[Federal Register Volume 72, Number 223 (Tuesday, November 20, 2007)]
[Proposed Rules]
[Pages 65248-65256]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-22560]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Part 1310

[Docket No. DEA-296P]
RIN 1117-AB10


Removal of Thresholds for the List I Chemicals Pseudoephedrine 
and Phenylpropanolamine

AGENCY: Drug Enforcement Administration, Department of Justice.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Drug Enforcement Administration (DEA) is proposing to 
remove the thresholds for importation, exportation, and domestic 
distributions of the List I chemicals pseudoephedrine and 
phenylpropanolamine. This rulemaking is being conducted as part of

[[Page 65249]]

DEA's implementation of the Combat Methamphetamine Epidemic Act of 2005 
and is needed to implement the Act's requirements for import and 
production quotas and to address the potential diversion of these 
chemicals. DEA is also clarifying that all transactions of drug 
products containing ephedrine, pseudoephedrine, and 
phenylpropanolamine, except retail transactions, are considered to be 
regulated transactions.

DATES: Written comments must be postmarked, and electronic comments 
must be sent, on or before January 22, 2008.

ADDRESSES: To ensure proper handling of comments, please reference 
``Docket No. DEA-296'' on all written and electronic correspondence. 
Written comments being sent via regular mail should be sent to the 
Deputy Assistant Administrator, Office of Diversion Control, Drug 
Enforcement Administration, Washington, DC 20537, Attention: DEA 
Federal Register Representative/ODL. Written comments sent via express 
mail should be sent to DEA Headquarters, Attention: DEA Federal 
Register Representative/ODL, 8701 Morrissette Drive, Springfield, VA 
22152. Comments may be directly sent to DEA electronically by sending 
an electronic message to [email protected]. Comments may 
also be sent electronically through http://www.regulations.gov using 
the electronic comment form provided on that site. An electronic copy 
of this document is also available at the  http://www.regulations.gov 
web site. DEA will accept attachments to electronic comments in 
Microsoft Word, WordPerfect, Adobe PDF, or Excel file formats only. DEA 
will not accept any file formats other than those specifically listed 
here.
    Posting of Public Comments: Please note that all comments received 
are considered part of the public record and made available for public 
inspection online at http://www.regulations.gov and in the Drug 
Enforcement Administration's public docket. Such information includes 
personal identifying information (such as your name, address, etc.) 
voluntarily submitted by the commenter.
    If you want to submit personal identifying information (such as 
your name, address, etc.) as part of your comment, but do not want it 
to be posted online or made available in the public docket, you must 
include the phrase ``PERSONAL IDENTIFYING INFORMATION'' in the first 
paragraph of your comment. You must also place all the personal 
identifying information you do not want posted online or made available 
in the public docket in the first paragraph of your comment and 
identify what information you want redacted.
    If you want to submit confidential business information as part of 
your comment but do not want it to be posted online or made available 
in the public docket, you must include the phrase ``CONFIDENTIAL 
BUSINESS INFORMATION'' in the first paragraph of your comment. You must 
also prominently identify confidential business information to be 
redacted within the comment. If a comment has so much confidential 
business information that it cannot be effectively redacted, all or 
part of that comment may not be posted online or made available in the 
public docket.
    Personal identifying information and confidential business 
information identified and located as set forth above will be redacted 
and the comment, in redacted form, will be posted online and placed in 
the Drug Enforcement Administration's public docket file. If you wish 
to inspect the agency's public docket file in person by appointment, 
please see the For Further Information paragraph.

FOR FURTHER INFORMATION CONTACT: Mark W. Caverly, Chief, Liaison and 
Policy Section, Office of Diversion Control, Drug Enforcement 
Administration, Washington, DC 20537 at (202) 307-7297.

SUPPLEMENTARY INFORMATION: 

DEA's Legal Authority

    DEA implements the Comprehensive Drug Abuse Prevention and Control 
Act of 1970, often referred to as the Controlled Substances Act (CSA) 
and Controlled Substances Import and Export Act (21 U.S.C. 801-971), as 
amended. DEA publishes the implementing regulations for these statutes 
in Title 21 of the Code of Federal Regulations (CFR), parts 1300 to 
1399. These regulations are designed to ensure that there is a 
sufficient supply of controlled substances for legitimate medical, 
scientific, research, and industrial purposes and deter the diversion 
of controlled substances to illegal purposes. The CSA mandates that DEA 
establish a closed system of control for manufacturing, distributing, 
and dispensing controlled substances. Any person who manufactures, 
distributes, dispenses, imports, exports, or conducts research or 
chemical analysis with controlled substances must register with DEA 
(unless exempt) and comply with the applicable requirements for the 
activity. The CSA, as amended, also requires DEA to regulate the 
manufacture, distribution, retail sale, import, and export of chemicals 
that may be used to manufacture controlled substances illegally. Listed 
chemicals that are classified as List I chemicals are important to the 
manufacture of controlled substances. Those classified as List II 
chemicals may be used to manufacture controlled substances.
    On March 9, 2006, the President signed the Combat Methamphetamine 
Epidemic Act of 2005 (CMEA), which is Title VII of the USA PATRIOT 
Improvement and Reauthorization Act of 2005 (Pub. L. 109-177). Among 
other actions, CMEA imposed new requirements regarding the retail sale 
of scheduled listed chemical products (products containing ephedrine, 
pseudoephedrine, or phenylpropanolamine, that may be marketed or 
distributed lawfully in the United States under the Federal Food, Drug 
and Cosmetic Act as nonprescription products) (21 U.S.C. 802(45)(A)). 
In a separate rulemaking, ``Retail Sales of Scheduled Listed Chemical 
Products; Self-Certification of Regulated Sellers of Scheduled Listed 
Chemical Products'' [Docket No. DEA-291, RIN 1117-AB05] (71 FR 56008, 
September 26, 2006; corrected at 71 FR 60609, October 13, 2006), DEA 
promulgated regulations implementing these provisions. The CMEA also 
subjects material containing ephedrine, pseudoephedrine, and 
phenylpropanolamine to manufacturing and import restrictions. 
Specifically, CMEA amended section 1002 of the Controlled Substances 
Act (21 U.S.C. 952(a)(1)) by adding the List I chemicals ephedrine, 
pseudoephedrine, and phenylpropanolamine to those narcotic raw 
materials whose importation into the United States is prohibited except 
for such amounts as the Attorney General finds to be necessary to 
provide for medical, scientific, or other legitimate purposes. In a 
separate rulemaking, ``Import and Production Quotas for Certain List I 
Chemicals'' [Docket No. DEA-293, RIN 1117-AB08] (72 FR 37439, July 10, 
2007), DEA promulgated regulations to implement these provisions. 
Further, the CMEA requires that importers of all listed chemicals 
provide DEA with information regarding the transferee, (i.e., the 
downstream customer) of the chemical, as well as information regarding 
the quantity of the chemical to be transferred. Importers are further 
required to provide DEA with a return declaration regarding each import 
after the transaction is completed (CMEA Sec.  716, 21 U.S.C. 971(d) 
and (g), as

[[Page 65250]]

amended). In a separate rulemaking, ``Implementation of the Combat 
Methamphetamine Epidemic Act of 2005; Notice of Transfers Following 
Importation or Exportation'' [Docket No. DEA-292, RIN 1117-AB06] (72 FR 
17401, April 9, 2007; Temporary Stay of Certain Provisions 72 FR 28601, 
May 22, 2007), DEA promulgated regulations implementing these 
provisions. Further, the CMEA requires that the notice of importation 
(DEA Form 486) for ephedrine, pseudoephedrine, and phenylpropanolamine 
``shall include all information known to the importer on the chain of 
distribution of such chemical from the manufacturer to the importer.'' 
(CMEA Sec.  721, 21 U.S.C. 971(h) as amended). In a separate 
rulemaking, ``Information of Foreign Chain of Distribution for Certain 
List I Chemicals'' [Docket No. DEA-295, RIN 1117-AB07], DEA is 
promulgating regulations to implement this provision.

Ephedrine, Pseudoephedrine, and Phenylpropanolamine

    The List I chemicals ephedrine, pseudoephedrine, and 
phenylpropanolamine all serve as precursor chemicals for the illicit 
manufacture of controlled substances. Ephedrine and pseudoephedrine are 
the primary precursors used in the synthesis of the controlled 
substances methamphetamine, a schedule II controlled substance, and 
methcathinone, a schedule I controlled substance. Phenylpropanolamine 
is the primary precursor used in the illicit synthesis of amphetamine, 
a schedule II controlled substance.

Licit Use

    Ephedrine, pseudoephedrine, and phenylpropanolamine all have 
therapeutic uses in both over-the-counter and prescription drug 
products. Ephedrine is lawfully marketed under the Federal Food, Drug, 
and Cosmetic Act as an ingredient in nonprescription (``over-the-
counter'' (OTC)) drugs as a bronchodilator for the treatment of asthma. 
Ephedrine is also available OTC in combination with the active 
ingredient guaifenesin.
    As a prescription drug, ephedrine is used in parenteral 
(injectable) form in hospitals as part of an anesthesiology kit. 
Ephedrine has the beneficial effect of increasing blood pressure very 
rapidly in the event of hypotensive crisis (i.e., sudden loss of blood 
pressure sometimes experienced during surgery). Parenteral ephedrine is 
also sometimes used to relieve acute bronchospasm. Oral dosage forms of 
ephedrine are also available as prescription drugs for the treatment of 
asthma. These prescription drug products primarily consist of ephedrine 
in combination with other active ingredients such as potassium iodide 
(an expectorant) and/or theophylline (a bronchospamolytic).
    Pseudoephedrine is lawfully marketed under the Federal Food, Drug, 
and Cosmetic Act provisions for OTC use as a decongestant. 
Phenylpropanolamine has historically been marketed in the United States 
for OTC use as a decongestant and diet aid and there have been many 
legend (prescription) drug products that contain pseudoephedrine or 
phenylpropanolamine. In the vast majority of these preparations, 
pseudoephedrine or phenylpropanolamine were in combination with other 
active ingredients, such as antihistamines, expectorants, and/or 
antitussives.
    In November 2000, the U.S. Food and Drug Administration (FDA) 
issued a public health advisory concerning phenylpropanolamine and 
requested that all drug companies discontinue marketing products 
containing phenylpropanolamine due to risk of hemorrhagic stroke. In 
response, many companies have voluntarily reformulated their products 
to exclude phenylpropanolamine. Subsequently, on December 22, 2005, the 
FDA published a Notice of Proposed Rulemaking (70 FR 75988) proposing 
to categorize all over-the-counter nasal decongestants and weight 
control drug products containing phenylpropanolamine preparations as 
Category II, nonmonograph, i.e., not generally recognized as being safe 
for human consumption. Most products containing phenylpropanolamine 
intended for humans have been withdrawn from the market, but 
phenylpropanolamine is still sold by prescription for veterinary uses.
    While ephedrine and pseudoephedrine are pharmacologically different 
(and have quite different therapeutic uses), they are directly 
substitutable in the production of methamphetamine. This is because of 
the similarity of the chemical structures of the two drugs.

Discussion of This Rule

    In this rule, DEA is addressing two issues related to CMEA 
implementation. First, DEA is proposing to eliminate the thresholds for 
distribution, importation, and exportation of pseudoephedrine and 
phenylpropanolamine; the threshold for distribution, importation, and 
exportation of ephedrine was eliminated previously. Limits on retail 
transactions are set in the CMEA and were addressed in DEA's Interim 
Rule regarding the retail provisions of the CMEA (71 FR 56008, 
September 26, 2006; corrected at 71 FR 60609, October 13, 2006). 
Second, DEA is proposing to clarify that all distribution, importation, 
and exportation transactions involving drug products containing 
ephedrine, pseudoephedrine, or phenylpropanolamine are regulated 
transactions.

Thresholds

    Under the existing regulations (21 CFR 1310.04), the threshold for 
non-retail distribution, import, and export of pseudoephedrine is 1 
kilogram and for phenylpropanolamine, 2.5 kilograms. A single 
transaction or multiple transactions in a month with a single customer 
that equal or exceed the threshold are considered regulated 
transactions and trigger the reporting and recordkeeping requirements 
of 21 CFR part 1310. DEA has not established a threshold for ephedrine; 
all non-retail distribution, import, and export transactions involving 
ephedrine are already subject to recordkeeping and reporting 
requirements.
    CMEA mandates that DEA establish the total annual need for 
ephedrine, pseudoephedrine, and phenylpropanolamine to be manufactured 
or imported each calendar year to provide for the estimated medical, 
scientific, research, and industrial needs of the United States, for 
lawful export requirements, and for the establishment and maintenance 
of reserve stocks. These requirements apply equally to products 
containing these three List I chemicals as they do to the List I 
chemicals themselves. To limit the supply of the chemicals to the 
amount needed to meet the national need, CMEA requires DEA to establish 
import and production quotas for all three chemicals. DEA published its 
proposed 2007 assessment of annual needs for ephedrine, 
pseudoephedrine, and phenylpropanolamine on October 19, 2006 (71 FR 
61801). DEA published regulations implementing procedures for import 
and production quotas on July 10, 2007 (72 FR 37439).
    To obtain the information needed to assess the national need and 
set quotas to limit imports and production to meet that need, DEA 
identified two inadequacies regarding its existing regulations. First, 
persons who manufacture or import prescription drugs containing the 
chemicals are not registered. In another rulemaking, ``Registration 
Requirements for List I Chemicals'' [Docket No. DEA-294, RIN 1117-
AB09], DEA is revising its registration requirements to cover

[[Page 65251]]

manufacturers and importers of prescription drugs containing these 
chemicals and will issue quotas to them although the distribution and 
export of prescription drugs containing the chemicals will continue to 
be exempt from DEA regulatory control.
    The second inadequacy involves the thresholds that apply to 
pseudoephedrine and phenylpropanolamine. To determine the annual need 
and set quotas, DEA must obtain information on all imports and 
production involving the chemicals, not just those that exceed the 
existing thresholds. The existing thresholds, although relatively low, 
would allow a considerable market in the chemicals to continue 
unregulated. For example, under the current 1 kilogram (2.2 pound) 
threshold for pseudoephedrine, a person could import or distribute more 
than 2 pounds a month, or approximately 25 pounds a year, of 
pseudoephedrine without exceeding the threshold and triggering DEA's 
controls. Assuming a low 50 percent conversion rate of pseudoephedrine 
to methamphetamine, a person could annually manufacture approximately 
12.5 pounds of methamphetamine with that total sum of sub-threshold 
quantities. DEA analysis for 2006 estimates that the national range in 
the street price for one pound of methamphetamine (powder) is between 
$2,500 and $48,000. To further implement the Combat Methamphetamine 
Epidemic Act of 2005, this rule seeks to curb the availability of 
pseudoephedrine at the wholesale level for illicit purposes.
    Additionally, under the current 2.5 kilogram (5.5 pound) threshold 
for phenylpropanolamine, a person could import or distribute more than 
5 pounds a month, or approximately 66 pounds a year of 
phenylpropanolamine without exceeding the threshold and triggering 
DEA's controls. Assuming a low 50 percent conversion rate of 
phenylpropanolamine to amphetamine, a person could annually manufacture 
approximately 33 pounds of amphetamine with that total sum of sub-
threshold quantities. The resulting amphetamine would have street value 
comparable to methamphetamine. To further implement the Combat 
Methamphetamine Epidemic Act of 2005, this rule seeks to curb the 
availability of phenylpropanolamine at the wholesale level for illicit 
purposes.
    Currently, DEA is notified of all imports and exports of these 
chemicals which exceed the established thresholds or for which no 
threshold is established. DEA does not, however, receive import and 
export notifications for imports and exports of listed chemicals less 
than established thresholds. If DEA does not eliminate the threshold 
for imports and exports of pseudoephedrine and phenylpropanolamine, DEA 
will not have complete and accurate information regarding the 
quantities of these chemicals imported into, and exported from, the 
United States. Further, manufacturers and distributors are not required 
to maintain records of distributions of listed chemicals at or below 
established thresholds. Without the maintenance of these records, DEA 
will not have complete and accurate information regarding the 
quantities of these chemicals being distributed domestically.
    To establish the controls that Congress mandated and limit imports 
and production to that needed for legitimate uses, DEA is proposing to 
eliminate the thresholds for all transactions involving the List I 
chemicals pseudoephedrine and phenylpropanolamine. As discussed 
previously, no threshold currently exists for transactions involving 
the List I chemical ephedrine; thus, all transactions are regulated. 
Any registrant manufacturing, distributing, importing, or exporting 
pseudoephedrine or phenylpropanolamine, in any quantity, either as bulk 
chemicals or in over-the-counter drug products, would be subject to the 
reporting and recordkeeping requirements. Any manufacturer or importer 
of prescription drug products containing one of the chemicals would 
also be subject to reporting and recordkeeping requirements. 
Importation of the chemicals is allowed only if it is within an import 
quota that the importer has applied for and been granted by DEA. The 
one exception to the import limits provided in CMEA is that an 
individual may import not more than 7.5 grams in any 30-day period of a 
scheduled listed chemical product (i.e., a product containing 
ephedrine, pseudoephedrine, or phenylpropanolamine which may be 
marketed or distributed lawfully in the United States under the Federal 
Food, Drug, and Cosmetic Act as a nonprescription drug) by means of the 
U.S. Postal Service or a private or commercial carrier (21 U.S.C. 
844(a)).
    The distribution and export of prescription drug products 
containing the chemicals are not covered because DEA will be able to 
obtain the information it needs for the assessment of annual national 
needs from importers and manufacturers of these products. DEA has not 
determined that prescription drug products are being diverted.

Regulated Transactions

    The definition of ``regulated transaction'' as amended by CMEA (21 
U.S.C. 802(39)(A)(iv)) excludes:

    (iv) 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 (21 U.S.C. 301 
et seq.), subject to clause (v), unless--
    (I) The Attorney General has determined under section 204 of the 
Act (21 U.S.C. 814) that the drug or group of drugs is being 
diverted to obtain the listed chemical for use in the illicit 
production of a controlled substance; and
    (II) The quantity of the listed chemical contained in the drug 
included in the transaction or multiple transactions equals or 
exceeds the threshold established for that chemical by the Attorney 
General.
    Section 814 (b) states that:
    In removing a drug or group of drugs from exemption * * * the 
Attorney General shall consider, with respect to a drug or group of 
drugs that is proposed to be removed from exemption--
    (1) The scope, duration, and significance of the diversion;
    (2) Whether the drug or group of drugs is formulated in such a 
way that it cannot be easily used in the illicit production of a 
controlled substance; and
    (3) Whether the listed chemical can be readily recovered from 
the drug or group of drugs.

    DEA in this rule is clarifying that nonprescription (``over-the-
counter'') drug products containing ephedrine, pseudoephedrine, and 
phenylpropanolamine do not qualify for the exemption from the 
definition of ``regulated transaction'' based on the three factors 
listed in 21 U.S.C. 814(b).

Evaluation of Statutory Factors for Removal of Exemption From the 
Definition of ``Regulated Transaction''

Factor 1: Scope, Duration, and Significance of Diversion

    Throughout the late 1970s, methamphetamine was illicitly produced 
primarily through the use of the precursor phenylacetone ( phenyl-2-
propanone (P2P)) by outlaw motorcycle gangs in the United States. In 
response to the use of P2P, DEA controlled P2P as a schedule II 
controlled substance in 1980, under the immediate precursor provisions 
of the CSA, specifically 21 U.S.C. 811(e). Clandestine laboratory 
operators responded by developing a variety of synthetic methods for 
producing P2P and also migrated to the use of ephedrine as precursor 
material.
    Trafficking groups widely used a procedure for converting ephedrine 
to methamphetamine that employed hydriodic acid and red phosphorus (HI/
Red P). Use of the HI/Red P technique

[[Page 65252]]

(also known as a ``hydriodic acid reduction'' or ``ephedrine 
reduction'') exploded across the western and southwestern United States 
through the 1980s, and by 1990 accounted for 90 percent of all 
clandestine laboratory seizures reported to DEA.
    With the rapid increase in the use of the HI/Red P technique 
through the 1980s came increased law enforcement pressure. Purchases of 
bulk ephedrine were loosely monitored, and legitimate domestic 
suppliers of ephedrine began restricting or denying sales of bulk 
ephedrine to questionable buyers. In response, clandestine 
manufacturers turned to foreign suppliers, and thefts and diversion of 
bulk shipments of ephedrine also began to increase across the United 
States.
    In 1989, DEA control of chemicals was initiated with passage of the 
Chemical Diversion and Trafficking Act of 1988 (CDTA) (Subtitle A of 
Title VI of Pub. L. 100-690). This law placed recordkeeping and 
reporting requirements on a wide variety of precursors and essential 
chemicals used in every aspect of clandestine drug manufacture, 
including bulk powder ephedrine, pseudoephedrine, and 
phenylpropanolamine. In response to the regulations, traffickers moved 
to the illicit use of single-entity ephedrine OTC tablets as an 
unregulated source of precursor material for the production of 
methamphetamine.
    The extraction of the precursor chemical ephedrine from OTC tablets 
was an easy task. The tablets were simply ground using a kitchen 
blender and ephedrine extracted with an appropriate solvent. Upon 
filtration and evaporation of the solution, the traffickers were able 
to isolate the ephedrine bulk powder. Traffickers began widely 
exploiting what became known as the ``tablet loophole.''
    Soon after, DEA began encountering ``ephedrine extraction 
laboratories'' whose primary purpose was to recover ephedrine from OTC 
tablets and capsules, either for resale on the black market or for use 
in associated clandestine methamphetamine laboratories. Many 
laboratories combined ephedrine extraction and methamphetamine 
production.
    Over the next three years, a number of well-publicized seizures of 
rogue businesses (and prosecutions of their owners) began to impact the 
tablet manufacturing industry, and the loophole allowing the sale of 
single-entity ephedrine products was closed in late 1993 with the 
passage of the Domestic Chemical Diversion Control Act of 1993 (DCDCA) 
(Pub. L. 103-200).
    In efforts to circumvent the provisions of the DCDCA, OTC tablet 
manufacturers began marketing new ephedrine combination products (i.e., 
ephedrine/guaifenesin tablets), which were exempt from DCDCA controls. 
The most dramatic shift forced by the CDTA and DCDCA, however, was a 
rapid transition from ephedrine to pseudoephedrine as the primary 
precursor for illicit methamphetamine manufacture. Although bulk 
pseudoephedrine was formally controlled under the CDTA in 1989, OTC 
products containing pseudoephedrine remained exempt under both the CDTA 
and DCDCA. In contrast to ephedrine, pseudoephedrine was present in a 
wide variety of pharmaceutical products, including hundreds of OTC cold 
and allergy preparations, and formal monitoring and control was 
considered (at that time) to be problematic. OTC pseudoephedrine-
containing products, therefore, represented an easy precursor source 
for clandestine laboratory operators. By the mid-1990s, illicit 
methamphetamine laboratories using pseudoephedrine surpassed those 
still using ephedrine.
    In 1996, the existing controls on precursor and essential chemicals 
imposed by the CDTA and DCDCA were further tightened with the passage 
of the Comprehensive Methamphetamine Control Act of 1996 (MCA) (Pub. L. 
104-237). What followed was a series of legislative actions on both the 
Federal and State levels to tighten controls on pharmaceutical products 
that serve as precursor material for clandestine methamphetamine 
laboratories. At the federal level, this effort included passage of the 
Methamphetamine Anti-Proliferation Act of 2000 (MAPA) (Title XXXVI of 
Pub. L. 106-310). Today, however, ephedrine and pseudoephedrine OTC 
products continue to serve as the primary precursor source for the 
illicit production of methamphetamine, which has spread across the 
entire United States in epidemic proportions.

Current Seizures

    Methamphetamine remains the primary drug produced in illicit 
laboratories within the United States. Data from the El Paso 
Intelligence Center's (EPIC) Clandestine Laboratory Database indicates 
that more than 10,010 methamphetamine laboratories were seized in 
calendar year 2004 and 5,883 laboratories in calendar year 2005 (as 
reported to EPIC through 05/08/07). According to EPIC, from January 
2000 through December 2006, there were 7,087 laboratories reportedly 
using ephedrine and 46,290 reportedly using pseudoephedrine as 
precursor material for methamphetamine production. Additionally EPIC 
reports the seizure of 52 amphetamine laboratories (using 
phenylpropanolamine) during the same period. The vast majority of these 
laboratories used pharmaceutical products containing pseudoephedrine, 
ephedrine, and phenylpropanolamine as the source of precursor material.

Illicit Uses

    Factor 2: whether the drug or group of drugs is formulated in such 
a way that it cannot be easily used in the illicit production of a 
controlled substance.
    Factor 3: whether the listed chemical can be readily recovered from 
the drug or group of drugs.
    The production of methamphetamine from ephedrine or pseudoephedrine 
can be accomplished via a series of reactions using widely available 
``recipes'' and can be accomplished with little or no chemistry 
expertise. A variety of different methods exist to convert the 
precursor material to methamphetamine. If very small batches are made, 
there is not even a requirement to heat the reactants. For example, 
quantities of ephedrine or pseudoephedrine, iodine, and red phosphorous 
can be reacted with the addition of water and small quantities of 
methamphetamine can be produced. For larger batches the reactants are 
combined and heated for several hours. A variety of different reagents 
can be used to make the conversion to methamphetamine if the precursors 
ephedrine and pseudoephedrine are obtained. These reactants can also be 
used to convert phenylpropanolamine to amphetamine. Manufacturing 
procedures are readily available on the Internet and even unskilled 
persons can obtain a 50-70 percent yield of methamphetamine or 
amphetamine.

    Note: Pseudoephedrine and ephedrine can also serve as precursor 
material for the manufacture of the schedule I controlled substance 
methcathinone. From January 2000 through December 2006, there were 
165 methcathinone laboratory seizures reported to EPIC.

    There is a common misconception in industry and among some in the 
public that OTC drug products, particularly pseudoephedrine or 
ephedrine products in combination with other medically active 
ingredients (combo products), are somehow less likely to be diverted or 
are less desirable among clandestine laboratory cooks for the 
manufacture of methamphetamine. This is not the case.
    Most of the clandestine laboratories found in the United States are 
using tablets, either single-entity or

[[Page 65253]]

combination. In many of the methamphetamine exhibits analyzed by DEA 
analytical laboratories, the presence of antihistamines is detected, 
indicating that combination products were used in the reactions.
    While the vast majority of clandestine laboratories seized have 
used tableted pseudoephedrine and ephedrine products, gel caps and 
liquid dosage form products can easily serve as the source of precursor 
material for the production of methamphetamine. DEA scientific studies 
show that liquid, gel cap, and combination products are easily used as 
the source of precursor material and the pseudoephedrine/ephedrine from 
these products can be easily extracted with appropriate reagents/
solvents. These reagents/solvents are all readily available at hardware 
and auto parts stores in the United States.
    The controlled substances produced from these chemicals, 
methamphetamine and amphetamine, have a high abuse potential. The 
public health consequences of the manufacture, trafficking, and abuse 
of these two substances are well known and documented.

Findings

    Therefore, based on the above discussion, the Administrator of the 
Drug Enforcement Administration, pursuant to the authority delegated by 
the Attorney General, finds, pursuant to the criteria specified in 21 
U.S.C. 814(b), that drug products containing the List I chemicals 
ephedrine, pseudoephedrine, and phenylpropanolamine are being diverted 
for the illicit production of controlled substances, namely 
methamphetamine and amphetamine. As DEA has discussed, these products 
have a demonstrated history over the past 20 years of diversion for 
illicit purposes. These List I chemicals are diverted regardless of 
formulation--liquid, nonliquid, gel capsule--and regardless of dosage 
strength. Accordingly, the Administrator of the Drug Enforcement 
Administration, pursuant to the authority delegated by the Attorney 
General, removes drug products containing the List I chemicals 
ephedrine, pseudoephedrine, and phenylpropanolamine from exemption from 
the definition of ``regulated transaction'' under 21 U.S.C. 
802(39)(a)(iv). As such, unless otherwise exempted, such materials 
would be subject to the chemical regulatory control provisions of the 
CSA. DEA is proposing to add a new section 1310.14 removing these drugs 
from the exemption.
    The CSA has specifically exempted retail transactions involving 
scheduled listed chemical products from the definition of regulated 
transaction (21 U.S.C. 802(39)(a)(v)) and established a separate set of 
regulations that control those retail transactions (71 FR 56008, 
September 26, 2006; corrected at 71 FR 60609, October 13, 2006).

Technical Correction

    While drafting this rulemaking, DEA became aware of an inaccurate 
citation in 21 CFR 1310.10, the section paralleling the criteria to be 
considered in evaluating the statutory factors for removal of exemption 
from the definition of ``regulated transaction'' at 21 U.S.C. 814 and 
discussed above. Specifically, the definition of ``regulated 
transaction'' cited in 21 CFR 1310.10 is inaccurate. Therefore, to 
alleviate any confusion, DEA is proposing to correct this citation.

Regulatory Certifications

Regulatory Flexibility Act

    The Deputy Administrator hereby certifies that this rulemaking has 
been drafted in accordance with the provisions of the Regulatory 
Flexibility Act (RFA) (5 U.S.C. 601-612). Without this rule, DEA will 
not be able to effectively implement the quota and import provisions of 
CMEA.
    As DEA has demonstrated throughout this document, traffickers and 
others in search of the chemicals necessary for clandestine manufacture 
of methamphetamine and amphetamine, are actively looking to exploit any 
loophole in chemical controls.
    As discussed above, the current thresholds create a loophole that 
could be exploited by traffickers who can turn below-existing-threshold 
quantities of List I chemicals into valuable, sought-after quantities 
of methamphetamine and/or amphetamine. The diversion of below-threshold 
quantities of these precursor chemicals could result in the illicit 
production of significant quantities of methamphetamine and/or 
amphetamine. CMEA was enacted to prevent this illicit production. 
Congress specifically imposed a 3.6 gram daily sales limit, and a 9 
gram 30-day purchase limit for all transactions involving scheduled 
listed chemical products, as well as a 7.5 gram 30-day sales limit for 
sales of scheduled listed chemical products made by mobile retail 
vendors and mail order distributors. Congress, through the CMEA, also 
limited the quantity of scheduled listed chemical products an 
individual may import into the United States to not more than 7.5 grams 
during a 30-day period by means of shipping through any private or 
commercial carrier or the Postal Service. Congress further limited 
importation of ephedrine, pseudoephedrine, and phenylpropanolamine, 
prohibiting all imports except ``such quantities * * * as the Attorney 
General finds to be necessary to provide for medical, scientific, or 
other legitimate purposes,'' (21 U.S.C. 952(a)(1)). It is inconsistent 
with Congressional intent to limit retail sales and purchases, and 
importation, of scheduled listed chemical products while allowing 
producers and traffickers to import or purchase from distributors 
quantities 100 times greater than retail sales limits without 
subjecting those transactions to any controls.
    As noted previously, below-threshold transactions are not 
documented to DEA; thus, DEA has no knowledge of the movement, 
including importation and exportation, of below-threshold quantities of 
pseudoephedrine and phenylpropanolamine. Specifically, non-retail 
distribution, import, and export transactions involving less than 1 
kilogram of pseudoephedrine (approximately 2.2 pounds), or less than 
2.5 kilograms of phenylpropanolamine (approximately 5.5 pounds), per 
month per customer would be exempt from DEA recordkeeping and reporting 
requirements. DEA cannot monitor, and does not receive reports on, 
these import, export, and distribution transactions. As discussed 
previously, the diversion of below-threshold quantities of these 
precursor chemicals could result in the illicit production of 
significant quantities of methamphetamine and/or amphetamine.
    Not removing the thresholds would also create a loophole in the 
system of import and production quotas established by the CMEA and 
implemented in an Interim Final Rule with Request for Comment (72 FR 
37439, July 10, 2007). Without the reporting of all such transactions 
involving ephedrine, pseudoephedrine, and phenylpropanolamine to DEA, 
it would be more difficult for DEA to establish an assessment of annual 
national needs and to administer individual quotas for these List I 
chemicals. DEA would have incomplete information regarding these 
chemicals on which to base its assessments and quotas.
    Finally, this rule seeks to clarify that ephedrine, 
pseudoephedrine, and phenylpropanolamine have been, and continue to be, 
diverted for the illicit manufacture of controlled substances. By 
making this statement, this document hereby would formally

[[Page 65254]]

include ephedrine, pseudoephedrine, and phenylpropanolamine, and drug 
products containing ephedrine, pseudoephedrine, and 
phenylpropanolamine, within the scope of the definition of ``regulated 
transaction'' found at 21 U.S.C. 802(39). This rule is necessary to 
avoid possible confusion in interpreting and applying the CMEA 
definition of ``regulated transaction.''
    DEA notes that the effect of eliminating the thresholds will impose 
a minimal burden on regulated entities. Although it is likely that many 
of the registrants who handle the two chemicals are small businesses 
under the Small Business Administration definition of small entities, 
the changes impose virtually no burden on these entities for three 
reasons. First, most, if not all, legitimate transactions at the 
import, export, manufacturing, and distribution level are in excess of 
the previous thresholds. DEA does not expect any new registrations to 
result from the change. Second, although it is possible that some 
registrants may have some transactions that will be newly regulated, 
the recordkeeping for these can be met with standard business records. 
The only information required in records for regulated transactions is 
the name and address of the seller and purchaser (plus their DEA 
registration numbers, if applicable); the date of the transaction; the 
name, quantity, and form of packaging of the listed chemical; the 
method of transfer; and the method of identification used by the 
customer and any unique identification number associated with the 
identification. This information is normally included on purchase 
orders or invoices and the shipping papers and is needed to complete 
and track the transaction. As long as the purchaser can extract the 
records for examination, if necessary, no additional effort is needed. 
Because almost all business records for manufacturers, importers, and 
distributors are now generated and transmitted electronically, DEA does 
not expect that any registrant will need additional recordkeeping.
    Third, if any person is importing or exporting in very small 
quantities, there may be some additional import/export declarations 
required, but these forms require less than half an hour to complete 
and file. The only other requirement would be to report suspicious 
small transactions. These reports also require less than a half hour to 
complete and file.
    As noted above, DEA does not believe that legitimate importers or 
exporters are handling such small quantities. The purpose of this rule 
is to close a loophole that could be exploited by those seeking the 
chemicals for illicit purposes and to ensure that DEA can accurately 
assess the legitimate need. DEA, therefore, certifies that the rule 
will not have a significant economic impact on a substantial number of 
small entities.

Executive Order 12866

    The Deputy Administrator further certifies that this rulemaking has 
been drafted in accordance with the principles in Executive Order 12866 
section 1(b). It has been determined that this is ``a significant 
regulatory action.'' Therefore, this action has been reviewed by the 
Office of Management and Budget. This rule supports implementation of 
provisions of the CMEA. The CMEA is expansive in its breadth, 
essentially reclassifying ephedrine, pseudoephedrine, and 
phenylpropanolamine as scheduled listed chemicals, imposes new retail 
restrictions on these products, and mandates new domestic and import 
quotas. Without this rule, traffickers could exploit below-threshold 
transactions, which are not reported to DEA and for which records are 
not required to be maintained, to divert valuable quantities of 
pseudoephedrine and phenylpropanolamine for the clandestine manufacture 
of methamphetamine and/or amphetamine. Further, without this rule, DEA 
would not have complete information on which to base its assessment of 
the annual national needs for the List I chemicals ephedrine, 
pseudoephedrine, and phenylpropanolamine as DEA does not receive 
information regarding below-threshold transactions. This lack of 
information would create a loophole in the quota system, and would 
prevent DEA from fulfilling its legislative mandate that imports of 
pseudoephedrine and phenylpropanolamine be prohibited except for 
medical, scientific, or other legitimate purposes. Without this rule, 
DEA will not be able to effectively and fully implement the quota and 
import provisions of the CMEA.
    As discussed above, DEA does not anticipate that this change will 
impose more than the minimal costs that would be associated with 
reporting small transactions that the registrant thought suspicious and 
possibly filing forms for import and export notifications. The benefits 
of the rule are those associated with controlling access to chemicals 
used to manufacture methamphetamine, and other controlled substances, 
illicitly. As has been discussed extensively throughout this document, 
traffickers and others are actively looking to exploit any loophole in 
chemical controls to continue their operations. As noted previously, 
the current thresholds could permit a person to divert approximately 25 
pounds of pseudoephedrine and 66 pounds of phenylpropanolamine 
annually, without exceeding existing thresholds. This rule closes a 
loophole that could result in the undocumented diversion of these 
chemicals for illicit production of significant quantities of 
methamphetamine and/or amphetamine. As noted previously in this rule, 
below-threshold transactions are not documented to DEA; the diversion 
of below-threshold quantities of these precursor chemicals could result 
in the illicit production of significant quantities of methamphetamine 
and/or amphetamine.

Executive Order 12988

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

Unfunded Mandates Reform Act of 1995

    This rule will not result in the expenditure by state, local, and 
tribal governments, in the aggregate, or by the private sector, of 
$120,000,000 or more (adjusted for inflation) in any one year, and will 
not significantly or uniquely affect small governments. Therefore, no 
actions were deemed necessary under the provisions of the Unfunded 
Mandates Reform Act of 1995.

Congressional Review Act

    This rule is not a major rule as defined by section 804 of the 
Small Business Regulatory Enforcement Fairness Act of 1996 
(Congressional Review Act). 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.

[[Page 65255]]

Paperwork Reduction Act

    This rule would require that records be maintained regarding 
distributions of the List I chemicals pseudoephedrine and 
phenylpropanolamine. These records are maintained as a normal course of 
business.
    The rule also proposes to reduce the thresholds for the List I 
chemicals pseudoephedrine and phenylpropanolamine from 1 kilogram and 
2.5 kilograms, respectively, to zero, thereby requiring that DEA 
receive advance notification of all importations and exportations of 
these List I chemicals. DEA notes that it already receives some Import/
Export Declarations if the cumulative amount of the transactions 
exceeds the thresholds on a monthly basis. Therefore, DEA does not 
believe that this change will significantly increase the burden 
associated with this information collection. Specifically, DEA 
estimates that 53 additional export notifications and 53 additional 
export return declarations will be received annually. Further, DEA 
estimates that 50 additional import declarations and 55 additional 
import return declarations will be received annually. DEA assumes 10 
percent of all imports will not be transferred in the first 30 days and 
will necessitate submission of a subsequent return declaration. The 
receipt of these additional forms increases the hour burden by 34 hours 
annually. Therefore, DEA is revising its existing information 
collection [OMB approval number 1117-0023 ``Import/Export Declaration 
for List I and List II Chemicals'', DEA Form 486] to reflect the 
increased burden associated with receipt of these import/export 
declarations.
    The Department of Justice, Drug Enforcement Administration, has 
submitted the following information collection request to the Office of 
Management and Budget for review and clearance in accordance with 
review procedures of the Paperwork Reduction Act of 1995. The proposed 
information collections are published to obtain comments from the 
public and affected agencies. All comments and suggestions, or 
questions regarding additional information, to include obtaining a copy 
of the information collection instrument with instructions, should be 
directed to Mark W. Caverly, Chief, Liaison and Policy Section, Office 
of Diversion Control, Drug Enforcement Administration, Washington, DC 
20537.
    Written comments and suggestions from the public and affected 
agencies concerning the collection of information are encouraged. Your 
comments on the information collection-related aspects of this rule 
should address one or more of the following four points:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information, including the validity of the 
methodology and assumptions used;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submission of responses.

Overview of Information Collection 1117-0023

    (1) Type of Information Collection: Revision of a Currently 
Approved Collection.
    (2) Title of the Form/Collection: Import/Export Declaration for 
List I and List II Chemicals.
    (3) Agency form number, if any, and the applicable component of the 
Department sponsoring the collection:
    Form number: DEA Form 486.
    Component: Office of Diversion Control, Drug Enforcement 
Administration, U.S. Department of Justice.
    (4) Affected public who will be asked or required to respond, as 
well as a brief Abstract:
    Primary: Business or other for-profit.
    Other: None.
    Abstract: Persons importing, exporting, and conducting 
international transactions with List I and List II chemicals must 
notify DEA of those transactions in advance of their occurrence, 
including information regarding the person(s) to whom the chemical will 
be transferred and the quantity to be transferred. Persons must also 
provide return declarations, confirming the date of the importation, 
exportation, or international transaction and transfer, and the amounts 
of the chemical transferred. This information is used to prevent 
shipments not intended for legitimate purposes.
    (5) An estimate of the total number of respondents and the amount 
of time estimated for an average respondent to respond: A respondent 
may submit multiple responses. The below table presents information 
regarding the number of respondents, responses, and associated burden 
hours.

----------------------------------------------------------------------------------------------------------------
                                           Number of       Number of        Average time per
                                          respondents      responses            response           Total (hours)
----------------------------------------------------------------------------------------------------------------
 
Form 486 (export).....................             239           8,050  0.2 hour (12 minutes)...        1,610
Form 486 (Export Return Declaration)..             239           8,050  0.08 hour (5 minutes)...          670.9
Form 486 (import).....................             230           2,450  0.25 hour (15 minutes)..          612.5
Form 486 (import return declaration) *             230           2,695  0.08 hour (5 minutes)...          224.6
Form 486 (international transaction)..               9             111  0.2 hour (12 minutes)...           22.2
Form 486 (international transaction                  9             111  0.08 hour (5 minutes)...            9.25
 return declaration).
Quarterly reports for imports of                   110             440  0.5 hour (30 minutes)...          220
 acetone, 2-butanone, and toluene.
                                       -------------------------------------------------------------------------
    Total.............................             239  ..............  ........................        3,369.45
----------------------------------------------------------------------------------------------------------------
* DEA assumes 10 percent of all imports will not be transferred in the first 30 days and will necessitate
  submission of a subsequent return declaration.

    (6) An estimate of the total public burden (in hours) associated 
with the collection: 3,370 annual burden hours.
    If additional information is required contact: Lynn Bryant, 
Department Clearance Officer, United States Department of Justice, 
Justice Management Division, Policy and Planning Staff, Patrick Henry 
Building, Suite 1600, 601 D Street, NW., Washington, DC 20530.

[[Page 65256]]

List of Subjects in 21 CFR Part 1310

    Drug traffic control, Exports, Imports, Reporting and recordkeeping 
requirements.
    For the reasons set forth above, 21 CFR part 1310 is proposed to be 
amended as follows:

PART 1310--RECORDS AND REPORTS OF LISTED CHEMICALS AND CERTAIN 
MACHINES [AMENDED]

    1. The authority citation for part 1310 continues to read as 
follows:

    Authority: 21 U.S.C. 802, 827(h), 830, 871(b), 890.

    2. Section 1310.04 is amended by revising paragraphs (f)(1)(i) 
table and (ii), (g)(1)(i) through (vii), and adding paragraphs 
(g)(1)(viii) and (ix) to read as follows:


Sec.  1310.04  Maintenance of records.

* * * * *
    (f) * * *
    (1) * * *
    (i) * * *

------------------------------------------------------------------------
                                                     Threshold by base
        Code                   Chemical                   weight
------------------------------------------------------------------------
8522...............  N-Acetylanthranilic acid,    40 kilograms.
                      its esters, and its salts.
8530...............  Anthranilic acid, its        30 kilograms.
                      esters, and its salts.
8256...............  Benzaldehyde...............  4 kilograms.
8735...............  Benzyl cyanide.............  1 kilogram.
8675...............  Ergonovine and its salts...  10 grams.
8676...............  Ergotamine and its salts...  20 grams.
8678...............  Ethylamine and its salts...  1 kilogram.
6695...............  Hydriodic acid.............  1.7 kilograms (or 1
                                                   liter by volume).
8704...............  Isosafrole.................  4 kilograms.
8520...............  Methylamine and its salts..  1 kilogram.
8502...............  3, 4-Methylenedioxyphenyl-2- 4 kilograms.
                      propanone.
8115...............  N-Methylephedrine, its       1 kilogram.
                      salts, optical isomers,
                      and salts of optical
                      isomers.
8119...............  N-Methylpseudoephedrine,     1 kilogram.
                      its salts, optical
                      isomers, and salts of
                      optical isomers.
6724...............  Nitroethane................  2.5 kilograms.
8317...............  Norpseudoephedrine, its      2.5 kilograms.
                      salts, optical isomers,
                      and salts of optical
                      isomers.
8791...............  Phenylacetic acid, its       1 kilogram.
                      esters, and its salts.
2704...............  Piperidine and its salts...  500 grams.
8750...............  Piperonal (also called       4 kilograms.
                      heliotropine).
8328...............  Propionic anhydride........  1 gram.
8323...............  Safrole....................  4 kilograms.
------------------------------------------------------------------------

    (ii) For List I chemicals that are contained in scheduled listed 
chemical products as defined in Sec.  1300.02(b)(34)(i), the thresholds 
established in paragraph (g) of this section apply only to non-retail 
distribution, import, and export. Sales of these products at retail are 
subject to the requirements of Part 1314 of this chapter.
* * * * *
    (g) * * *
    (1) * * *
    (i) Ephedrine, its salts, optical isomers, and salts of optical 
isomers
    (ii) Gamma-Butyrolactone (Other names include: GBL; Dihydro-2(3H)-
furanone; 1,2-Butanolide; 1,4-Butanolide; 4-Hydroxybutanoic acid 
lactone; gamma-hydroxybutyric acid lactone)
    (iii) Hypophosphorous acid and its salts (including ammonium 
hypophosphite, calcium hypophosphite, iron hypophosphite, potassium 
hypophosphite, manganese hypophosphite, magnesium hypophosphite, and 
sodium hypophosphite)
    (iv) Iodine
    (v) N-phenethyl-4-piperidone (NPP)
    (vi) Pseudoephedrine, its salts, optical isomers, and salts of 
optical isomers
    (vii) Phenylpropanolamine, its salts, optical isomers, and salts of 
optical isomers
    (viii) Red phosphorus
    (ix) White phosphorus (Other names: Yellow Phosphorus)
* * * * *
    3. Section 1310.10 is amended by revising paragraph (a) 
introductory text to read as follows:


Sec.  1310.10  Removal of the exemption of drugs distributed under the 
Food, Drug and Cosmetic Act.

    (a) The Administrator may remove from exemption under section 
1300.02(b)(28)(i)(D) any drug or group of drugs that the Administrator 
finds is being diverted to obtain a listed chemical for use in the 
illicit production of a controlled substance. In removing a drug or 
group of drugs from the exemption the Administrator shall consider:
* * * * *
    4. Section 1310.14 is added to read as follows:


Sec.  1310.14  Removal of exemption from definition of regulated 
transaction.

    The Administrator finds that the following drugs or groups of drugs 
are being diverted to obtain a listed chemical for use in the illicit 
production of a controlled substance and removes the drugs or groups of 
drugs from exemption under Sec.  1300.02(b)(28)(i)(D) of this chapter 
pursuant to the criteria listed in Sec.  1310.10 of this part:
    (a) Nonprescription drugs containing ephedrine, its salts, optical 
isomers, and salts of optical isomers.
    (b) Nonprescription drugs containing pseudoephedrine, its salts, 
optical isomers, and salts of optical isomers.
    (c) Nonprescription drugs containing phenylpropanolamine, its 
salts, optical isomers, and salts of optical isomers.

    Dated: November 7, 2007.
Michele M. Leonhart,
Deputy Administrator.
[FR Doc. E7-22560 Filed 11-19-07; 8:45 am]
BILLING CODE 4410-09-P