Registration of Manufacturers and Importers of Controlled Substances

DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Part 1301

Registration of Manufacturers and Importers of Controlled

Substances

AGENCY: Drug Enforcement Administration (DEA).

ACTION: Supplemental notice of proposed rulemaking (SNPRM).

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SUMMARY: On October 7, 1993, DEA published a notice a proposed

rulemaking (NPRM) in the Federal Register (58 FR 52246) to amend its

regulations to eliminate the mandatory administrative hearing

requirement for objections to the registration of certain bulk

manufacturers and importers of controlled substances. This SNPRM

revises the NPRM by proposing to eliminate the hearing provision

relating to bulk manufacturers altogether and leave unaltered the

hearing provision relating to registration of importers.

DATES: Written comments and objections to this SNPRM must be received

on or before August 15, 1994.

ADDRESSES: Comments and objections should be submitted in quintuplicate

to the Administrator, Drug Enforcement Administration, Washington, DC

20537, Attention: DEA Federal Register Representative/CCR.

FOR FURTHER INFORMATION CONTACT:

Julie C. Gallagher, Associate Chief Counsel, Diversion and Regulatory

Section, Office of Chief Counsel, Drug Enforcement Administration,

Washington, DC 20537, telephone (202) 307-8010.

SUPPLEMENTARY INFORMATION: On October 7, 1993, DEA published a NPRM in

the Federal Register (58 FR 52246). The DEA proposed to amend two

sections of its regulations, specifically 21 CFR 1301.43(a) and

1311.42(a), in which the Administrator is required to hold an

administrative hearing on an application for registration to

manufacture or import a bulk Schedule I or II controlled substance when

requested to do so by any current bulk manufacturer of the substance(s)

or by any other applicant for a similar registration. Because the

proposals in this SNPRM differ in some respects from the NPRM, DEA

encourages interested persons to file comments in response to this

SNPRM even if they have already commented on the NPRM. Comments

previously received under the NPRM will be considered under the SNPRM

to the extent they are relevant to the changes in the SNPRM.

Section 1311.42(a)

In the NPRM, DEA proposed to remove the provision which enabled a

person registered as a bulk manufacturer of a controlled substance or

applicant thereof to request a hearing on the application of an

importer of that controlled substance. As several commentators argued,

the proposed amendment to 21 CFR 1311.42, cannot be reconciled with the

hearing provisions of 21 U.S.C. 958(i). The relevant portion of 21

U.S.C. 958(i) states: ``prior to issuing a registration under this

section . . . the Attorney General shall give manufacturers holding

registrations for the bulk manufacture of the substance an opportunity

for a hearing.'' In keeping with the above requirement, 21 CFR 1311.42,

allows current bulk manufacturer registrants to request an

administrative hearing regarding their objections to the registration

of certain importers of Schedule I and II controlled substances. With

an existing statute in effect, DEA is not empowered to adopt

regulations that contravene the express language of that statute.

Therefore, based on the hearing provisions under 21 U.S.C. 958(i), 21

CFR 1311.42, Application for importation of Schedule I and II

controlled substances, shall remain unchanged.

Section 1301.43(a)

Unlike the registration of importers, the Controlled Substances Act

(21 U.S.C. 801, et seq.) does not require that current registrants be

allowed to request a hearing on an application for registration as a

bulk manufacturer of a controlled substance. The NPRM proposed to

modify Sec. 1301.43(a) and provide for a hearing only when ``the

Administrator determines that a hearing is necessary to receive factual

evidence and/or expert testimony with respect to issues raised by the

application or objections thereto.'' The SNPRM goes one step further

and eliminates this hearing provision entirely. However, the

Administrator would still be required to hold hearings when requested

by the applicant pursuant to an order to show cause, Sec. 1301.44, and

current registrants and applicants would still be permitted to submit

comments or objections concerning an application for registration. In

addition, current registrants and applicants would be granted an

opportunity to participate in any hearings conducted pursuant to

Sec. 1301.44.

DEA recognizes that the antecedent for this hearing provision

derives from statutory acknowledgement that limiting the number of

registrants may increase the capability to control diversion. The

regulations clearly state, however, that the Administrator is not

required to limit the number of manufacturers even if the current

registrants can provide an adequate supply, as long as DEA can maintain

effective controls against diversion. 21 CFR 1301.43(b). In addition,

as stated in the NPRM, the Administrator has never denied an

application solely on the basis of increased danger of diversion or

adverse impact upon domestic competition.

DEA also agrees that current registrants and applicants should be

allowed to object to an additional registration by filing comments on

grounds that it would adversely affect diversion or competition in a

highly regulated industry. But DEA finds that registrants and

applicants have abused the mandatory hearing requirement in the past

and it remains a future source of abuse where these individuals deter

or delay new registrations and retaliate by opposing annual renewals.

Most important, the proposed change as provided herein does not

violate statutory intent but instead comports with sound principles of

substantive and procedural due process. First, eliminating the hearing

requirement except when requested by the applicant after issuance of an

order to show cause, supports the statutory and regulatory mandate that

an applicant for registration as a bulk manufacturer shall have the

burden of proof at ``any hearing'' that the requirements of

registration are met. See 21 CFR 1301.55. The Administrative Procedure

Act (APA) which controls these matters further provides that ``[e]xcept

as otherwise provided by statute, the proponent of a rule or order has

the burden of proof.'' See 5 U.S.C. 556(d).

Second, the proposed change eliminates the potential for multiple

hearings which not only promotes judicial economy but also avoids the

anomalous result of DEA conducting administrative hearings which are

not dispositive of the ultimate issue of whether an applicant should be

registered. For example, because DEA must issue an order to show cause

whenever it takes action to deny an application, 21 U.S.C. 824(c),

under the current regulation a second hearing would likely be required

when DEA decided to deny an application after a hearing held pursuant

to a ``third-party'' request. Further, this second hearing would

involve many of the same issues raised in the prior proceeding.

Finally, the proposed change continues to permit current

registrants and applicants to submit written comments and objections

concerning an applicant's registration. There is no reason to believe

that this procedure does not provide an adequate mechanism for these

individuals to convey the substance and criticality of any objections

or that DEA would fail to consider such evidence prior to making a

final determination. Moreover, these individuals could still

participate in any hearing conducted contemporaneous with an

application, thereby providing an additional opportunity to present

evidence.

Accordingly, the Deputy Assistant Administrator for Diversion

Control is proposing to delete the hearing requirement from this

regulation. The notice requirement and the opportunity to comment upon

and oppose applications shall be retained, while current registrants

and other applicants will retain the opportunity to participate in any

hearing requested by the Applicant pursuant to an order to show cause.

The Deputy Assistant Administrator hereby certifies that the SNPRM

will have no significant impact upon those entities whose interests

must be considered under the Regulatory Flexibility Act, 5 U.S.C. 601,

et seq. The registrants and applicants who use, or are affected by, the

hearing covered by these regulations are typically not small entities.

The proposed rule is not a significant regulatory action pursuant

to Executive Order 12866 and therefore, has not been submitted to the

Office of Management and Budget centralized review. This action has

been analyzed in accordance with the principles and criteria in E.O.

12612, and it has been determined that the proposed rule does not have

sufficient federalism implications to warrant the preparation of a

Federalism Assessment.

List of Subjects in 21 CFR Part 1301

Administrative practice and procedure, Drug traffic control and

security measures.

Therefore, pursuant to the authority vested in the Attorney General

by 21 U.S.C. 821 and 871(b), as delegated to the Administrator of the

Drug Enforcement Administration, and redelegated to the Deputy

Assistant Administrator, Office of Diversion Control by 28 CFR 0.100

and 0.104, the Deputy Assistant Administrator, Office of Diversion

Control hereby proposes that part 1301 of Title 21, Code of Federal

Regulations be amended as follows:

PART 1301--[AMENDED]

1. The authority citation for part 1301 continues to read as

follows:

Authority: 21 U.S.C. 821, 822, 823, 824, 871(b), 875, 877.

2. Section 1301.43 is proposed to be amended by revising paragraph

(a) to read as follows:

Sec. 1301.43 Application for bulk manufacture of Schedule I and II

substances.

(a) In the case of an application for registration or

reregistration to manufacture in bulk a basic class of controlled

substance listed in Schedule I or II, the Administrator shall, upon the

filing of such application, publish in the Federal Register a notice

naming the applicant and stating that such applicant has applied to be

registered as a bulk manufacturer of a basic class of narcotic or

nonnarcotic controlled substance, which class shall be identified. A

copy of said notice shall be mailed simultaneously to each person

registered as a bulk manufacturer of that basic class and to any other

applicant therefor. Any such person may, within 30 days from the date

of publication of the notice in the Federal Register, file with the

Administrator written comments on or objections to the issuance of the

proposed registration.

* * * * *

3. Section 1301.44 is proposed to be amended by redesignating

paragraph (b) as paragraph (c) and adding a new paragraph (b) to read

as follows:

Sec. 1301.44 Certificate of registration; denial of registration.

* * * * *

(b) If a hearing is requested by an applicant for registration or

reregistration to manufacture in bulk a basic class of controlled

substance listed in Schedule I or II, any person entitled to file

comments or objections to the issuance of the proposed registration

pursuant to Sec. 1301.43(a) may participate in the hearing by filing a

notice of appearance in accordance with Sec. 1301.54. Notice of the

hearing shall be published in the Federal Register and shall be mailed

simultaneously to the applicant and to all persons to whom notice of

the application was mailed. Notice of the hearing shall contain a

summary of all comments and objections filed regarding the application

and shall state the time and place for the hearing, which shall not be

less than 30 days after the date of publication of such notice in the

Federal Register.

* * * * *

4. Section 1301.54 is proposed to be amended by revising paragraphs

(a), (b), (c) and (d) to read as follows:

Sec. 1301.54 Request for hearing or appearance; waiver.

(a) Any person entitled to a hearing pursuant to Secs. 1301.42,

1301.44, or 1301.45 and desiring a hearing shall, within 30 days after

the date of receipt of the order to show cause, file with the

Administrator a written request for a hearing in the form prescribed in

Sec. 1316.47 of this chapter.

(b) Any person entitled to participate in a hearing pursuant to

Sec. 1301.44(b) and desiring to do so shall, within 30 days of the date

of publication of notice of the hearing in the Federal Register, file

with the Administrator a written notice of his intention to participate

in such hearing in the form prescribed in Sec. 1316.48 of this chapter.

Any person filing a request for a hearing need not also file a notice

of appearance.

(c) Any person entitled to a hearing or to participate in a hearing

pursuant to Secs. 1301.42, 1301.44, or 1301.45 may, within the period

permitted for filing a request for a hearing or a notice of appearance,

file with the Administrator a waiver of an opportunity for a hearing or

to participate in a hearing, together with a written statement

regarding his position on the matters of fact and law involved in such

hearing. Such statement, if admissible, shall be made a part of the

record and shall be considered in light of the lack of opportunity for

cross-examination in determining the weight to be attached to matters

of fact asserted therein.

(d) If any person entitled to a hearing or to participate in a

hearing pursuant to Secs. 1301.42, 1301.44, or 1301.45 fails to file a

request for a hearing or a notice of appearance, or if he so files and

fails to appear at the hearing, he shall be deemed to have waived his

opportunity for the hearing or to participate in the hearing, unless he

shows good cause for such failure.

* * * * *

5. Section 1301.55 is proposed to be amended by revising paragraph

(a) to read as follows:

Sec. 1301.55 Burden of proof.

(a) At any hearing on an application to manufacture any controlled

substance listed in Schedule I or II, the applicant shall have the

burden of proving that the requirements for such registration pursuant

to section 303(a) of the Act (21 U.S.C. 823(a)) are satisfied. Any

other person participating in the hearing pursuant to Sec. 1301.44(b)

shall have the burden of proving any propositions of fact or law

asserted by him in the hearing.

* * * * *

Dated: May 26, 1994.

Gene R. Haislip,

Deputy Assistant Administrator, Office of Diversion Control.

[FR Doc. 94-14333 Filed 6-13-94; 8:45 am]

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