[Federal Register Volume 67, Number 244 (Thursday, December 19, 2002)]
[Notices]
[Pages 77805-77809]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-31949]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

[Docket Nos. 01-12; 01-13]


Indace, Inc., c/o Seegott, Inc.; Malladi, Inc. Suspension of 
Shipments

    On January 25, 2001, the then-Administrator of the Drug Enforcement 
Administration (DEA) issued an Order to Suspend Shipment to Indace, 
Inc. c/o Seegott, Inc. (Indace) of Elgin, Illinois, notifying it that 
pursuant to 21 U.S.C. 971, DEA had ordered the suspension of a shipment 
of 3,000 kilograms of ephedrine hydrochloride, a listed chemical, from 
India into the United States. Indace indicated in its request for 
importation that the listed chemical was intended for further shipment 
to PDK Laboratories, Inc. (PDK) of Hauppage, New York. The Order to 
Suspend Shipment stated that DEA concluded that the listed chemical may 
be diverted to the clandestine manufacture of a controlled substance 
based on the appearance of products manufactured from imports of 
ephedrine and pseudoephedrine destined for PDK at illicit manufacturing 
sites.
    On January 26, 2001, the then-Administrator of the Drug Enforcement 
Administration (DEA) issued an Order to Suspend Shipment to Malladi, 
Inc., (Malladi) of Edison, New Jersey, notifying it that pursuant to 21 
U.S.C. 971, DEA had ordered the suspension of a shipment of 3,000 
kilograms of ephedrine hydrochloride, a listed chemical, from India 
into the United States. Malladi indicated in its request for 
importation that the listed chemical was intended for further shipment 
to PDK laboratories, Inc. (PDK) of Hauppage, New York. The Order to 
Suspend Shipment stated that DEA concluded that the listed chemical may 
be diverted to the clandestine manufacture of a controlled substance 
based on the appearance of products manufactured from prior imports of 
ephedrine and pseudoephedrine destined for PDK at illicit manufacturing 
sites.
    On February 8, 2001, PDK requested a hearing in both matters, 
asserting standing as a Respondent pursuant to a ruling in PDK 
Laboratories Inc. v. Reno, et al., 134 F.Supp.2d24 (D.D.C. 2001). DEA 
complied with the court's ruling, and both matters were docketed before 
Administrative Law Judge (ALJ) Gail A. Randall.
    On March 8, 2001, the ALJ issued an order consolidating both 
matters for hearing purposes. Neither Indace nor Malladi requested a 
hearing in these matters. Following prehearing procedures, a hearing 
was held in Arlington, Virginia on March 26-30, April 5-6, April 11-13, 
and April 16-17, 2001. At the hearing, PDK and the Government called 
witnesses to testify and introduced documentary evidence. After the 
hearing, both parties filed proposed findings of fact, conclusions of 
law, and argument.
    On April 5, 2002, the ALJ issued a consolidated Recommended 
Rulings, Findings of Fact, Conclusions of Law, and Decision of the 
Administrative Law Judge recommending that both the suspensions be 
lifted, and the importers be allowed to complete the shipments. On 
April 25, 2002, the Government filed Exceptions to the ALJ's 
Recommended Rulings, Findings of Fact, Conclusions of Law, and 
Decision. In response, on May 21, 2002, PDK filed PDK's Response to the 
Exceptions Filed by the Government. Subsequently, on June 5, 2002, the 
ALJ transmitted the record of these proceedings as her report to the 
Deputy Administrator for final action pursuant 5o 21 CFR 1313.57.
    The Deputy Administrator has considered the record in its entirety, 
and pursuant to 21 CFR 1313.57, hereby issues his final order regarding 
the Indace and Malladi suspensions of shipments based upon findings of 
fact and conclusions of law hereinafter set forth. The Deputy 
Administrator is issuing one final order regarding both suspension 
cases since the same findings of fact and conclusions of law apply to 
both suspensions. Except as hereafter noted, the Deputy Administrator 
rejects, in its entirely, the Recommended Rulings, Findings of Fact, 
Conclusions of Law, and Decision of the Administrative Law Judge

[[Page 77806]]

(hereinafter ``Recommendation''). Based on his review of the record in 
this matter, including all submissions of both parties, and Exceptions 
as filed, the Deputy Administrator adopts such findings of fact and 
conclusions of law as hereinafter follow.
    The Deputy Administrator finds that both Indace and Malladi are 
registered with the DEA as importers of listed chemicals. Both 
importers were advised in the Orders to Suspend Shipment of their right 
to request a hearing. Neither importer chose to do so. Furthermore, the 
record reflects that the ALJ gave Indace an opportunity to participate 
in prehearing matters, but Indace did not respond. Accordingly, the 
Deputy Administrator concludes that both Indace and Malladi have waived 
their right to a hearing pursuant to 21 CFR 1313.54.
    A significant issue that must await future consideration by the 
Deputy Administrator is whether a party in PDK's position (i.e. a 
wholesale distributor/manufacturer who receives bulk listed chemicals 
from an importer) is in fact ``a regulated person to whom an order 
applies under paragraph (1)'' of 21 U.S.C. 971(c)(2) entitled to a 
hearing. In PDK Laboratories Inc. v. Reno, et al., 134 F. Supp. 2d 24 
(D.D.C. 2001), the court found, in reference to this processing, that 
PDK was ``a regulated person to whom an order applies under 21 U.S.C. 
971(c)(2) with respect to the suspension of List I chemicals to be 
imported on PDK's behalf.'' The United States District Court for the 
District of Columbia has created a rule for this case; however, the 
Deputy Administrator declines at this time to adopt the rule as DEA 
policy.
    On January 25 and 26, 2001, DEA issued the Orders to Suspend 
Shipment to Indace and Malladi that are the subject of this 
proceedings. The Orders asserted as a basis for the suspensions that 
the ephedrine to be imported may be diverted to the illicit production 
of a controlled substance. The issue before the Deputy Administrator is 
whether or not the record as a whole establishes by a preponderance of 
the evidence that DEA should suspend the two shipments of ephedrine 
hydrochoride destined to be shipped from India to the United States, 
pursuant to 21 U.S.C. 971 (c)(1) and 21 CFR 1313.41(a).
    The Deputy Administrator notes that the DEA Orders to Suspend 
Shipment recited that a DEA investigation revealed that products 
produced from prior imports of ephedrine and pseudoephedrine destined 
for PDK has appeared as clandestine methamphetamine laboratories in the 
United States. The Orders also indicated that traffickers utilize 
ephedrine and pseudoephedrine in the illicit production of 
methamphetamine, that PDK manufacturers and distributes over-the-
counter drug products containing the listed chemicals pseudoephedrine 
and ephedrine, that these PDK products are distributed in strength, 
quantity and packaging unlike the traditional market (referred to by 
DEA as ``gray market'' products), and that these products are generally 
distributed and sold through non-traditional retail outlets. The Orders 
to Suspend Shipment also indicated that DEA data regarding clandestine 
laboratory seizures noted that gray market products are prodominantly 
encountered in larger clandestine methamphetamine laboratories.
    In her Recommendation, the ALJ interpreted the terms ``listed 
chemical'' and the ``the chemical'' as set forth in 21 U.S.C. 971(c)(1) 
(hereafter ``971''), to be limited to the actual material to be 
imported, in this case, bulk ephedrine hydrochloride, as opposed to the 
products PDK manufactured from bulk ephedrine. The Deputy Administrator 
rejects this conclusion, and concurs with the following reasoning 
proposed by the Government.
    The Government argues that the terms ``listed chemical'' as set 
forth in 971(a) and (c)(1) and ``regulated transaction'' in 971 (c)(1) 
must be construed in light of 21 U.S.C. 802(39)(A) and 21 U.S.C. 
802(39)(A)(iv)(aa) regarding ''regulated transactions.'' While 
802(39)(A)(iv) excludes FDA drug products generally from being included 
in ``regulated transactions,'' 802(39)(A)(iv)(I)(aa) explictly includes 
in the definition of ``regulated transaction'' any ``drug [that 
contains ephedrine or its salts, optical isomers, or salts of optical 
isomers[.]'' After 971 was made law in 1988, Congress in 1993 amended 
21 U.S.C. 802(39)(A)(iv) to include, inter alia, ephedrine drug 
products under 802(39)(A)(iv)(I)(aa). Thus a ``regulated transaction'' 
includes any ephedrine drug product as a ``listed chemical.'' See also 
Section 401(f) of Pub. L. 104-237 set forth in the Historical and 
Statutory Notes to 21 U.S.C. 802.
    The ALJ cites three prior DEA cases in support of her statutory 
interpretation of the term ``listed chemical:'' Suspension of Shipment 
Cases, 65 FR 51,333 (2002); Yi Heng Enters. Dev. Co., 64 Fed. Reg. 
2,234 (1999); and Neil Laboratories, Inc. 64 FR 30,063 (1999). The 
Deputy Administrator finds these cases distinguishable in that none of 
the cases involve or discuss the same issue of chemical identity 
addressed in this case.
    The Deputy Administrator finds additional support for the 
Government's position in United States v. Abdul Daas, 198 F.3d 1167, 
1175 (9th Cir. 1999), cert. denied, 531 U.S. 999 (2002). The court in 
Daas found that the term ``listed chemical'' as used in 21 U.S.C. 
841(d)(2) (now 841(c)(2)) and defined at 21 U.S.C. 802 (34) included 
finished List I chemical products that contain other ingredients. The 
Daas court stated: ``The chemical matrix in which ephedrine and 
pseudoephedrine are contained is irrelevant because they do not 
disappear, become different chemicals, or become useless when combined 
with other substances to make [finished products]. For the purposes of 
Sec.  841(d)(2), the other ingredients * * * function solely as a 
carrier medium or packaging material facilitating distribution of the 
listed chemical.'' Id. at 1175. The court concluded that ``the plain 
meaning of `listed chemical' encompasses the ephedrine and 
pseudoephedrine contained in [finished products].'' Id. The Deputy 
Administrator finds this analysis equally applicable to the instant 
case.
    The Deputy Administrator has also considered the legislative 
history of the Domestic Chemical Diversion Control Act of 1993 (DCDCA), 
Public Law 103-200, Sec.  9, 107 Stat. 2333 (1993). The then-acting DEA 
Administrator made a report to the House Committee clearly indicating 
that this legislation was intended, in part, to close the ``loophole'' 
for those who divert ephedrine drug products. H.R. Rep. 103-3791 at 5, 
8 (1993), reprinted in U.S.C.C.A.N. 2983, 2986 (1993).
    Accordingly, the ALJ's interpretation of ``listed chemical'' and 
``the chemical,'' as those terms appear in 971(a) and (c), is hereby 
rejected. The Deputy Administrator finds that the application of 971 is 
not limited to the imported form of the listed chemical. The Deputy 
Administrator concludes that the provisions of 971 apply to regulated 
transactions involving listed chemicals regardless of imported or 
exported form, i.e. bulk or finished products. The Deputy Administrator 
further concludes the provisions of 971 apply to finished products 
subsequently manufactured from bulk imported list chemicals.
    The ALJ also disagreed with the Government's interpretation of 
971(c), finding that it would create a form of ``strict liability'' for 
the importers in this case. As mentioned previously, although the 
suspension was directed against the importers, the party in interest in 
this proceeding is the manufacturer-customer of the importer. It is the 
conduct of that party, PDK, and

[[Page 77807]]

its customers, and the fact that the product which it manufactured and 
distributed ended up in clandestine drug laboratories, that forms the 
basis of the Government's contention that the ephedrine imported ``may 
be diverted.'' The Deputy Administrator concluded in the case of 
Mediplas Innovations, 67 FR 41256 (2002), published subsequent to the 
ALJ's recommendation in the instant case, that whether a regulated 
person foresaw or knew of diversion was not a determining factor as to 
whether the listed chemical ``may be diverted.'' While knowledge of 
regulated person, or its party in interest customer, may be relevant in 
a totality of the circumstances analysis, the ultimate issue is whether 
the listed chemical being imported into the United States ``may be 
diverted.'' The focus of the inquiry is the ultimate destination of the 
listed chemical, not the culpability of the regulated person.
    The Deputy Administrator concluded in Mediplas that the test for 
whether Sec.  971(c) suspension orders are justified is ``whether the 
totality of the circumstances provides grounds to believe that the 
suspended chemical shipments may be diverted.'' Id. at 41262. In the 
instant case, the Deputy Administrator concludes that the totality of 
the circumstances supports the conclusion that the listed chemicals in 
the suspended chemical shipments may be diverted.
    The DEA Orders to Suspend Shipment list various facts in support of 
the suspensions. The Orders to Suspend Shipment refer to four occasions 
during 1994-95, when PDK apparently shipped 25 mg. ephedrine tablets to 
a mail order distributor in Ontario, Canada without filing an export 
notification with DEA as required by 21 U.S.C. 971(a). In 1995, PDK 
made multiple shipments of ephedrine in response to mail order requests 
by individuals. In periods ranging from one to nine months, these 
individuals purchased 14,000 to 32,000 tablets of ephedrine. The Orders 
further allege that PDK failed to make reports of transactions of 
extraordinary quantities of listed chemicals, and that three 
individuals who purchased thousands of dosage units of ephedrine from 
PDK by mail order were convicted of methamphetamine manufacturing 
offenses. The Orders also state that in 1997, PDK was issued a Warning 
Letter by DEA stating that approximately 51 methamphetamine laboratory-
related sites were found to contain evidence of PDK products, and that 
in 1998-99, approximately 49 methamphetamine laboratory-related sites 
were found to contain evidence of PDK products. Finally, the orders 
stated that from February 2000 through January 2001, DEA issued 22 
Warning Letters notifying PDK that its products had been found at over 
40 different clandestine methamphetamine laboratory-related sites in 
several states.
    These recitations were relied upon by the Government to support its 
finding that pursuant to 971(c) the ephedrine proposed to be imported 
may be diverted for the illicit production of a controlled substance. 
The Government contends that evidence supporting these recitations 
would be sufficient to show that the listed chemicals may be diverted.
    The Deputy Administrator finds that based upon the evidence in the 
record, the listed chemicals ephedrine and pseudoephedrine are marketed 
in prescription and over-the-counter drug products which have 
legitimate therapeutic uses as a bronchodilator and nasal decongestant, 
respectively.
    The Deputy Administrator also finds that, over the past decades, 
DEA has been engaged in enforcement and regulatory activity to control 
the large-scale diversion of chemicals, including ephedrine and 
pseudoephedrine, into the illicit manufacture of controlled substances. 
The controlled substance methamphetamine is easily produced in 
clandestine laboratories using either ephedrine or pseudoephedrine. The 
process of manufacturing methamphetamine is easily accomplished with 
minimal equipment and readily available chemical supplies.
    The Controlled Substances Act has always prohibited the illicit 
(i.e. without a DEA registration) manufacture of controlled substances. 
The earliest illicit methamphetamine laboratories used the freely 
available chemical P2P to produce methamphetamine, until that substance 
was itself scheduled as a controlled substance. In the 1980's, 
methamphetamine laboratories increasingly began to switch to an 
ephedrine process. The Chemical Diversion and Trafficking Act of 1988 
(CDTA), Public Law 100-690, established the basic scheme of chemical 
regulation and imposed reporting and record keeping and import/export 
notification requirements on certain regulated transactions involving 
chemicals, including bulk ephedrine. Those listed chemicals contained 
in drug products were exempted at that time.
    In response to these controls, illicit methamphetamine laboratories 
began to switch to tableted ``single entity'' ephedrine as a raw 
material. The Domestic Chemical Diversion Control Act of 1993 (DCDCA), 
Public Law 103-200, was then crafted to close the ephedrine 
``loophole'' by removing the exemption for ``single entity'' ephedrine 
products, and lowering its sales threshold. In addition, the DCDCA 
initiated a registration requirement for handlers of List I chemicals.
    Subsequently, illicit laboratories shifted to pseudoephedrine and 
combination ephedrine drug products as sources of raw material, 
prompting the passage of the Comprehensive Methamphetamine Control Act 
of 1996 (MCA), Public Law 104-237, to establish additional controls and 
quantity thresholds for reporting transactions regarding listed 
chemicals. The MCA also established a Suspicious Orders Task Force in 
part to assist in alerting the chemical industry to the many devices 
used by individuals who seek to divert large quantities of listed 
chemicals and listed chemical products into the illicit manufacture of 
controlled substances.
    The Deputy Administrator finds that evidence was presented at the 
hearing to include certain data gathered from law enforcement sources 
and analyzed by DEA. This information demonstrated that seizures 
involving illicit methamphetamine laboratories have been increasing in 
recent years. For example, DEA methamphetamine laboratory-related 
seizures grew from 263 to more than 2,000 over the period from 1994 to 
1999.
    An additional number of state and local law enforcement 
methamphetamine-related seizures were reported in 1999.
    The Deputy administrator finds that the record shows that DEA 
initiated a Warning Letter program intended to inform listed chemical 
registrants when their listed chemical products are discovered at 
illicit clandestine laboratory-related sites. According to DEA, this 
program was developed to assist DEA registrants to: (1) Identify 
products that had been diverted, and (2) allow registrants to decide 
upon appropriate remedial action. The record indicates and the Deputy 
Administrator finds that the Government presented evidence to show that 
22 Warning Letters were issued to PDK advising it of the diversion of 
its listed chemical products. The first Warning Letter, sent to PDK in 
march 1998, documented 51 occasions in which PDK ephedrine and 
pseudoephedrine were found at various sites related to the illicit 
manufacture of methamphetamine. It appears that for investigative 
reasons, DEA did not resume sending Warning Letters to PDK until 
February 2000.
    The Deputy Administrator finds that on February 15, 2000, DEA sent 
PDK a Warning Letter, which notified PDK that

[[Page 77808]]

throughout 1999 PDK's ephedrine and pseudoephedrine products had been 
discovered in sites related to the illicit manufacture of 
methamphetamine in eleven states. Thereafter, DEA sent PDK twenty more 
Warning Letters between February 2000 and January 2001. The Warning 
Letters notified PDK of the location of the illicit sites where PDK's 
ephedrine and pseudoephedrine products were discovered. The Warning 
Letters documented that PDK products were discovered in 18 states, 
including California and Missouri, where PDK had previously agreed with 
DEA not to sell listed chemical products. These Warning Letters 
documented that the range of 60 count bottles found at these various 
sites was from just a few bottles to about 14,000 bottles.
    In Mediplas, the Deputy Administrator found ``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[.]'' Mediplas, 67 FR at 41262. In this case, PDK 
received 22 Warning Letters documenting the diversion of thousands of 
bottles of its List I chemical products to approximately 140 illicit 
methamphetamine laboratory-related sites in at least 18 states. As in 
mediplas, the Deputy Administrator concludes that the Warning Letters 
issued to PDK provide substantial evidence documenting the diversion of 
thousands of bottles of its List I chemical products to ``the 
clandestine manufacture of a controlled substance.'' Mediplas, 67 FR at 
41262; 21 U.S.C. 971(c)(1).
    The Deputy Administrator finds that the record shows through 
testimony and documentary evidence that over a period of several years, 
PDK and DEA corresponded and met with the intention of resolving the 
problem regarding the diversion of PDK's ephedrine and pseudoephedrine 
products. Evidence presented by PDK indicated that it had taken steps 
to implement controls in its plant and distribution chain. During this 
period, DEA permitted certain listed chemical shipments, destined for 
PDK, to be imported. However, testimony shows that DEA personnel and 
PDK were not in agreement as to the level of success at controlling 
diversion of the PDK products. The Deputy Administrator concludes that 
the continued discovery of PDK's products in illicit settings, as 
documented by the Warning Letters, shows that diversion continues to 
occur.
    The Deputy Administrator further finds that evidence was presented 
at the hearing that PDK, between 1994 and 1995, sold to Sun Labs of 
Canada at least four shipments of ephidrine. The president and owner of 
Sun Labs at the time was Perry Krape, former owner of PDK. The parties 
disputed whether these shipments were exports, which would then have 
required reporting to DEA on a DEA Form 486 within 15 days of the 
export pursuant to 21 CFR 1313.21(a). The ALJ noted in her findings of 
fact that Mr. Krasnoff of PDK credibly testified that these orders were 
delivered to New York, and further noted that Mr. Krasnoff assumed that 
Sun Labs's owner was going to distribute this product in Canada. The 
ALJ also noted that Mr. Krasnoff had a ``no-complete'' agreement with 
Sun Labs in which Sun Labs agreed that it would not sell ephidrine in 
PDK's territory, which included the entire United States. Although the 
ALJ noted that there was no testimony to demonstrate that the ephidrine 
actually was shipped to Canada, the Deputy Administrator finds that it 
is a reasonable inference that the ephidrine was destined for Canada, 
and that the ephidrine was not destined to remain in the United States 
in storage areas indefinitely. In fact, Mr. Krasnoff testified in 
reference to these transactions that he ``believe[d] that [Sun Labs] 
intention was to take the product to Canada at some point in time and 
that [Sun Labs] was putting together a distribution system in order to 
distribute that product in Canada.'' The Deputy Administrator finds, 
given the circumstances of these sales, and especially given PDK 
actually believed the product was designed for export. that PDK should 
have complied with DEA export regulations in effect at the time. The 
Deputy Administrator therefore concluded PDK violated 21 CFR 1313.21 by 
failing to file export notifications for each of the four shipments at 
issue, regardless of whether the ephidrine actually left the United 
States.
    The Deputy Administrator notes that at that hearing DEA witnesses 
testified regarding traditional retail outlets and non-traditional 
retail outlets and the types of listed chemical products distributed to 
these outlets. The Government alleges that the traditional market is 
characterized by a short distribution pattern to large chain grocery 
stores, large chain drug stores, large discount retailers and large 
chain convenience stores. These products are packaged in blister packs 
and are 30 mg. in strength. DEA alleges the non-traditional outlets are 
characterized by a very lengthy distribution chain of listed chemical 
products and that these products are sold by gas stations, liquor 
stores, hair salons, ``head'' shops, and video stores. Allegedly, the 
non-traditional market packaging differs from the traditional market 
because non-traditional retail outlets sell pseudoephedrine in 60 mg. 
strength in bottles of 60 or more dosage units. The higher strength 
products are those products usually found at the illicit 
methamphetamine sites.
    The ALJ noted that the Suspicious Orders Task Force identified 
certain ``suspicious orders'' identification criteria. This criteria 
included certain retail stores identified as ``non-traditional'' 
outlets for over-the-counter regulated products, for example, head 
shops, drug paraphernalia stores, liquor stores, record stores, and 
video shops. The Task Force Report did not identify convenience stores 
as ``nontraditional'' outlets. The Task Force Report criteria did 
identify as suspicious customers who resell large volumes into the 
``independent convenience store'' market. The Deputy Administrator 
notes the record shows PDK does not distribute List I chemical products 
directly to customers, nor to any retail sales outlets, including 
convenience stores.
    In Mediplas the Government also presented testimony concerning 
``traditional'' versus ``non-traditional'' markets for List I chemical 
products. 67 FR at 41264. The Deputy Administrator found in that cast 
the ``the probative weight of this [anecdotal] evidence is minimal 
without some form of further extrinsic evidence to support these 
arguments.'' The Deputy Administrator adopts this finding in the 
present case, as the Government here relied upon essentially identical 
evidence as in Mediplas.
    The Deputy Administrator has also considered the Government's 
arguments that PDK in 1995 and 1996 engaged in the mail order sale of 
excessive quantities of 25 mg. ephedrine products to consumers. A DEA 
Diversion Investigator testified that in his opinion, such sales to 
individuals, involving 14,000 to 32,000 tablets over periods ranging 
from one to nine months, were excessive in light of the levels of 
maximum therapeutic dosing. In addition, the record shows several 
individual retail customers received amounts of 12,000 dosage units or 
more per month. The record also shows that two of these customers were 
subsequently convicted of criminal felonies relating to the manufacture 
or distribution of methamphetamine and a third was arrested. The 
Government argues that PDK should have submitted reports to DEA 
concerning the transactions with these individuals

[[Page 77809]]

because such sales allegedly ``clearly'' excessive and should have been 
reported pursuant to 21 CFR 1310.05(a)(1).
    The Deputy Administrator disagrees, and concerns instead with the 
position of the ALJ, who found DEA failed to prove by a preponderance 
of the evidence that PDK violated the excessive sales reporting 
requirements. The Deputy Administrator concurs with her finding that 
the record contains insufficient evidence to support the conclusion 
that the sales to these individuals constituted excessive quantities 
since the Government failed to rebut PDK's evidence that it reasonably 
believed the products were intended for repackaging and resale, and not 
for personal consumption by the purchasing individuals.
    Further, despite the subsequent Federal arrest and conviction of 
two of these individuals for operating methamphetamine laboratories, 
the Deputy Administrator concurs with the ALJ's finding that there is 
no evidence in the record showing that PDK was aware if any illicit 
activity by these individuals at the time of the sales. The Deputy 
Administrator further concurs with the ALJ's finding evidence in the 
record demonstrating PDK's willingness to file suspicious transaction 
reports in cases where PDK had a factual basis for doing so.
    The Deputy Administrator notes the record is replete with PDK's 
contentions that it has worked hard to evaluate its activities and to 
cooperate with DEA in stemming diversion. However, the record shows 
that diversion of PDK products has continued to occur, and that, based 
upon the Warning Letters received, PDK should have known its remedial 
actions were insufficient to stem the diversion of its List I chemical 
products. Moreover, the record shows evidence that PDK violated DEA 
export regulations on at least four occasions by failing to file the 
required notifications of its shipments to Sun Labs. The totality of 
the circumstances therefore supports the Government's assertion that 
the list chemicals sought to be imported and distributed to PDK may be 
diverted and furthermore that the Suspension Orders were proper and 
should be sustained. Mediplas, 67 FR at 41264. The fact that PDK 
products containing ephedrine and pseudolephedrine have repeatedly been 
found at the site of clandestine methamphetamine laboratories and dump 
sites is a significant indicator that these products may continue to be 
diverted to such illicit activities.
    In arriving at this decision, the Deputy Administrator has 
considered PDK's stature and activities in the business community, its 
efforts at compliance, as well as the evidence available to DEA up to 
the time of the hearing. The Deputy Administrator finds that there was 
sufficient evidence at the time of the hearing to support DEA's 
contention that the chemicals may be diverted. Mediplas, 67 FR at 
41260-41261. As the Deputy Administrator has previously noted, 
``[e]vidence of a violation of law is not necessary to demonstrate that 
the suspensions were lawful.'' Mediplas, at 67 FR at 41262, citing 
Suspension of Shipments, 65 FR at 51337. Therefore, the Deputy 
Administrator concludes that the suspensions set forth in the January 
25 and 26, 2001 Orders to Suspend Shipments of ephedrine hydrochloride 
issued to Indace and Malladi were justified.
    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) and 0.104, hereby orders that the suspensions 
of the above described shipments, be, and hereby are, sustained, and 
that these proceedings are hereby concluded.
    This final order is effective immediately.

    Dated: December 13, 2002.
John B. Brown, III,
Deputy Administrator.
[FR Doc. 02-31949 Filed 12-18-02; 8:45 am]
BILLING CODE 4410-09-M