Establishment of Freight Forwarding Facilities for DEA Distributor Registrants

DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Parts 1301 and 1304

[DEA-143P]

RIN 1117-AA36

Establishment of Freight Forwarding Facilities for DEA

Distributor Registrants

AGENCY: Drug Enforcement Administration (DEA), Justice.

ACTION: Proposed rule.

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SUMMARY: In response to industry concerns, the Drug Enforcement

Administration (DEA) proposes to amend its regulations to define the

term freight forwarding facility. DEA further proposes to amend its

regulations to exempt certain freight forwarder facilities from

registration requirements. These amendments will establish regulatory

guidelines under which distributors registered with DEA may utilize

freight forwarding facilities when shipping controlled substances to

another DEA registrant.

DATES: February 18, 1996.

ADDRESSES: Comments and objections should be submitted in quintuplicate

to the Deputy Assistant Administrator, Office of Diversion Control,

Drug Enforcement Administration, Washington, DC 20537, Attention: DEA

Federal Register Representative/CCR.

FOR FURTHER INFORMATION CONTACT:

Mr. G. Thomas Gitchel, Chief, Liaison and Policy Section, Office of

Diversion Control, Drug Enforcement Administration, Washington, DC

20537, Telephone (202) 307-7297.

SUPPLEMENTARY INFORMATION:

I. Background

For many years, distributors registered with the DEA have utilized

the services of common carriers to transport controlled substances to

other registrants. These common carriers, who are not DEA registrants

and therefore are not subject to the security and record keeping

regulations promulgated pursuant to the Controlled Substances Act

(CSA), often transfer the controlled substances from one conveyance to

another at certain points during the shipment. In-transit losses due to

theft of controlled substances have frequently occurred at these

transfer points.

In discussions with DEA, distributors have expressed their interest

in utilizing ``freight forwarding facilities,'' enabling them to employ

proprietary or contracted shipping and better prevent in-transit

losses. These controlled substance distributors represent that

permitting distributors to utilize freight forwarding facilities will

not only minimize in-transit losses, it will also facilitate more

timely delivery of controlled substances and help lower health care

costs.

To accomplish these goals, DEA proposes to permit distributors to

extend their registrations to freight forwarding facilities operated by

the distributor. In so doing, DEA is providing distributors an

alternative means of delivery and allowing them to exercise direct

control and responsibility for the controlled substances. By so

extending the registration, the distributor will be required to comply

with certain security and record keeping requirements proposed below.

Pursuant to these regulations, DEA proposes to allow distributors

to use certain designated freight forwarding facilities as an extension

of their registration. However, DEA has determined that due to security

concerns, returns of controlled substances cannot be routed through the

freight forwarding facilities because the registrant operating the

facility will have no control over when drugs will be returned to the

facility. Distributors who use freight forwarding facilities will not

be required to obtain a separate registration for such facilities, but

will be required to comply with record keeping and security

requirements detailed below.

Distributors will be required to notify DEA in advance of their

intent to utilize a freight forwarding facility. The distributor

understands that if DEA approves the distributor's request, DEA will

have the authority to conduct administrative inspections of the freight

forwarding facility pursuant to 21 U.S.C. 822 and 880.

II. Notification of Use of a Freight Forwarding Facility

Although no separate DEA registration will be required for

utilization of freight forwarding facilities for DEA distributor

registrants, it will be necessary to notify DEA of their existence. DEA

distributor registrants who intend to operate a freight forwarding

facility must first notify both the DEA office in the area in which the

distributor is located and the office in which the freight forwarding

facility will be located. This facility must be for exclusive use of

the named DEA distributor registrant and cannot be shared for use by

another DEA registrant. Notification must be accomplished by registered

letter, return receipt requested. If DEA does not communicate written

disapproval within 21 days after confirmed receipt, the facility will

be considered approved. Reasons for disapproval of a freight forwarding

facility might include a registrant's failure to comply with DEA

regulations or a history of losses.

Notification should consist of the distributor's DEA registration

number, registered address and the address of the freight forwarding

facility. A description of the operation of the freight forwarding

facility should be included, listing such information as the hours of

operation and the name, home address and date of birth of the

designated responsible person. Information should be provided

indicating what measures have been taken to limit accessibility to

controlled substances at the facility. Notification should also include

a description of the physical security in place at the facility. The

physical security description should include a summary of the

controlled substance temporary storage area including dimensions,

specifications and alarm devices and identify the central station

provider or delineation of the registrant's control station as

specified in 21 CFR 1301.72(b)(4)(v).

A description of the recordkeeping procedures should also be

included in the notification by providing an outline of recordkeeping

procedures or copies of sample records.

III. Security of Freight Forwarding Facilities

The DEA distributor registrant utilizing a freight forwarding

facility is

[[Page 66638]]

responsible for providing adequate security to guard against losses of

controlled substances. DEA is proposing to amend 21 CFR Part 1301 by

adding a new Section, 1301.77, outlining the security requirements. The

new section requires either continuous observation of controlled

substances stored in a segregated area by a designated responsible

person(s) during the temporary storage, or by the installation of

appropriate physical security measures. In some situations, a

combination of the aforementioned two options may be permitted. The

general security requirements currently found in 21 CFR 1301.71 are

applicable and should be emphasized, since the freight forwarding

facilities are located outside the normal realm of the distributor's

registered location. It is necessary to pay special attention to

security considerations, such as the extent of unsupervised public

access and adequacy of supervision over employees within the facility.

Definite procedures are required to be in place to control maintenance

personnel and nonemployee service personnel.

Proposed physical security controls for all controlled substances

routed through the freight forwarding facility, including Schedule II

controlled substances, are those currently in place for Schedule III-V

substances as set forth in 21 CFR 1301.72(b), unless the substances

will remain under the constant observation of responsible person(s).

Access to controlled substances will be kept to an absolute minimum

number of specifically authorized individuals. Only sealed containers,

which do not identify controlled substances contents on the outside

packaging, will be permitted to be temporarily stored or shipped

through the freight forwarding facility. DEA distributor registrants

will be permitted to utilize their proprietary fleet, or a specific

contract carrier. Temporary storage at the freight forwarding facility

will be permitted for a period of less than twenty-four (24) hours.

IV. Recordkeeping

There must be a clearly defined audit trail as part of the complete

records maintained for all controlled substances transferred through

the freight forwarding facility. DEA is proposing to amend the

regulations by adding 21 CFR Section 1304.03(i), to specify the

recordkeeping requirements. The records must contain dates, times of

transfer, authorized signatures and number of cartons, crates, drums,

or other packages in which commercial containers of controlled

substances are shipped, to document the flow of controlled substances

from the long distance conveyance through the freight forwarding

facility to the local conveyance or from long distance conveyance

directly to the local conveyance. These records must be traceable to a

particular registrant invoice. The type of records to be kept can be

designed by the individual registrant and must be kept for two years

and stored at the freight forwarding facility. All other controlled

substance recordkeeping requirements currently found in 21 CFR part

1304 are applicable. The freight forwarding facility will be exempt

from all inventory requirements and ARCOS reporting.

The Deputy Assistant Administrator, Office of Diversion Control, in

accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), has

reviewed this proposed regulation and by approving it certifies that

this regulation will not have a significant economic impact on a

substantial number of small entities. This proposal provides an

alternative system that may allow some distributors a more efficient

means of delivering controlled substances. Indeed, the regulated

industry has represented that this procedure will benefit the industry

by allowing it to lower costs associated with shipping controlled

substances. Further, this regulation has been drafted and reviewed in

accordance with Executive Order 12866, Sec. 1(b), Principles of

Regulations. The Deputy Assistant Administrator, Office of Diversion

Control, has determined that this rule is not a ``significant

regulatory action'' under Executive Order 12866, section 3(f),

Regulatory Planning and Review, and accordingly this rule has not been

reviewed by the Office of Management and Budget. This regulation

provides an exemption from certain requirements of the CSA for

registrants operating freight forwarding facilities, thus allowing them

a more efficient and cost effective means of doing business.

This action has been analyzed in accordance with the principles and

criteria in Executive Order 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

21 CFR Part 1301

Administrative practice and procedure, Drug traffic control,

Security measures.

21 CFR Part 1304

Drug traffic control, Reporting and recordkeeping requirements.

For reasons set out above, DEA is proposing to amend 21 CFR parts

1301 and 1304 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,

unless otherwise noted.

2. Section 1301.02 is proposed to be amended by redesignating

paragraph (m) as paragraph (n) and adding a new paragraph (m) to read

as follows:

Sec. 1301.02 Definitions.

* * * * *

(m) The term freight forwarding facility means a separate facility

operated by a DEA distributor registrant through which sealed, packaged

controlled substances, in unmarked shipping containers, are stored for

less than 24 hours while being routed to the ultimate DEA registrant

consignee. A freight forwarding facility is a controlled premises as

defined in Sec. 1316.02 (c). The term does not include a facility

through which controlled substance returners are processed.

* * * * *

3. Section 1301.23 is proposed to be amended by adding a new

paragraph (b)(4) to read as follows:

Sec. 1301.23 Separate registrations for separate locations.

* * * * *

(b) * * *

(4) A freight forwarding facility operated by the registrant

distributor through which the registered distributor transfers

controlled substances from long distance conveyances to local

conveyances, provided that the registrant has submitted written notice

by registered mail, return receipt requested, of intent to operate the

facility to the Administration's offices in the area in which the

distributor is registered and in the area in which the facility will be

located and that notice has been approved. Such notice shall detail the

location of the facility, the hours of operation, the individual(s)

responsible for the controlled substances, and the security and

recordkeeping procedures that will be employed. The notice will be

considered approved 21 days after receipt by the Administration

provided the registrant has not been otherwise notified in writing by

the Administration.

4. Section 1301.77 is proposed to be added under the undesignated

center

[[Page 66639]]

heading ``Security Requirements'' as follows:

Sec. 1301.77 Security controls for freight forwarding facilities.

(a) All Schedule II-V controlled substances that will be

temporarily stored/docked at the freight forwarding facility must be:

(1) Maintained under constant observation of the designated

responsible individual(s) in a segregated area; or

(2) Where controlled substances will not be under the constant

observation of the designated responsible individual(s), temporary

storage in a caged area which meets the requirements of

Sec. 1301.72(b), and is secured by an alarm system operated by the

registrant as specified in Sec. 1301.72 (b)(4)(v), is required.

(b) Access to controlled substances must be kept to a minimum

number of specifically authorized individuals.

(c) Only sealed, unmarked shipping containers will be permitted for

transfer or temporary storage at the freight forwarding facility.

PART 1304--[AMENDED]

1. The authority citation for part 1304 continues to read as

follows:

Authority: 21 U.S.C. 821, 827, 871(b), 958(d), 965, unless

otherwise noted.

2. Section 1304.03 is proposed to be amended by adding a new

paragraph (i) to read as follows:

Sec. 1304.03 Person required to keep records and file reports.

* * * * *

(i) A distributor registrant that utilizes a freight forwarding

facility shall maintain records reflecting the transfer of controlled

substances from the long distance conveyance, through the facility, to

the local conveyance or from the long distance conveyance directly to

the local conveyance. The records must contain the date, time of

transfer, number of cartons, crates, drums or other packages in which

commercial containers of controlled substances are shipped and

authorized signatures for each transfer. The records of these shipments

must be maintained at the facility for a period of two years.

Dated: December 6, 1996.

Gene R. Haislip,

Deputy Assistant Administrator, Office of Diversion Control.

[FR Doc. 96-32077 Filed 12-17-96; 8:45 am]

BILLING CODE 4410-09-M