[Federal Register Volume 72, Number 16 (Thursday, January 25, 2007)]
[Notices]
[Pages 3417-3419]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-1053]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Importer of Controlled Substances; Correction to Notice of 
Application

    The Drug Enforcement Administration (DEA) is hereby correcting a 
notice of application that appeared in the Federal Register on April 
17, 2006 (71 FR 20729). That document announced the application of 
Rhodes Technologies to be registered as an importer of raw opium and 
concentrate of poppy straw. This is the second correction to the 
original notice of application. This document augments the correction 
which was published in the Federal Register on May 22, 2006 (71 FR 
29354).
    The April 17, 2006, notice of application incorrectly stated that 
``[a]ny manufacturer who is presently, or is applying to be, registered 
with DEA to manufacture such basic classes of controlled substances may 
file comments or objections to the issuance of the proposed 
registration and may, at the same time, file a written request for a 
hearing on such application pursuant to 21 CFR 1301.43 and in such form 
as prescribed by 21 CFR 1316.47.'' Correctly stated, under the 
Controlled Substances Act (CSA) and DEA regulations, applications to 
import narcotic raw materials, including raw opium and concentrate of 
poppy straw, are not required to be published in the Federal Register. 
Further, the notice of application, although not required to be 
published at all, should have stated that ``bulk manufacturers'' of raw 
opium or concentrate of poppy straw may file a written request for a 
hearing. As explained below, since there are no domestic bulk 
manufacturers of narcotic raw materials registered with DEA, no 
registrant has a statutory or regulatory right to a hearing on the 
application.
    In response to the notice, several importers of narcotic raw 
materials who also hold manufacturing registrations (but not as ``bulk 
manufacturers'' of narcotic raw materials) requested a hearing on the 
application. DEA's Administrative Law Judge (ALJ) accepted the requests 
for hearings and placed the case on DEA's administrative hearing 
docket. This correction notifies the applicant, the public, and those 
importers/manufacturers that requested a hearing that DEA is denying 
the requests for hearing and dismissing the case on the agency's 
administrative docket.

Statutory and Regulatory Provisions

    As set forth in 21 U.S.C. 958(i), the Attorney General (by 
delegation, the Administrator and Deputy Administrator of DEA) \1\ 
shall, prior to issuing an importer registration to a bulk manufacturer 
of a controlled substance in schedule I or II, and prior to issuing a 
regulation under 21 U.S.C. 952(a) authorizing the importation of such a 
substance, provide ``manufacturers holding registrations for the bulk 
manufacture of the substance an opportunity for a hearing.'' (Emphasis 
added.) Thus, the CSA contemplates that only ``bulk manufacturers'' 
shall be entitled to hearing on an application to import a schedule I 
or II controlled substance and, further, that only those who are 
registered to bulk manufacture the particular substance that the 
applicant seeks to import. Accordingly, if no one is registered to bulk 
manufacture the substance that the applicant seeks to import, no one is 
entitled to a hearing on that application.
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    \1\ 21 U.S.C. 871(a); 28 CFR 0.100(b) and 0.104, appendix to 
subpart R, sec. 12.
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    DEA's registration database confirms that no person holds a 
registration as a bulk manufacturer of raw opium, concentrate of poppy 
straw, or any of the other narcotic raw materials listed in 21 U.S.C. 
952(a)(1).\2\ Accordingly, the

[[Page 3418]]

CSA provides no right to a hearing to any person seeking to challenge 
the application of another to become registered to import such narcotic 
raw materials.
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    \2\ When applying for registration, manufacturers are required 
to complete DEA Form-225, which requires the applicant to specify 
the nature of the proposed manufacturing activity. The categories 
include, among others, ``bulk synthesis/extraction'' and ``dosage 
form manufacture.'' Likewise, the registration database maintained 
by DEA indicates the specific type of manufacturing activity that is 
authorized by each registration.
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    Consistent with the CSA, the DEA regulations provide that the only 
persons who are entitled to a hearing on an application for a 
registration to import a schedule I or II controlled substance are 
those who are either ``registered as a bulk manufacturer of that 
controlled substance'' or an ``applicant therefor.'' 21 CFR 
1301.34(a).\3\
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    \3\ Moreover, as set forth in 21 CFR 1301.34(a), the right to a 
hearing is limited to cases in which the applicant is seeking to 
import a controlled substance pursuant to 21 U.S.C. 952(a)(2)(B).
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    In sum, neither the CSA nor the DEA regulations provide a right to 
a hearing for anyone seeking to contest the application of Rhodes 
Technologies to import narcotic raw material.

Historical Agency Practice and Other Statutory Considerations

    DEA is aware that the agency has, in some prior cases of 
applications to import narcotic raw materials, granted requests for 
hearings made by persons that were not bulk manufacturers of the 
narcotic raw material--despite the fact that no such hearing right is 
contemplated by the governing statute or implementing regulations. See, 
e.g., Penick Corp.; Importation and Manufacture of Controlled 
Substances, Objections, Requests for Hearing, and Hearing, 42 FR 82760 
(1980); Mallinckrodt, Inc.; Approval of Registration, 46 FR 24747 
(1981); Johnson Matthey, Inc.; Conditional Grant of Registration to 
Import Schedule II Substances, 67 FR 39041 (2002); Penick Corporation, 
Inc.; Grant of Registration to Import Schedule II Substances, 68 FR 
6947, 6948 (2003); Chattem Chemicals, Inc.; Grant of Registration to 
Import Schedule II Substances, 71 FR 9834 (2006). In these past cases, 
the agency did not state that such non-bulk-manufacturers were entitled 
to a hearing under 21 U.S.C. 958(i) or 21 CFR 1301.34(a). Rather, the 
agency either granted the hearing without explanation or did so based 
on what it termed its ``discretionary authority.'' See, e.g., Penick 
Corporation, Inc.; Grant of Registration to Import Schedule II 
Substances, 68 FR 6947, 6948 (2003). Without addressing whether the 
agency indeed has the theoretical legal authority to grant such hearing 
requests, I now conclude that the most sound reading of the statute and 
regulations is that which limits the right to a hearing to those 
situations in which Congress expressly provided such a right.
    As stated above, 21 U.S.C. 958(i), by its plain terms, gives the 
right to request a hearing not in the case of all applications for a 
registration to import, but only in those in which the applicant for 
the import registration is a ``bulk manufacturer'' and only where the 
person seeking the hearing is a ``bulk manufacturer'' of the substance 
the applicant is seeking to import. Because there are no registered 
bulk manufacturers of narcotic raw materials,\4\ the facts triggering 
the right to a hearing under section 958(i) are not present in cases in 
which the applicant for an import registration is seeking to import 
narcotic raw materials under section 952(a)(1). In contrast, the facts 
needed to invoke the hearing right of section 958(i) will be present 
when the applicant is seeking to import the substances referred to in 
section 952(a)(2), since there are registered bulk manufacturers of the 
substances referred to in section 952(a)(2) (substances which are not 
narcotic raw materials).\5\
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    \4\ Since well before the CSA was enacted (beginning with the 
Narcotic Drugs Import and Export Act of 1922), it has been the 
policy of the United States (reflected in legislation enacted by 
Congress) to favor the importation of narcotic raw materials for 
conversion in the United States into finished narcotic drug products 
over domestic production of the raw materials and over the 
importation of processed narcotic materials and finished narcotic 
products. This is currently reflected in part by in 21 U.S.C. 952(a) 
and, in particular, by comparing subsection 952(a)(1) with 
subsection 952(a)(2) (the latter being more restrictive than the 
former).
    \5\ Section 958(i) expressly excludes from the hearing right 
applications pursuant to section 952(a)(2)(A) (emergency 
situations).
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    Congress could have extended the hearing right under 958(i) to 
importers of narcotic raw materials. That it instead chose to limit 
that right to bulk manufacturers indicates a determination on its part 
that extending the hearing right to others is not necessary to advance 
the goals of the CSA. Among other considerations, invocation of the 
hearing right by a competitor can add considerable time (months and 
sometimes years) to the process by which the agency determines whether 
to grant the application. An existing registrant could ask for a 
hearing simply to delay a competitor's entry into the market--
particularly given that DEA has not promulgated any criteria for 
deciding whether to grant these types of hearing requests. Such a delay 
would tend to run counter to the obligation of an agency under the 
Administrative Procedure Act requires to conclude adjudications ``with 
due regard to the convenience and necessity of the parties * * * and 
within a reasonable time.'' 5 U.S.C. 555(b). Moreover, if DEA were to 
maintain a policy (not contemplated by the CSA) whereby a competitor 
could simply request a hearing without making any showing that the 
hearing either would assist the agency in deciding whether to grant the 
application or otherwise advance the goals of the CSA, it would be 
difficult to envision how the agency could act on such hearing requests 
other than on arbitrary basis. Basic principles of fairness dictate 
against such an outcome.
    Of course, the consideration of delay to the applicant also exists 
when a bulk manufacturer seeks a hearing on the application of a 
potential competitor as allowed under section 958(i). However, that 
Congress expressly provided for a hearing right in such circumstances 
indicates that Congress weighed the consideration of delay and, on 
balance, determined the goals of the CSA were advanced by providing a 
hearing right in such circumstances. Again, that Congress expressed 
clear criteria as to when the hearing right applied reflects a clear 
delineation by Congress as to when such hearing right does--or does 
not--advance the overall goals of the Act.
    The mere fact that the agency has followed a procedural practice in 
the past does not, by itself, compel that the agency repeat the 
procedure in perpetuity. Finding no valid justification for the past 
practice, and finding such practice inconsistent with the particular 
criteria for a hearing rights set forth in the CSA and implementing 
regulations, I decline to follow this practice.
    It should be emphasized, however, that this decision to disallow a 
hearing right beyond that stated in the statute or regulations by no 
means should be construed as an indication that this application will 
be approved without the appropriate scrutiny. As mandated by the CSA, 
DEA will--prior to deciding whether to issue an order to show cause to 
deny this application--evaluate the application in accordance with the 
applicable statutory criteria (21 U.S.C. 952(a)(1) and 958(a)). Section 
958(a) requires DEA to evaluate the application under the six public 
interest factors set forth in 21 U.S.C. 823(a). See Penick Corporation, 
68 FR 6947 (2003); Roxane Laboratories, Inc., 63 FR 55891 (1998).

[[Page 3419]]

Conclusion

    For the reasons and in the manner set forth above, I correct the 
Notice of Application dated April 17, 2006. I direct the ALJ to remove 
from the agency's administrative docket the hearing on the application 
of Rhodes Technologies to register as an importer of narcotic raw 
materials.

    Dated: January 18, 2007.
Michele M. Leonhart,
Deputy Administrator.
 [FR Doc. E7-1053 Filed 1-24-07; 8:45 am]
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