[Federal Register Volume 72, Number 43 (Tuesday, March 6, 2007)]
[Notices]
[Pages 9969-9971]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-3839]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration


Georgia Convenience Wholesale, Inc.; Denial of Application

    On February 6, 2006, the Deputy Assistant Administrator, Office of 
Diversion Control, Drug Enforcement Administration, issued an Order to 
Show Cause to Georgia Convenience Wholesale, Inc., (Respondent) of 
Doraville, Georgia. The Show Cause Order proposed to deny Respondent's 
pending application for a Certificate of Registration to distribute 
list I chemicals on the ground that its registration ``would be 
inconsistent with the public interest.'' Show Cause Order at 1 (citing 
21 U.S.C. 823(h)).
    The Show Cause Order specifically alleged that on April 19, 2005, 
Respondent applied for a registration to distribute list I chemicals 
including pseudoephedrine, ephedrine and phenylpropanolamine (PPA), and 
that these products ``are commonly used to illegally manufacture 
methamphetamine, a Schedule II controlled substance.'' Show Cause Order 
at 1-2. The Show Cause Order alleged that Respondent was proposing to 
distribute these products to convenience stores, and that ``law 
enforcement officials have observed that an overwhelming proportion of 
precursors found at illicit methamphetamine sites have involved non-
traditional pseudoephedrine and ephedrine brands sold through 
convenience stores.'' Id. at 2. The Show Cause Order also alleged that 
as non-traditional products ``become more tightly regulated, even 
traditional products are subject to diversion.'' Id.
    The Show Cause Order further alleged that during a pre-registration 
investigation, Respondent's owner/operator was not aware that PPA had 
been withdrawn from the over-the-counter market. Id. Relatedly, the 
Show Cause Order alleged that Respondent had also sought registration 
for other list I chemicals even though these chemicals ``were not 
ingredients in any over-the-counter drug product.'' Id. Finally, the 
Show Cause Order alleged that Respondent ``does not have adequate 
experience or familiarity with products and the sales potentials in the 
industry to carry out the responsibilities of a registrant and prevent 
the diversion of listed chemical precursors into illicit activities.'' 
Id. at 3.
    On or about February 24, 2006, the Show Cause Order, which also 
notified Respondent of its right to request a hearing, was served by 
certified mail,

[[Page 9970]]

return receipt requested, as evidenced by the signed return receipt 
card. Since that time, neither Respondent, nor anyone purporting to 
represent it, has responded. Because (1) more than thirty days have 
passed since service of the Show Cause Order, and (2) no request for a 
hearing has been received, I conclude that Respondent has waived its 
right to a hearing. See 21 CFR 1309.53(c). I therefore enter this final 
order without a hearing based on relevant material contained in the 
investigative file and make the following findings.

Findings

    Respondent is a Georgia corporation which is located at 4030 
Pleasantdale Road, Doraville, Georgia. Respondent is a wholesale 
distributor of general merchandise to convenience stores, gas stations, 
candy stores, dollar stores, party stores, and liquor stores in the 
Atlanta, Georgia metropolitan area. Respondent has been in business 
since May 2005.
    On April 19, 2005, Respondent's president, Mr. Mohammad S. Yaqoob, 
applied for a DEA Certificate of Registration to distribute list I 
chemicals. Specifically, Respondent applied to distribute ephedrine, 
methylephedrine, n-methlypseudoephedrine, norpseudoephedrine, 
phenylpropanolamine (PPA), and pseudoephedrine.
    As explained in numerous DEA final orders, both pseudoephedrine and 
ephedrine currently have therapeutic uses. See, e.g., Tri-County Bait 
Distributors, 71 FR 52160, 52161 (2006).\1\ Both chemicals are, 
however, regulated under the Controlled Substances Act because they are 
precursor chemicals which are easily extracted from non-prescription 
products and used in the illicit manufacture of methamphetamine, a 
Schedule II controlled substance. See 21 U.S.C. Sec.  802(34); 21 CFR 
1308.12(d).
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    \1\ The FDA is, however, currently proposing to remove 
combination ephedrine-guaifenesin products from its over-the-counter 
(OTC) drug monograph and to declare them not safe and effective for 
OTC use. See 70 FR 40232 (2005).
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    Methamphetamine is a powerful and highly addictive central nervous 
system stimulant. See, e.g., Tri-County Bait Distributors, 71 FR at 
52161. The illegal manufacture and abuse of methamphetamine pose a 
grave threat to this country. Methamphetamine abuse has destroyed 
numerous lives and families and ravaged communities. Moreover, because 
of the toxic nature of the chemicals which are used to make the drug, 
the illegal manufacture of methamphetamine causes serious environmental 
harms. Id.
    On June 9, 2005, two DEA Diversion Investigators (DIs) went to 
Respondent's proposed registered location to conduct a pre-registration 
investigation. The DIs met with Mr. Yaqoob, who informed the 
investigators that he had purchased the business on May 1, 2005. The 
DIs also met with Mr. Omar, Respondent's Vice-President.
    Both Mr. Yaqoob and Mr. Omar told the DIs that each had previously 
owned a gas station and had sold list I chemical products. Mr. Yaqoob 
informed the DIs that Respondent's list I customers would be 
convenience stores and gas stations. Numerous DEA orders have found 
that these establishments are non-traditional (or gray market) 
retailers of list I chemical products. See, e.g., T. Young Associates, 
Inc., 71 FR 60567, 60568 (2006).
    Mr. Yaqoob also provided the DIs with a list of the list I chemical 
products Respondent intended to distribute. The list was comprised 
entirely of traditional cold and sinus medicines that contain 
pseudoephedrine. When one of the DIs asked Mr. Yaqoob why he had 
originally requested authorization to handle other list I chemicals, 
Mr. Yaqoob stated that he had not known exactly which drug codes were 
needed to handle pseudoephedrine so he asked for the additional codes. 
Mr. Yaqoob, however, had submitted a letter, which is dated prior to 
the onsite inspection, withdrawing Respondent's request to handle PPA, 
methylephedrine, n-methlypseudoephedrine, and norpseudoephedrine.
    The investigation determined that Respondent's business is located 
in a large brick building which has an alarm system with motion 
detectors, glass break strips, and metal contact strips, and is 
monitored by a security company. Moreover, the doors were equipped with 
metal cross bars and dead bolt locks. Finally, the list I products were 
to be stored in a separate room (which was to remain locked at all 
times) and not in the warehouse. Furthermore, Respondent appeared to 
have adequate procedures for handling the list I products, as well as 
for identifying and verifying new customers.

 Discussion

    Under 21 U.S.C. 823(h), an applicant to distribute list I chemicals 
is entitled to be registered unless the registration would be 
``inconsistent with the public interest.'' In making this 
determination, Congress directed that I consider the following factors:

    (1) Maintenance by the applicant of effective controls against 
diversion of listed chemicals into other than legitimate channels;
    (2) Compliance by the applicant with applicable Federal, State, 
and local law;
    (3) Any prior conviction record of the applicant under Federal 
or State laws relating to controlled substances or to chemicals 
controlled under Federal or State law;
    (4) Any past experience of the applicant in the manufacture and 
distribution of chemicals; and
    (5) Such other factors as are relevant to and consistent with 
the public health and safety.

Id.

    ``These factors are considered in the disjunctive.'' Joy's Ideas, 
70 FR 33195, 33197 (2005). I may rely on any one or a combination of 
factors, and may give each factor the weight I deem appropriate in 
determining whether an application for registration should be denied. 
See, e.g., David M. Starr, 71 FR 39367 (2006); Energy Outlet, 64 FR 
14269 (1999). Moreover, I am ``not required to make findings as to all 
of the factors.'' Hoxie v. DEA, 419 F.3d 477, 482 (6th Cir. 2005); 
Morall v. DEA, 412 F.3d 165, 173-74 (D.C. Cir. 2005).
    In this case, I acknowledge that factors one, two, and three would 
not bar Respondent's registration. I find dispositive, however, that 
Respondent lacks relevant experience in the wholesale distribution of 
list I chemicals (factor four) and that it intends to distribute list I 
chemicals to the gray market (factor five), a market in which the risk 
of diversion is substantial. Consistent with DEA precedents, I hold 
that Respondent's registration would be inconsistent with the public 
interest.

Factor One--The Maintenance of Effective Controls Against Diversion

    This investigative file does not establish that Respondent would 
fail to maintain adequate procedures to protect against diversion. 
Moreover, the file establishes that Respondent would provide adequate 
security of list I chemical products to protect them from theft. Thus, 
this factor does not support a finding that Respondent's registration 
would be inconsistent with the public interest.

Factors Two and Three--Compliance With Applicable Laws and the 
Applicant's Prior Record of Relevant Criminal Convictions

    There is no evidence that Respondent is not in compliance with 
applicable Federal, State, or local laws. Relatedly, there is no 
evidence that Respondent, or any person affiliated with it, has ever 
been convicted of a crime under either Federal or State laws relating 
to

[[Page 9971]]

controlled substances or listed chemicals. I thus conclude that neither 
factor supports a finding that Respondent's registration would be 
inconsistent with the public interest.

Factor Four--The Applicant's Past Experience in the Distribution of 
Listed Chemicals

    DEA precedent establishes that ``an applicant's lack of experience 
in distributing list I chemicals creates a greater risk of diversion 
and thus weighs heavily against the granting of an application.'' Tri-
County Bait Distributors, 71 FR at 52163. According to the 
investigative file, Respondent's president and vice-president 
previously owned gas stations at which they sold list I chemical 
products. But as I explained in Tri-County Bait Distributors, merely 
engaging in the retail sale of these products is not sufficient to 
establish that an applicant has experience which is relevant to 
fulfilling the regulatory obligations of a wholesaler of these 
products. Id.
    Distributors of list I chemicals are subject to a comprehensive and 
complex regulatory scheme.See 21 CFR parts 1309 and 1310. Moreover, 
prior to the enactment of the Combat Methamphetamine Epidemic Act of 
2005, retail distributors of ephedrine and pseudoephedrine were 
generally exempt from recordkeeping and reporting requirements.\2\
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    \2\ Effective September 30, 2006, retail distributors are now 
required to maintain a logbook which records the name and address of 
each purchaser of ephedrine or a pseudoephedrine product containing 
more than 60 mg. of the chemical, the date and time of the sale, the 
product name and the quantity sold.
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    Accordingly, for an applicant's (or its key employee's) experience 
to be relevant, the key employee must have been actively involved in 
the fulfillment of a registrant's regulatory obligations as a wholesale 
distributor and demonstrate adequate knowledge of the applicant's 
proposed products.\3\ Because neither of Respondent's key employees has 
such experience, I conclude that this factor supports a finding that 
granting it a registration would be inconsistent with the public 
interest.
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    \3\ Respondent initially sought registration for additional 
chemicals beyond pseudoephedrine and ephedrine even though it 
intended only to carry products containing pseudoephedrine. 
According to the documentary evidence, Respondent withdrew its 
request to be registered for these chemicals before the inspection. 
Accordingly, I conclude that Respondent's initial request to be 
registered for the additional chemicals does not support a finding 
that it lacks adequate product knowledge.
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Factor Five--Other Factors That Are Relevant to and Consistent With 
Public Health and Safety

    Numerous DEA orders recognize that convenience stores and gas-
stations constitute the non-traditional retail market for legitimate 
consumers of products containing pseudoephedrine and ephedrine. See, 
e.g., Tri-County Bait Distributors, 71 FR at 52161; D & S Sales, 71 FR 
37607, 37609 (2006); Branex, Inc., 69 FR 8682, 8690-92 (2004). DEA 
orders also establish that the sale of list I chemical products by non-
traditional retailers is an area of particular concern in preventing 
diversion of these products into the illicit manufacture of 
methamphetamine. See, e.g., Joey Enterprises, 70 FR 76866, 76867 
(2005). As Joey Enterprises explains, ``[w]hile there are no specific 
prohibitions under the Controlled Substances Act regarding the sale of 
listed chemical products to [gas stations and convenience stores], DEA 
has nevertheless found that [these entities] constitute sources for the 
diversion of listed chemical products.'' Id. See also TNT Distributors, 
70 FR 12729, 12730 (2005) (special agent testified that ``80 to 90 
percent of ephedrine and pseudoephedrine being used [in Tennessee] to 
manufacture methamphetamine was being obtained from convenience 
stores''); OTC Distribution Co., 68 FR 70538, 70541 (2003) (noting 
``over 20 different seizure of [gray market distributor's] 
pseudoephedrine product at clandestine sites,'' and that in eight-month 
period, distributor's product ``was seized at clandestine laboratories 
in eight states, with over 2 million dosage units seized in Oklahoma 
alone.''); MDI Pharmaceuticals, 68 FR 4233, 4236 (2003) (finding that 
``pseudoephedrine products distributed by [gray market distributor] 
have been uncovered at numerous clandestine methamphetamine settings 
throughout the United States and/or discovered in the possession of 
individuals apparently involved in the illicit manufacture of 
methamphetamine'').
    Significantly, all of Respondent's proposed customers participate 
in the non-traditional market for ephedrine and pseudoephedrine 
products. DEA orders recognize that there is a substantial risk of 
diversion of list I chemicals into the illicit manufacture of 
methamphetamine when these products are sold by non-traditional 
retailers. See, e.g. Joy's Ideas, 70 FR at 33199 (finding that the risk 
of diversion was ``real'' and ``substantial''); Jay Enterprises, Inc., 
70 FR 24620, 24621 (2005) (noting ``heightened risk of diversion'' 
should application be granted). Under DEA precedents, an applicant's 
proposal to sell into the non-traditional market weighs heavily against 
the granting of a registration under factor five. So too here.
    Because of the methamphetamine epidemic's devastating impact on 
communities and families throughout the country, DEA has repeatedly 
denied an application when an applicant proposed to sell into the non-
traditional market and analysis of one of the other statutory factors 
supports the conclusion that granting the application would create an 
unacceptable risk of diversion. Thus, in Xtreme Enterprises, 67 FR 
76195, 76197 (2002), my predecessor denied an application observing 
that the respondent's ``lack of a criminal record, compliance with the 
law and willingness to upgrade her security system are far outweighed 
by her lack of experience with selling list I chemicals and the fact 
that she intends to sell ephedrine almost exclusively in the gray 
market.'' I have repeatedly adhered to this reasoning in denying 
applications to distribute list I chemicals to the non-traditional 
market. See, e.g., Jay Enterprises, 70 FR at 24621; Prachi Enterprises, 
69 FR 69407, 69409 (2004).
    Here, Respondent's key persons have no experience in the wholesale 
distribution of list I chemical products and yet the firm intends to 
distribute these products to non-traditional retailers, a market in 
which the risk of diversion is substantial. See Taby Enterprises of 
Osceola, Inc., 71 FR 71557, 71559 (2006). Given these findings, I hold 
that granting Respondent's application would be ``inconsistent with the 
public interest.'' 21 U.S.C. 823(h).

Order

    Pursuant to the authority vested in me by 21 U.S.C. 823(h), and 28 
CFR 0.100(b) and 0.104, I order that the application of Georgia 
Convenience Wholesale, Inc., for a DEA Certificate of Registration as a 
distributor of list I chemicals be, and it hereby is, denied. This 
order is effective April 5, 2007.

    Dated: February 23, 2007.
Michele M. Leonhart,
Deputy Administrator.
 [FR Doc. E7-3839 Filed 3-5-07; 8:45 am]
BILLING CODE 4410-09-P