[Federal Register Volume 69, Number 9 (Wednesday, January 14, 2004)]
[Rules and Regulations]
[Pages 2062-2066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-722]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Parts 1300, 1309, 1310

[Docket No. DEA-239T]


Clarification of the Exemption of Sales by Retail Distributors of 
Pseudoephedrine and Phenylpropanolamine Products

AGENCY: Drug Enforcement Administration (DEA), Justice.

[[Page 2063]]


ACTION: Interpretive rule.

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SUMMARY: By this interpretive rule, DEA is providing guidance to retail 
distributors for compliance with the law and DEA regulations regarding 
the exemption of sales of pseudoephedrine or phenylpropanolamine 
regulated products. Pseudoephedrine and phenylpropanolamine, which are 
regulated as List I chemicals, are components of many over-the-counter 
cold and allergy products. This rule does not change DEA's regulations 
and will have no impact on individual retail customers of such products 
who have been purchasing them from retailers which have been properly 
following DEA's regulations.
    DEA regulations already provide--and this rule clarifies--that an 
exemption from being a regulated transaction exists for sales of 
ordinary over-the-counter pseudoephedrine and phenylpropanolamine 
products (``safe harbor'' products) by retail distributors. However, 
some sellers have failed to adequately understand that this exemption 
must be considered in the context of the definition of a ``retail 
distributor.'' A retail distributor is one whose sales of regulated 
pseudoephedrine and phenylpropanolamine products are limited almost 
exclusively to quantities below the 9 gram threshold--whether these 
products are defined as ``safe harbor'' products or not--to individuals 
for legitimate medical use. Therefore, a person who sells more than an 
occasional amount of pseudoephedrine or phenylpropanolamine product at 
or above the 9 gram threshold for these products does not fit the 
definition of a retail distributor on which the exemption is based.

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

SUPPLEMENTARY INFORMATION:

Special Notice

    Due to concerns regarding possible harmful side effects from the 
use of phenylpropanolamine, the Food and Drug Administration (FDA) 
initiated action in November, 2000, to remove products containing it 
from the market. As a result, many firms voluntarily discontinued 
marketing products containing phenylpropanolamine and removed them from 
the shelves for disposal. However, since some products containing 
phenylpropanolamine are still available, and since the regulations 
specifically address products containing phenylpropanolamine, DEA has 
written this interpretive rule to include drug products containing 
phenylpropanolamine as well as drug products containing 
pseudoephedrine.

Introduction

    DEA is publishing this Interpretive Rule to clarify its policies 
and procedures regarding the exemption of sales of ordinary over-the-
counter pseudoephedrine and phenylpropanolamine products (``safe 
harbor'' products) by retail distributors from being regulated 
transactions and to provide guidance for compliance with the law and 
DEA regulations. The Controlled Substances Act (CSA), which is found in 
Title 21 of the United States Code (21 U.S.C.), sections 801 et seq., 
sets forth the law for controlled substances and listed chemicals. 
Implementing regulations are found in Title 21 of the Code of Federal 
Regulations (21 CFR). Pertinent implementing regulations pertaining to 
the distribution of List I chemicals are found in 21 CFR 1300.02--
definitions relating to listed chemicals; part 1309--information on the 
requirements for registration and security; and part 1310--requirements 
for recordkeeping and reports for listed chemicals. This interpretive 
rule does not change the regulations. Also, this rule does not have an 
impact on individual retail customers of regulated pseudoephedrine and 
phenylpropanolamine products who have been purchasing them from 
retailers that have been following DEA's regulations.
    Some retail distributors have failed to adequately understand this 
exemption. They believe that this exemption is absolute--that a 
retailer may, without regulation, sell as much ``safe harbor'' 
pseudoephedrine and phenylpropanolamine product to any person for any 
purpose as often as that person wishes to make a purchase. This is not 
the case. The exemption of sales of ``safe harbor'' products by retail 
distributors from being regulated transactions must be considered in 
the context of the definition of a retail distributor of 
pseudoephedrine and phenylpropanolamine products on which it is based. 
In the definition of a retail distributor (21 U.S.C. 802(46)(A)), all 
sales of these regulated products--whether the products are defined as 
``safe harbor'' products or not--are limited almost exclusively to 
below-threshold amounts to individuals for legitimate personal medical 
use. The transaction threshold for sales of regulated pseudoephedrine 
or phenylpropanolamine products by retail distributors is 9 grams (in 
packages of not more than 3 grams) in a single transaction (21 U.S.C. 
802(39)(A)(iv)(II)). Therefore, a person who sells more than an 
occasional amount of these products at or above the 9 gram threshold 
does not meet the definition of a retail distributor on which the 
exemption is based. The seller would need to register with DEA as a 
distributor of List I chemicals and comply with the recordkeeping and 
other regulatory requirements that are set forth for all regulated 
transactions.

Background

    The Comprehensive Methamphetamine Control Act of 1996 (MCA) created 
the exemption that sales of ordinary over-the-counter pseudoephedrine 
and phenylpropanolamine products by retail distributors are not 
regulated transactions (21 U.S.C. 802(39)(A)(iv)(I)(aa), 802(45) and 
802(46)). To understand the intent of Congress in creating this 
exemption, it is necessary to review the legislative history of the 
MCA. Congress proposed the MCA to curb the fast spreading abuse of 
methamphetamine and amphetamine across the United States. In the 
Findings to the MCA, Congress stated that ``methamphetamine is a very 
dangerous and harmful drug'' and that ``Illegal methamphetamine 
manufacture and abuse presents an imminent public health threat * * *'' 
(Pub. L. 104-237, section 2).
    To combat the illegal manufacture and the abuse of methamphetamine 
and amphetamine, Congress chose to restrict access to the chemical 
precursors of these drugs--ephedrine, pseudoephedrine and 
phenylpropanolamine. However, many legal over-the-counter allergy and 
cold products contain these precursor chemicals. Therefore, Congress 
balanced the need to restrict access to legal over-the-counter drug 
products containing precursor chemicals with the need of the public to 
have access to them. Senator Biden clearly stated this in the 
Congressional Record:

The legislation [MCA] goes after the source of the methamphetamine 
problem--the precursor chemicals, often found in legal, over-the-
counter drug products, which are used to manufacture methamphetamine 
and its ugly cousin, amphetamine. While still allowing consumer 
access to many helpful and commonly used products containing the 
precursor chemicals, the bill will place significant restrictions on 
the bulk sale of the chemicals, both through the mail and over the 
counter. (142 Cong. Rec. S 10717 (September 17, 1996))

    In addition to allowing consumers access to over-the-counter 
products

[[Page 2064]]

containing the precursor chemicals, Congress also tried not to 
overburden retailers with recordkeeping. As Representative Riggs 
stated:

Thus, while imposing measures to decrease the availability of 
precursor chemicals, the legislation does not restrict the ability 
of law-abiding citizens to use common remedies for colds and 
allergies. Nor does the legislation subject sales of such legal 
products to onerous recordkeeping requirements at the retail level. 
(142 Cong. Rec. H 11111 (September 25, 1996))

Clarification

    The MCA created an exemption or ``safe harbor'' for the sale by 
retail distributors of ordinary over-the-counter pseudoephedrine or 
phenylpropanolamine products. (Ephedrine and combination ephedrine 
products were not included in this ``safe harbor.'') These 
pseudoephedrine and phenylpropanolamine products are packaged according 
to specific criteria, which includes blister packs or unit dose pouches 
or packets for products in solid form (21 U.S.C. 802(45)). Many retail 
distributors have the misconception that the exemption is unqualified--
that they may, without regulation, sell as many ``safe harbor'' 
pseudoephedrine or phenylpropanolamine products as they want to anyone 
for any purpose so long as these products meet the ``safe harbor'' 
definition. A review of the law shows this is not the case, nor was it 
the intent of Congress. The intent of Congress has been established by 
the previous statements cited from the legislative history of the MCA. 
It is further demonstrated by the following statement of Senator 
Grassley, which clearly indicates that sales of large quantities of 
these products at retail stores were not to be allowed.

Some of the chemical companies also tried to create so-called safe 
harbors so large that enormous bulk purchases of meth ingredients 
would never have to be reported to the DEA. That means criminals 
could go to the corner drugstore, purchase legal products like 
pseudoephedrine in large quantities and make poison with no one the 
wiser. And then that poison is sold to our kids. (142 Cong. Rec. S 
10717 (September 17, 1996))

    When reference is made to the ``safe harbor'' exemption, it is 
actually referring to ordinary over-the-counter pseudoephedrine and 
phenylpropanolamine products, which are defined as follows [emphasis 
added]:

The term ordinary over-the-counter pseudoephedrine or 
phenylpropanolamine product means any product containing 
pseudoephedrine or phenylpropanolamine that is regulated * * * and * 
* * sold in package sizes of not more than 3.0 grams of 
pseudoephedrine base or 3.0 grams of phenylpropanolamine base, and 
that is packaged in blister packs, each blister containing not more 
than two dosage units, or where the use of blister packs is 
technically infeasible, that is packaged in unit dose packets or 
pouches; and * * * for liquids, sold in package sizes of not more 
than 3.0 grams of pseudoephedrine base or 3.0 grams of 
phenylpropanolamine base. (21 U.S.C. 802(45))

    To fully understand the exemption of sales of ordinary over-the-
counter pseudoephedrine and phenylpropanolamine products by retail 
distributors from a regulated transaction, it is necessary to clearly 
understand the definition of a regulated transaction [emphasis added]:

The term regulated transaction means--a distribution, receipt, sale, 
importation, or exportation of * * * a listed chemical, or if the 
Attorney General establishes a threshold amount for a specific 
listed chemical, a threshold amount, including a cumulative 
threshold amount for multiple transactions * * * of a listed 
chemical, except that such term does not include--* * *

[sbull] [not a regulated transaction] any transaction in a listed 
chemical that is contained in a drug that may be marketed or 
distributed lawfully in the United States under the Federal Food, 
Drug, and Cosmetic Act * * * unless--

[sbull] [regulated transaction] the drug contains ephedrine or its 
salts, optical isomers, or salts of optical isomers, pseudoephedrine 
or its salts, optical isomers, or salts of optical isomers, or 
phenylpropanolamine or its salts, optical isomers, or salts of 
optical isomers * * * except

[sbull] [not a regulated transaction] that any sale of ordinary 
over-the-counter pseudoephedrine or phenylpropanolamine products by 
retail distributors shall not be a regulated transaction * * * (21 
U.S.C. 802(39)(A))

    It is also necessary to understand the definition of a retail 
distributor as it relates to pseudoephedrine or phenylpropanolamine 
products. A retail distributor of pseudoephedrine and 
phenylpropanolamine products is defined as follows [emphasis added]:

The term retail distributor means--a[n] * * * entity or person whose 
activities as a distributor relating to pseudoephedrine or 
phenylpropanolamine products are limited almost exclusively to sales 
for personal use, both in number of sales and volume of sales, 
either directly to walk-in customers or in face-to-face transactions 
by direct sales * * * Sale for personal use means the sale of below-
threshold quantities in a single transaction to an individual for 
legitimate medical use. (21 U.S.C. 802(46))

    This definition of the activities of a retail distributor makes no 
distinction between ``safe harbor'' and other regulated pseudoephedrine 
or phenylpropanolamine products. All retail sales of these products--
both safe harbor products and other regulated pseudoephedrine or 
phenylpropanolamine products--are limited almost exclusively to amounts 
below the retail threshold to an individual for legitimate medical use.
    When all of the above definitions and conditions are taken as a 
whole, the exemption of sales of ordinary over-the-counter 
pseudoephedrine or phenylpropanolamine products (``safe harbor'' 
products) by a retail distributor from being a regulated transaction 
must be read as follows:

Any sale of ordinary over-the-counter pseudoephedrine or 
phenylpropanolamine products by [a] person whose activities as a 
distributor relating to pseudoephedrine or phenylpropanolamine 
products are limited almost exclusively to sales for personal use, 
both in number of sales and volume of sales, either directly to 
walk-in customers or in face-to-face transactions by direct sales 
shall not be a regulated transaction. Sale for personal use means 
the sale of below-threshold quantities in a single transaction to an 
individual for legitimate medical use.

    Since sales of ordinary over-the-counter pseudoephedrine or 
phenylpropanolamine products by retail distributors are limited almost 
exclusively to below-threshold amounts to an individual for personal 
medical use, it is necessary to set forth the general threshold for 
pseudoephedrine and phenylpropanolamine products for retail 
distributors:

The threshold for any sale of products containing pseudoephedrine or 
phenylpropanolamine products by retail distributors * * * shall be 9 
grams of pseudoephedrine or 9 grams of phenylpropanolamine in a 
single transaction and sold in packages of not more than 3 grams of 
pseudoephedrine base or 3 grams of phenylpropanolamine base; * * * 
(21 U.S.C. 802(39)(A)(iv)(II)).

    Thus, sales by retail distributors of all regulated pseudoephedrine 
and phenylpropanolamine products--both ``safe harbor'' products as well 
as other regulated products--are almost exclusively to be below the 9 
gram threshold (in packages of not more than 3 grams) in a single 
transaction. An occasional sale at or above the 9 gram threshold is 
permitted for ``safe harbor'' products. Such an occasional sale is not 
a regulated transaction and does not subject the retail distributor to 
recordkeeping or registration as a distributor. Examples of occasional 
sales at or above threshold for ``safe harbor'' products would include 
a sale to a family where everyone is sick or suffering from allergies 
or a sale to a person who comes from a long distance away, such as in a 
rural area. For other

[[Page 2065]]

regulated pseudoephedrine and phenylpropanolamine products, a sale at 
or above threshold, while permitted, is a regulated transaction 
necessitating recordkeeping and other regulatory requirements (21 
U.S.C. 802(39)(A)(iv)(I)(aa)).
    If sales of either ``safe harbor'' or other regulated 
pseudoephedrine or phenylpropanolamine products exceed ``almost 
exclusively below-threshold'' amounts either in number of sales or 
volume of sales (i.e., such sales are not just rare events or sales are 
not in relatively small quantities), the seller does not meet the 
definition of a retail distributor and must register with DEA as a 
distributor of List I chemicals and meet all the applicable regulatory 
requirements (21 CFR 1309). This includes the requirements for customer 
identification (21 CFR 1310.07), recordkeeping and reporting (21 CFR 
1310), and the security of List I chemicals (21 CFR 1309.71).
    Following is a table showing the qualifications and requirements 
for the exemption of sales of ``ordinary over-the-counter 
pseudoephedrine or phenylpropanolamine'' regulated products by retail 
distributors.

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Qualifications and Requirements for the Exemption of Sales of ``Ordinary
    Over-the-Counter Pseudoephedrine or Phenylpropanolamine Regulated
      Products'' (``Safe Harbor Products'') by Retail Distributors
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Seller must first meet the definition of retail distributor relating to
 regulated pseudoephedrine, phenylpropanolamine, or ephedrine products
 listed below:
1. Means a grocery store, general merchandise store, drug store, or
 other entity or person whose activities as a distributor relating to
 drug products containing pseudoephedrine or phenylpropanolamine are``
2. Limited to sales almost exclusively for personal use, both in the
 number of sales and volume of sales [regardless of the packaging of the
 products].
Sale for personal use means the sale of below-threshold quantities in a
 single transaction to an individual for legitimate medical use.
AND
3. Sales are made either directly to walk-in customers or face-to-face
 by direct sales. (21 U.S.C. 802(46) & 21 CFR 1300.02(b)(29))
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Requirements and conditions if       Requirements and conditions if
 retail distributor qualifies for     retail distributor does not
 the exemption                        qualify for the exemption
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DEA registration as a distributor    Seller must register with DEA as a
 of List I chemicals is waived. (21   distributor of List I chemicals.
 CFR 1309.23(e)).                     (21 CFR 1309)
As a regulated person whose          Distributor must meet security
 registration has been waived, a      requirements for List I chemicals
 retail distributor must meet         found in 21 CFR in 21 CFR 1309.71-
 security requirements for List I     1309.73.
 chemicals 1309.71-1309.73. (21 CFR
 1309.24(k)).
As a regulated person whose          Distributor is subject reporting
 registration has been waived, a      requirements for listed chemicals
 retail distributor is subject to     in 21 CFR 1310.
 the to the reporting regulated
 transactions requirements for of
 listed chemicals in 21 CFR
 1310.05. (21 CFR 1309.24(k)).
No records are required for sales    No records are required for sales
 of regulated pseudoephedrine or      of regulated pseudoephedrine or
 phenylpropanolamine products below   phenylpropanolamine products below
 threshold quantities in a single     threshold quantities in a single
 transaction regardless of            transaction regardless of
 packaging (not a regulated           packaging (not a regulated
 transaction).                        transaction).
Records must be retained for all     Records must be retained for all
 sales of threshold and above         transactions of threshold or above
 quantities of pseudoephedrine and    CFR quantities regardless of type
 phenylpropanolamine regulated        of packaging (regulated
 products not in blister packs        transactions). (21 CFR 1310)
 (such as bottles), which are
 regulated transactions, as set
 forth in 21 1310.
If sales of pseudoephedrine or       For all transactions amountsat or
 phenylpropanolamine regulated        above threshold amounts (regulated
 products exceed ``almost             transactions), distributor must
 exclusively below-threshold''        meet proof of identity
 either in number of sales or         requirements for customers. (21
 volume of sales--regardless of the   CFR 1310.07)
 kind of packaging, then seller
 must register with DEA as a
 distributor of List I chemicals.
 (See the other side of this table--
 Requirements and Conditions If for
 Retail Distributor Does Not
 Qualify for the Exemption.).
------------------------------------------------------------------------

Conclusion

    For sales of ordinary over-the-counter pseudoephedrine or 
phenylpropanolamine products (``safe harbor'' products) by a retail 
distributor to qualify for exemption from a regulated transaction, they 
must fall within the definition of the activities of a retail 
distributor (21 U.S.C. 802(46)(A)). The activities of a retail 
distributor relating to regulated drug products containing 
pseudoephedrine and phenylpropanolamine makes no distinction between 
``safe harbor'' and other regulated pseudoephedrine and 
phenylpropanolamine products. All sales by a retail distributor of 
these products are limited almost exclusively to amounts below the 
retail threshold for a single transaction to an individual for 
legitimate personal medical use. Products must be sold to walk-in 
customers or must be sold in face-to-face transactions. More than 
occasional sales of these products by a seller at or above-threshold 
quantities to an individual in a single transaction or a large number 
of sales of these products to an individual are inconsistent with the 
activities defined for a retail distributor. An occasional sale of 
``safe harbor'' pseudoephedrine or phenylpropanolamine products at or 
above the retail threshold is not a regulated transaction and does not 
require the retail distributor to keep records. More than an occasional 
sale that does not fit within these parameters requires the seller to 
obtain a DEA registration as a distributor and to meet all the 
requirements for a distributor, including, but not limited to, security 
requirements for storing List I chemicals and all the requirements for 
any sales that are regulated transactions.

Regulatory Certifications

Regulatory Flexibility Act

    The Deputy Assistant Administrator hereby certifies that this 
rulemaking has been drafted in accordance with the Regulatory 
Flexibility Act (5 U.S.C. 605(b)), has reviewed this regulation, and by 
approving it certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities. The rule 
provides DEA's interpretation of its law

[[Page 2066]]

and regulations regarding the sale by retail distributors of ordinary 
over-the-counter pseudoephedrine and phenylpropanolamine products 
(``safe harbor'' products). Compliance with the current law and 
regulations, as interpreted by this rulemaking, will not result in any 
change in economic activity for retail distributors of pseudoephedrine 
and phenylpropanolamine regulated products.

Executive Order 12866

    The Deputy Assistant Administrator certifies that this rulemaking 
has been drafted in accordance with the principles of Executive Order 
12866, section 1(b). The rule provides DEA's interpretation of its law 
and regulations regarding the sale by retail distributors of ordinary 
over-the-counter pseudoephedrine and phenylpropanolamine products 
(``safe harbor'' products). DEA has determined that this is not a 
significant regulatory action. Therefore, this action has not been 
reviewed by the Office of Management and Budget.

Executive Order 12988

    This rule meets the applicable standards set forth in sections 3(a) 
and 3(b)(2) of Executive Order 12988, Civil Justice Reform.

Executive Order 13132

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

Unfunded Mandates Act

    This rule will not result in the expenditure by State, local, and 
tribal governments, in the aggregate, or by the private sector, of 
$100,000,000 or more in any one year, and will not significantly or 
uniquely affect small governments. Therefore, no actions are necessary 
under the Unfunded Mandates Reform Act of 1995.

Small Business Regulatory Enforcement Fairness Act of 1996

    This rule is not a major rule as defined by section 804 of the 
Small Business Regulatory Enforcement Fairness Act of 1996. This rule 
will not result in an annual effect on the economy of $100,000,000 or 
more; a major increase in costs or prices; or significant adverse 
effects on competition, employment, investment, productivity, 
innovation, or on the ability of United States-based companies to 
compete with foreign-based companies in domestic and export markets.

    Dated: January 5, 2004.
Laura M. Nagel,
Deputy Assistant Administrator, Office of Diversion Control.
[FR Doc. 04-722 Filed 1-13-04; 8:45 am]
BILLING CODE 4410-09-P