[Federal Register Volume 69, Number 5 (Thursday, January 8, 2004)]
[Notices]
[Pages 1311-1314]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-345]


-----------------------------------------------------------------------

DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Shop It For Profit; Denial of Application

    On November 22, 2002, the Deputy Assistant Administrator, Office of

[[Page 1312]]

Diversion Control, Drug Enforcement Administration (DEA), issued an 
Order to Show Cause to Shop It For Profit (SIFP) proposing to deny its 
application, executed on December 28, 1999, for DEA Certificate of 
Registration as a distributor of list I chemicals. The Order to Show 
Cause alleged in relevant part that granting the application of SIFP 
would be inconsistent with the public interest as that term is used in 
21 U.S.C. 823(h) and 824(a). The Order to Show Cause also notified SIFP 
that should no request for a hearing be filed within 30 days, its 
hearing right would be deemed waived.
    According to the DEA investigative file, the Order to Show Cause 
was sent by certified mail to SIFP at its proposed registered location 
in Smyrna, Tennessee. The return receipt indicated that the show cause 
order was received on December 7, 2002, by December Pennington (Ms. 
Pennington), owner and sole proprietor of SIFP. DEA has not received a 
request for hearing or any other reply from SIFP or anyone purporting 
to represent the company in this matter.
    Therefore, the Acting Deputy Administrator of DEA, finding that (1) 
30 days having passed since receipt of the Order to Show Cause, and (2) 
no request for hearing having been received, concludes that SIFP has 
waived its hearing right. See Aqui Enterprises, 67 FR 12576 (2002). 
After considering relevant material from the investigative file in this 
matter, the Acting Deputy Administrator now enters her final order 
without a hearing pursuant to 21 CFR 1309.53(c) and (d) and 1316.67 
(2003). The Acting Deputy Administrator finds as follows:
    List I chemicals are those that may be used in the manufacture of a 
controlled substance in violation of the Controlled Substances Act. 21 
U.S.C. 802(34); 21 CFR 1310.02(a). Pseudoephedrine and ephedrine are 
list I chemicals commonly used to illegally manufacture 
methamphetamine, a Schedule II controlled substance. At the time that 
SIFP submitted its application for DEA registration, 
phenylpropanolamine, also a list I chemical, was a legitimately 
manufactured and distributed product used to provide relief of the 
symptoms resulting from irritation of the sinus, nasal and upper 
respiratory tract tissues, and is also used for weight control. 
Phenylpropanolamine is also a precursor chemical used in the illicit 
manufacture of methamphetamine and amphetamine. As noted in previous 
DEA final orders, Methamphetamine is an extremely potent central 
nervous system stimulant, and its abuse is a persistent and growing 
problem in the United States. Yemen Wholesale Tobacco and Candy Supply, 
Inc. 67 FR 9997 (2002); Denver Wholesale, 67 FR 99986 (2002).
    The Acting Deputy Administrator's review of the investigative file 
reveals that on December 28, 1999, SIFP submitted an application for 
DEA registration as a distributor of the list I chemicals ephedrine, 
pseudoephedrine and phenylpropanolamine. The application was submitted 
on behalf of SIFP by Ms. Pennington. There is no information before the 
Acting Deputy Administrator that SIFP has sought to modify its pending 
application with respect to any of the listed chemical products it 
proposes to distribute. Upon receipt of the application, the DEA 
Tennessee District Office initiated a pre-registration investigation of 
SIFP on June 15, 2000.
    The Acting Deputy Administrator's review of the investigative file 
reveals that SIFP began its business operation in January 1999. It is 
located in a residential neighborhood of Smyrna, Tennessee, and is 
housed at Ms. Pennington's residence. SIFP is a retailer that 
distributes candies, novelty items such as figurines, NASCAR, 
collegiate and pro sports items, seasonal items such as gloves, fishing 
gear and floats, as well as non-prescription medicines such as aspirin 
and other cold remedies. At the time of DEA's inspection, Ms. 
Pennington had lived at this location for approximately 12 years with 
her then-11 year old son.
    SIFP employed one other person, who along with Ms. Pennington was 
responsible for delivery of merchandise to SIFP's customers. Ms. 
Pennington informed a DEA investigator that approximately 5% of her 
business would be made up of the distribution of listed chemical 
products, but further admitted that the distribution of these products 
is ``unknown territory.''
    DEA's investigation revealed that the State of Tennessee does not 
license chemical handlers (distributors). However, SIFP operates 
pursuant to a Rutherford County (Tennessee) Business License number 
(Class 3) of Gift, Novelty and Souvenir Shops. In addition, SIFP has a 
Tennessee Department of Revenue Certificate of Registration Sales & Use 
number. The firm also has a Department of the Treasury, Internal 
Revenue Service Employer Identification number.
    During the pre-registration inspection, a DEA Diversion 
investigator provided Ms. Pennington with DEA publications on the 
diversion of pseudoephedrine, phenylpropanolamine, combination 
ephedrine products, methyl sulfone, anhydrous ammonia and iodine. The 
investigator also provided copies of DEA regulations pertaining to 
listed chemicals, specifically, title 21 of the Code of Federal 
Regulations, sections 1300, 1309 and 1310, a copy of threshold 
provisions for ephedrine, pseudoephedrine and phenylpropanolamine, as 
well as a guidance document on what constitutes ``suspicious orders'' 
of list I chemicals.
    The DEA diversion investigator further informed Ms. Pennington of 
the recordkeeping and reporting requirements of a registrant, including 
the reporting of losses, thefts and suspicious orders of list I 
chemicals. Ms. Pennington was also informed of the requirement to 
maintain all records for the regulated products for two years. Ms. 
Pennington stated her willingness to comply with all recordkeeping and 
reporting requirements.
    With respect to the manner in which her establishment would handle 
listed chemical products, Ms. Pennington informed the DEA investigator 
that she would be responsible for the recordkeeping and security of 
listed chemicals for SIFP and she would require her customers to 
provide her with a business sales tax license number before any product 
is distributed to them. DEA's investigation revealed that SIFP has 
approximately 90 customers. Ms. Pennington stated that SIFP distributes 
products throughout Middle Tennessee, and the firm does not sell to 
individuals. Ms. Pennington also provided DEA information regarding her 
proposed supplier of list I chemicals.
    Ms. Pennington further informed the DEA investigator that she makes 
visits (by truck) to her customers and asks if they need anything. If 
products are delivered, the delivery is made by a company owned truck. 
Ms. Pennington stated that her customers are allowed in her delivery 
truck in order to see what items she has in stock and that she is 
always present with her customers during these visits.
    With respect to storage and transport of list I chemicals, Ms. 
Pennington stated that these products will be stored on designated 
shelves in the rear area of her truck and that the back door of the 
truck has a heavy duty key lock that is kept locked. Ms. Pennington 
stated that she is the only person with a key to the truck, and the 
truck is usually parked in her driveway. As an additional measure of 
security, Ms. Pennington also proposed parking her truck in her 
backyard, an area surrounded by a wood fence. On a related matter, the 
DEA diversion investigator contacted by telephone a representative of 
Security Services of Murfreesboro, Inc., in Murfreesboro, Tennessee, 
who informed

[[Page 1313]]

DEA that SIFP had contracted with the security company for electronic 
surveillance services.
    The DEA diversion investigator informed Ms. Pennington that because 
of the increase in methamphetamine laboratory seizures in Tennessee and 
around the country, DEA was reevaluating the registrations of its list 
I chemical registrants as well as the applications of entities seeking 
to distribute these products. The investigator further informed Ms. 
Pennington about the diversion of list I chemical products to the 
clandestine manufacture of amphetamine and methamphetamine. In 
response, Ms. Pennington expressed that she was unaware of the problems 
associated with these products. She added however, that if not for the 
fact that SIFP's customers had requested list I chemical products, and 
the possibility that SIFP may lose those same customers to competitors 
that sell them, it would be her preference not to handle listed 
chemicals.
    On July 6, 2000, the DEA Tennessee District Office received a 
customer list from Ms. Pennington. The Acting Deputy Administrator's 
review reveals a customer list comprised primarily of convenience 
stores, gas stations and food stores. DEA also received from Ms. 
Pennington a list of products that she anticipated distributing through 
her company. A review of the list by a DEA investigator revealed 
several list I products under the brand names of Sudafed and``Max 
Alert.'' However, several of the products that Ms. Pennington 
represented as listed I chemical products were in fact not of that 
category.
    The Acting Deputy Administrator's review of the investigative file 
further reveals that the DEA Tennessee District office reviewed 
excessive purchase reports filed in that office for the period of March 
to December 2000. Excessive purchase reports reflect data involving 
unusually high volume purchases and sale of listed chemical products by 
various entities, and flag for law enforcement personnel possible 
unlawful activity with respect to these transactions. DEA's review of 
the reports revealed that at least five potential customers of SIFP had 
ordered in an excessive fashion, list I chemical products from a DEA 
registered distributor located in Crossville, Tennessee. In addition, 
DEA obtained information that at least one potential customer of SIFP 
was purchasing listed chemical products from the same company that Ms. 
Pennington proposed as a supplier for SIFP.
    Pursuant to 21 U.S.C. 823(h), the Acting Deputy Administrator may 
deny an application for Certificate of Registration if she determines 
that granting the registration would be inconsistent with the public 
interest as determined under that section. Section 823(h) requires the 
following factors be considered in determining the public interest:
    (1) Maintenance of effective controls against diversion of listed 
chemicals into other than legitimate channels;
    (2) Compliance with applicable Federal, State, and local law;
    (3) Any prior conviction record under Federal or State laws 
relating to controlled substances or to chemicals controlled under 
Federal or State law;
    (4) Any past experience in the manufacture and distribution of 
chemicals; and
    (5) Such other factors as are relevant to and consistent with the 
public health and safety.
    As with the public interest analysis for practitioners and 
pharmacies pursuant to subsection (f) of section 823, these factors are 
to be considered in the disjunctive; the Acting Deputy Administrator 
may rely on any one or combination of factors, and may give each factor 
the weight she deems appropriate in determining whether a registration 
should be revoked or an application for registration denied. See, e.g., 
Energy Outlet, 64 FR, 14269 (1999). See also, Henry J. Schwartz, Jr., 
M.D., 54 FR 16422 (1989).
    The Acting Deputy Administrator finds factors one, four and five 
relevant to SIFP's pending application for registration.
    With respect to factor one, maintenance of effective controls 
against the diversion of listed chemicals, DEA's pre-registration 
inspection documented adequate security measures taken by SIFP with 
respect to the company's proposed storage of listed chemicals.
    With respect to factor four, the applicant's past experience in the 
distribution of chemicals, DEA's investigation revealed that the owner 
of SIFP has no previous experience related to distributing or otherwise 
handling listed chemicals. In prior DEA decisions, the lack of 
experience in the handling list I chemicals was a factor in a 
determination to deny a pending application for DEA registration. See, 
Matthew D. Graham, 67 FR 10229 (2002); Xtreme Enterprises, Inc., 67 FR 
76195 (2002). Therefore, this factor similarly weights against the 
granting of SIFP's pending application. In addition, the Acting Deputy 
Administrator finds factor four relevant to Ms. Pennington's apparent 
unfamiliarity with listed chemical products as evidenced by the list of 
purported list I chemical products that was supplied to DEA on behalf 
of SIFP, which contained several products that were not of that 
category.
    With respect to factor five, other factors relevant to and 
consistent with the public safety, the Acting Deputy Administrator 
finds this factor relevant to SIFP's proposal to distribute listed 
chemical products primarily to convenience stores and combination food 
mart/gas stations. While there are no specific prohibitions under the 
Controlled Substance Act regarding the sale of listed chemical products 
to these entities, DEA has nevertheless found that gas stations and 
convenience stores constitute sources for the diversion of listed 
chemical products. See, e.g., Sinbad Distributing, 67 FR 10232, 10233 
(2002); K.V.M. Enterprises, 67 FR 70968 (2002) (denial of application 
based in part upon information developed by DEA that the applicant 
proposed to sell listed chemicals to gas stations, and the fact that 
these establishments in turn have sold listed chemical products to 
individuals engaged in the illicit manufacture of methamphetamine); 
Xtreme Enterprises, Inc., supra.
    The Acting Deputy Administrator finds factor five relevant to the 
results of DEA's verification of SIFP's proposed customers. Among the 
firm's potential customers were establishments that were part of an 
excessive purchase report involving listed chemicals obtained by DEA, 
and one potential customer that was purchasing listed chemical products 
from another supplier.
    The Acting Administrator also finds factor five relevant to SIFP's 
request to distribute phenylpropanolamine, and the apparent lack of 
safety associated with the use that product. DEA has previously 
determined that an applicant's request to distribute 
phenylpropanolamine constitutes a ground under factor five for denial 
of an application for registration. Shani Distributors, 68 FR 62324 
(2003). Based on the foregoing, the Acting Deputy Administrator 
concludes that granting the pending application of SIFP would be 
inconsistent with the public interest.
    Accordingly, the Acting Deputy Administrator of the Drug 
Enforcement Administration, pursuant to the authority vested in her by 
21 U.S.C. 823 and 28 CFR 0.100(b) and 0.104, hereby orders that the 
pending application for DEA Certificate of Registration, previously 
submitted by Shop It For Profit be, and it hereby is, denied. This 
order is effective February 9, 2004.


[[Page 1314]]


    Dated: December 18, 2003.
Michele M. Leonhart,
Acting Deputy Administrator.
[FR Doc. 04-345 Filed 1-7-04; 8:45 am]
BILLING CODE 4410-09-M