlled substances have a substantial and detrimental effect on 
the health and general welfare of the American people.'' 21 U.S.C. 801. 
``Congress [in enacting the CSA] was particularly concerned with the 
diversion of drugs from legitimate channels to illegitimate channels. 
It was aware that registrants, who have the greatest access to 
controlled substances and therefore the greatest opportunity for 
diversion, were responsible for a large part of the illegal drug 
traffic.'' United States v. Moore, 423 U.S. 122, 135 (1975) (citations 
omitted). This reasoning applies with equal force to the diversion of 
listed chemicals by DEA registrants and regulated persons. The 
interpretation of 21 U.S.C. 971(c)(1) set forth herein advances the 
purposes of the CSA by providing the DEA with the increased ability to 
thwart the threatened diversion of listed chemical importations and 
exportations by allowing consideration of the widest-possible range of 
relevant evidence. Moreover, the culpability of affected parties has 
been found irrelevant in criminal and civil actions involving the 
public health, safety, and welfare and carrying far more serious 
consequences

[[Page 41262]]

that the relatively brief and limited detention authorized by 21 U.S.C. 
971. Cf. United States v. Dotterweich, 320 U.S. 277 (1943) (upholding 
the Constitutionality of strict criminal liability for ``public welfare 
offenses'' involving drugs); United States v. Balint, 258 U.S. 250 
(1922) (same); United States v. Green Drugs, 905 F.2d 694, 697-8 (3d 
Cir. 1990) (applying strict civil liability to CSA recordkeeping 
violations and affirming assessment of monetary penalty). In 
determining whether the OTSS in this case were justified, the Deputy 
Administrator therefore rejects Judge Randall's factor-by-factor 
analysis for a much simpler test: whether the totality of the 
circumstances provides grounds to believe that the suspended chemical 
shipments may be diverted.
    In the instant case, the record shows the following: the nine 
Warning Letters issued to Mediplas provided substantial evidence 
documenting the diversion of thousands of bottles of its previously 
imported List I chemical products to ``clandestine manufacture of a 
controlled substance.'' 21 U.S.C. 971(c)(1). In addition, the 
Government provided evidence showing that Wholesale Outlet (1) was 
under DEA investigation related to its handling of listed chemical 
products; (2) was the subject of an August 3, 2000, DEA criminal search 
warrant related to the handling of its listed chemical products; and 
(3) was the subject of a DEA audit, discussed infra, documenting 
numerous and enormous shortages and overages of inter alia Mediplas 
List I chemical products running into the millions of dosage units. The 
Deputy Administrator finds this evidence provides ample justification 
for sustaining the OTSS in this case.
    While there was no evidence in the record that Wholesale Outlet had 
a record of criminal convictions, the Deputy Administrator finds that 
evidence in support of grounds to believe the suspended chemicals may 
be diverted is not restricted to conclusive legal judgments. The Deputy 
Administrator concurs with the finding in the Suspension of Shipment 
Cases, where the then-Deputy Administrator concluded that ``[e]vidence 
of a violation of law is not necessary to demonstrate that the 
suspensions were lawful.'' Id. at 51,337.
    In addition to this evidence, the record shows Mediplas violated 
applicable law and regulations with regard to its late-filed 486 forms 
and premature importations and distributions of the List I chemical 
pseudoephedrine, as set forth below.
    The responsibilities of a regulated person include the obligation 
to file an advance notification to the DEA of the import of a listed 
chemical that meets the threshold amounts triggering the notification 
requirement. 21 U.S.C. 971(a); 21 CFR 1313.12. Although the record 
shows Mediplas filed such notifications for every shipment imported, 
the record contains eight Form 486s that Mediplas did not timely file 
during 1999 and 2000. The DEA previously has held that ``failure to 
file [advanced notification] by itself, does not justify the suspension 
of the shipments.'' Suspension of Shipment Cases, 65 FR at 51,336. 
Thus, failure to notify in itself does not justify the suspension, but 
it may be a factor to be considered in the analysis of whether there is 
the potential for diversion. The record demonstrates that Mediplas 
failed to provide timely notification using the Form 486 procedure in 
eight instances during the time period of January through June 2000, 
prior to importing listed chemicals into the United States. The Form 
486s for the two suspended shipments at issue were each filed 
approximately four days late.
    Judge Randall found it significant that Mr. Ahmed was unaware of 
the untimely filing of the forms. He had hired a customs house broker 
to prepare and submit this paperwork, and the broker had assured Mr. 
Ahmed that the forms were faxed and mailed to the DEA. Since Mr. Ahmed 
had not heard from the DEA concerning these untimely filings prior to 
this suspension hearing, he was not aware of his broker's errors. Judge 
Randall concluded that this lack of knowledge logically negated any 
inference that Mediplas was intentionally failing to inform the DEA of 
the incoming shipments. Judge Randall noted Mediplas did not fail to 
notify the DEA of the two shipments at issue, but that the 
notifications were late. Thus, Judge Randall found it significant that 
Mediplas's obvious intent was compliance rather than deception in 
response to this legal requirement.
    The Government agrees in its Exceptions that in a prior DEA case, 
the Deputy Administrator found a DEA registrant responsible for the 
unlawful actions of its employee, even though the registrant claimed it 
had no knowledge of the unlawful acts, citing Leonard Merkow, M.D., 60 
FR 22,075 (1995). The Deputy Administrator agrees with the Government, 
and finds in the context of this case that Mediplas is liable for the 
negligent acts of its agent occurring within the scope of the agent's 
authority where Mediplas as principal had a statutory and regulatory 
duty to give 15-day advance notice of importation of a listed chemical. 
21 U.S.C. 971(a); 21 CFR 1313.12. See Restatement (Second) of Agency, 
Sections 272, 275, and 277 (1958). See also W. Seavey, Law of Agency, 
Section 98 (1964). Since the Deputy Administrator finds Mediplas is 
liable in this case for its agent's failure to timely file eight 486 
forms, the late-filed forms must weigh negatively in assessing 
Mediplas's compliance with the obligations of a DEA registrant. 
Pursuant to the Suspension of Shipments Cases ruling, however, these 
late-filed 486 forms do not in themselves justify issuance of the 
suspension orders in this case.
    The record also contains evidence that Mediplas imported 
pseudoephedrine without a modified Certificate of Registration from the 
DEA. Specifically, Mediplas was authorized by DEA on April 10, 2000, to 
import pseudoephedrine. Yet Mediplas's pseudoephedrine product was 
found at clandestine methamphetamine laboratory sites as early as March 
28, 2000. Further, the DEA had a letter from Mediplas dated February 
15, 2000, recording the arrival and sale of Mediplas's pseudoephedrine 
product. Thus, Judge Randall found Mediplas initially imported its 
paragraph product with the DEA's knowledge that it lacked DEA's 
authorization, in the form of a modified Certificate of Registration 
reflecting the addition of pseudoephedrine to the list of controlled 
chemicals Mediplas was authorized to import. Judge Randall noted the 
record contains no evidence that the DEA informed Mediplas of (1) its 
failure timely to obtain the appropriate registration or (2) of the 
fact that the DEA found Mediplas's pseudoephedrine product at 
clandestine laboratory sites prior to Mediplas obtaining the requisite 
registration. The record does contain letters from Mr. Ahmed, 
voluntarily informing the DEA of his importation and sales of 
pseudoephedrine product between February and April of 2000. Judge 
Randall concluded that Mr. Ahmed was not trying to avoid DEA regulatory 
requirements or in any way to deceive the DEA.
    Looking at the totality of these circumstances, Judge Randall 
concluded that Mediplas's failure to timely modify its registration, 
balanced by Mediplas's voluntary compliance efforts, did not justify 
the suspension of these two shipments. The Government in its Exceptions 
argues inter alia that it should not share the responsibility for a 
registrant's actions taken outside the scope of the registrant's 
authority.

[[Page 41263]]

    The Deputy Administrator finds that evidence of voluntary 
communications received by DEA from a registrant are admissible to show 
attempted compliance with applicable DEA registrant obligations. Lack 
of a DEA response to such voluntary communications, however, does not 
serve to ratify or to otherwise authorize illicit or unauthorized acts 
by the registrant. DEA regulations clearly state that ``[e]very person 
who * * * imports * * * any List I chemical * * * shall obtain annually 
a registration specific to the List I chemicals to be handled[.]'' 21 
CFR 1309.21(a). In addition, ``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.'' 21 CFR 1309.22(b). Finally, ``[n]o person required to be 
registered shall engage in any activity for which registration is 
required until the application for registration is approved and a 
Certificate of Registration is issued by the Administrator to such 
person.'' 21 CFR 1309.31(a). Mediplas violated these regulations by 
importing and distributing pseudoephedrine on two occasions without 
being properly registered to do so.
    The Deputy Administrator concurs with Judge Randall's conclusion 
that Mediplas was not trying to avoid DEA regulatory requirements or to 
deceive the DEA. Mediplas's efforts to comply with the obligations of a 
DEA chemical registrant were both extensive and laudable. The Deputy 
Administrator finds, however, that the record shows the violations set 
forth above were attributable to a lack of proper care and attention on 
the part of Mediplas. The Deputy Administrator is therefore forced to 
conclude that the untimely Form 486 filing violations attributable to 
Mediplas, together with Mediplas's multiple regulatory violations 
regarding its premature importations and distributions of 
pseudoephedrine, ultimately contribute to the finding herein that the 
suspended shipments at issue may be diverted.
    The Deputy Administrator further notes with regard to the instant 
case that efforts at compliance are ultimately irrelevant to the 
specific determination of whether a chemical shipment may be diverted. 
As previously stated, a suspension order may be justified without 
regard to culpability. Remedial efforts by a regulated person to whom 
such an order applies, however, could well be relevant to this 
determination. The Deputy Administrator notes Judge Randall found Mr. 
Ahmed credibly testified that, in a letter sent to the DEA Headquarters 
dated July 12, 2002, he had sought guidance from DEA concerning how to 
respond to the Warning Letters he received. Specifically, Mr. Ahmed 
provided a number of proposals for the DEA's approval, to include (1) 
Mediplas would discontinue the sale and import of pseudoephedrine, (2) 
Mediplas would reduce its imported amount of ephedrine per month, (3) 
Mediplas would repackage its product into ``pouch packs,'' and (4) 
Mediplas would discontinue sales to Wholesale Outlet, selling instead 
to another distributor. In addition, pursuant to his reconsideration of 
the Suspension of Shipments evidentiary ruling, the Deputy 
Administrator has considered a letter dated August 15, 2000, from Mr. 
Ahmed to DEA wherein Mr. Ahmed states he is holding the sale of the two 
shipments, and that he has stopped the importation of his Twin-Pseudo 
product. The Deputy Administrator finds that, while this evidence shows 
that Mediplas appears to be willing to take extensive remedial actions 
in an effort to thwart future diversion, without additional evidence 
establishing concrete remedial steps taken, this evidence is 
insufficient to mitigate the conclusion that the suspended shipments at 
issue may be diverted.
    Pursuant to his reconsideration of the evidentiary ruling in the 
Suspension of Shipment Cases above, the Deputy Administrator has also 
considered a Government exhibit representing he results of the 
previously-mentioned DEA audit of Wholesale Outlet's List I chemical 
products that was conducted subsequent to the date of the OTSS. The 
audit covered the time period from September 22, 1998, to September 22, 
2000, and focused on the accountability of List I chemicals supplied to 
Wholesale Outlet by Mediplas, as well as List I chemicals supplied to 
Wholesale Outlet by at least six additional suppliers. The audit 
revealed numerous dosage unit shortages and overages of various List I 
chemical products supplied to Wholesale Outlet by Mediplas. The audit 
also revealed numerous shortages and overages of List I chemical 
products supplied to Wholesale Outlet by the other six suppliers. There 
were shortages and overages in every List I chemical product audited, 
including each of Mediplas's List I chemical products supplied to 
Wholesale Outlet. Wholesale Outlet failed to account for various List I 
chemical products ranging from the hundreds to almost two million 
dosage units, depending on the product. The recordkeeping discrepancies 
for Mediplas products alone reached almost to eleven million dosage 
units of List I chemical products.
    List I chemical recordkeeping discrepancies constitute violations 
of 21 U.S.C. 830(a) and 842(a)(10) and 21 CFR 1310.03 and 1310.06. The 
Deputy Administrator finds that the results of this audit constitute 
substantial evidence showing Wholesale Outlet's significant failures to 
comply with applicable recordkeeping requirements, creating a grave 
risk of diversion. See Alexander Drug Company, Inc. 66 FR 18,299, 
18,303 (2001). Therefore, the Deputy Administrator finds that the 
results of this audit weigh heavily in favor of a determination that 
the suspended chemicals may be diverted.
    As further justification in issuing the OTSS in this case, the 
Government provided data concerning Mediplas's sales figures and the 
sales figures of a major distributor of pseudoephedrine products, 
Warner Lambert. The record shows that Mediplas distributed to Wholesale 
Outlet 135,094 bottles, or 16,211,280 dosage units, of List I chemical 
products between February 7 and March 1, 2000; while Warner Lambert 
distributed 38,287,089 dosage units of List I chemical products for the 
entire year of 1997. Judge Randall construed the Government's argument 
to suggest that, because Mediplas's sales figures seemed so 
disproportionately high compared to Warner Lambert's figures, that the 
sales were ``suspicious'' or otherwise led to a conclusion that 
Mediplas product were more likely to be diverted than Warner Lambert's 
product. Judge Randall concluded that this logic is not supported by 
the record because the Government provided no data of diverted product 
from Warner Lambert and therefore the basis for a complete comparison 
does not exist.
    In its Exceptions, the Government states that the purpose of this 
evidence is not to make a relative comparison of the likelihood of 
diversion of Mediplas versus Warner Lambert products. Rather, the 
Government seems to argue that this evidence is relevant to the ``may 
be diverted'' standard because of the large amount of chemicals sold by 
a relatively small company over a short period of time could saturate 
the market and create an environment conducive to diversion.
    The Deputy Administrator concurs with Judge Randall's finding that 
the statute and regulations provide quantity amounts of List I 
chemicals to define a ``regulated transaction.'' See 21 U.S.C. 
802(39)(a); 21 CFR 1300.02(28) and 1310.04. If a ``regulated person'' 
engages in a ``regulated transaction,'' then such

[[Page 41264]]

a transaction triggers recordkeeping and reporting requirements. See 21 
CFR 1310.04 and 1310.05. Neither the statute nor the regulations 
provide limitations on the amount of List I chemicals a registered 
importer may sell to a registered distributor in the normal course of 
business.
    The Deputy Administrator disagrees with the Government, and concurs 
with Judge Randall's determination that there is insufficient evidence 
in the record to find that the quantity of List I chemical products 
distributed by Mediplas over the above-referenced time period was an 
``extraordinary quantity.'' The Deputy Administrator also concurs with 
judge Randall's finding that the record contains no evidence that the 
quantities of List I chemicals sold to Wholesale Outlet by Mediplas 
violated any published regulations or other materials distributed by 
DEA to its business registrants. The Deputy Administrator notes the 
Government does not argue that Mediplas had any specific recordkeeping 
or reporting discrepancies, even though Government witnesses asserted 
that Mediplas engaged in ``excessive quantity'' sales.
    The Deputy Administrator notes that nowhere in the law, 
regulations, or in DEA guidelines is ``extraordinary quantity'' defined 
or discussed. The Deputy Administrator further notes that, while 
Mediplas may be a small company distributing to a single customer, that 
customer, Wholesale Outlet, had in turn approximately 200 of its own 
customers across the United States. The record shows that a number of 
these customers were distributors and wholesalers in their own right. 
The record further shows that Mr. Ahmed was aware of Wholesale Outlet's 
extensive distribution network, and this was a significant reason why 
he chose to do exclusive business with Wholesale Outlet. As to the 
Government's ``market saturation'' argument, the Government presented 
no evidence purporting to show that Wholesale Outlet's distribution 
network was inadequate to legitimately absorb the quantity of List I 
chemical products received from Mediplas.
    Likewise, the record contains no evidence that Mediplas sold 
unauthorized quantities of List I chemicals to Wholesale Outlet. 
Although several Government witnesses testified that Mediplas engaged 
in sales of excessive quantities, the Deputy Administrator concurs with 
Judge Randall's finding that the bases of their conclusions are 
speculative. The Government has provided insufficient evidence to 
support its conclusion that such sales of listed chemicals in such a 
business setting would equate to ``excessive quantities.'' Therefore, 
the Deputy Administrator concurs with Judge Randall's finding that the 
Government's ``excessive quantities'' arguments are not persuasive 
under the circumstances of this case. Accordingly, the Deputy 
Administrator further agrees with Judge Randall's conclusion that the 
quantities Mediplas sold in the normal course of business do not serve 
as grounds to believe that the two shipments at issue ``may be 
diverted.''
    As additional justification for the OTSS, several Government 
witnesses testified concerning the ``traditional'' market and the 
``non-traditional'' market for products containing ephedrine and 
pseudoephedrine. This testimony, supported only by anecdotal evidence, 
is as follows. The ``traditional'' market includes outlets where a 
consumer of such legitimate over-the-counter products containing 
ephedrine or pseudoephedrine would be expected to purchase them. Such 
outlets would include pharmacies, or pharmacy sections of grocery 
stores, or discount stores such as Wal Mart. In contrast, the ``non-
traditional market'' includes outlets where a consumer of such 
legitimate over-the-counter products containing ephedrine or 
pseudoephedrine would be less likely to purchase them. Such market 
outlets would include convenience stores, liquor stores, and gas 
stations. The ``traditional'' market and the ``non-traditional'' market 
also differ in the packaging of over-the-counter ephedrine and 
pseudoephedrine products. Outlets in the ``traditional'' market 
typically sell such over-the-counter products packaged in blister 
packs, in 24-count or 48-count packages sizes. The ``non-traditional'' 
market outlets, on the other hand, tend to sell over-the-counter 
products containing ephedrine and pseudoephedrine in bottles, typically 
of 60-count or 120-count size. Several Government witnesses testified 
that ephedrine and pseudoephedrine products found at larger illicit 
methamphetamine laboratories are usually packaged in the 60-count and 
120-count bottles. The DEA therefore concludes that the source of these 
bottles is the ``non-traditional'' market outlets. The DEA has also 
found such packaged pseudoephedrine products at methamphetamine 
laboratory dump sites.
    The Deputy Administrator notes, however, that a Government witness 
also testified that List I chemical products distributed through the 
traditional market, such as through Wal-Mart, have also be diverted. 
Upon cross examination, a Government witness admitted that the 
``traditional'' versus ``non-traditional'' outlet distinction was an 
informal, internal DEA use only. As of the date of the hearing, the DEA 
had not recorded such distinctions in any of its regulations. The 
Deputy Administrator finds the probative weight of this evidence is 
minimal without some form of further extrinsic evidence to support 
these arguments.
    Upon reviewing the totality of the circumstances of this case, the 
Deputy Administrator finds the OTSS justified. In reaching this 
conclusion, the Deputy Administrator has carefully considered 
Mediplas's exemplary efforts to comply with its obligations as a DEA 
chemical registrant, as well as its extensive record of cooperation 
with the DEA. The Government provided ample evidence to show these 
shipments may be diverted, however. The record shows that at the time 
of the hearing, Mediplas's immediate and sole customer, Wholesale 
Outlet, was under investigation by DEA regarding suspected misconduct 
in its handling of List I chemicals, and was also the subject of a DEA 
criminal search warrant, based upon probable cause to believe it was 
engaged in misconduct in handling List I chemicals. A DEA audit of 
Wholesale Outlet found numerous and enormous shortages and overages of 
inter alia Mediplas's List I chemical products. In addition, the nine 
Warning Letters issued to Mediplas documented thousands of bottles of 
Mediplas's List I chemical products being diverted to the clandestine 
manufacture of controlled substances.
    The record shows, moreover, that Mediplas significantly violated 
applicable law and regulations by, first, failing to timely file eight 
Form 486 advanced notifications of importations; and second, by 
importing and distributing the List I chemical pseudoephedrine on two 
occasions, without obtaining proper registration.
    Accordingly, the Deputy 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 
subject shipments be, and hereby are, sustained.
    This final order is effective immediately.

    Dated: May 30, 2002.
John B. Brown III,
Deputy Administrator.
[FR Doc. 02-15193 Filed 6-14-02; 8:45 am]
BILLING CODE 4410-09-M