Implementation of the Comprehensive Methamphetamine Control Act of 1996; Regulation of Pseudoephedrine, Phenylpropanolamine, and Combination Ephedrine Drug Products and Reports of Certain Transactions to Nonregulated Persons

DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Parts 1300, 1309, 1310

[DEA Number 163P]

RIN 1117-AA44

Implementation of the Comprehensive Methamphetamine Control Act

of 1996; Regulation of Pseudoephedrine, Phenylpropanolamine, and

Combination Ephedrine Drug Products and Reports of Certain Transactions

to Nonregulated Persons

AGENCY: Drug Enforcement Administration (DEA), Justice.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: DEA is proposing amending its regulations to implement the

requirements of the Comprehensive Methamphetamine Control Act of 1996

(MCA) with respect to the regulation of pseudoephedrine,

phenylpropanolamine, and combination ephedrine drug products as List I

chemicals and the reporting of certain transactions involving

pseudoephedrine, phenylpropanolamine, and ephedrine.

The MCA removed the previous exemption from regulation as List I

chemicals which had applied to pseudoephedrine, phenylpropanolamine,

and combination ephedrine drug products.

This action makes persons who distribute the products subject to

the registration requirement. Also, distributions, importations, and

exportations of the products became subject to the existing chemical

controls relating to regulated transactions, except in certain

circumstances specified in the MCA. The MCA also requires that reports

be submitted for certain distributions involving ephedrine,

pseudoephedrine, and phenylpropanolamine (including drug products

containing those chemicals) by Postal Service or private or commercial

carrier to nonregulated persons. This proposed rule amends the

regulations to make them consistent with the language of the MCA and to

establish the specific procedures to be followed to satisfy the new

reporting requirement.

DATES: Written comments or objections should be submitted by no later

than December 8, 1997.

ADDRESSES: Comments and objections should be submitted in quintuplicate

to the Deputy Assistant Administrator, Office of Diversion Control,

Drug Enforcement Administration, Washington, D.C. 20537, Attention: DEA

Federal Register Representative/CCR.

[[Page 52295]]

FOR FURTHER INFORMATION CONTACT:

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

Diversion Control, Drug Enforcement Administration, Washington, D.C.

20537, Telephone (202) 307-7297.

SUPPLEMENTARY INFORMATION:

Introduction

The Chemical Diversion and Trafficking Act of 1988 (CDTA) provided

the framework for DEA's programs to control the diversion of the

chemicals that are used in the illegal manufacture of controlled

substances. The chemical control activities under the CDTA focused

primarily on two areas: (1) the export of certain chemicals, mainly

solvents, that are used in the illegal manufacture of cocaine and

heroin, and (2) the domestic distribution of certain chemicals,

principally precursors, that are used in the illegal manufacture of

other dangerous drugs, such as methamphetamine, LSD, PCP, etc.

While the controls under the CDTA were successful in denying the

cocaine traffickers access to U.S. sources of chemicals, a loophole was

exploited by the methamphetamine traffickers. The CDTA contained a

provision that ``. . .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. . .'' was

not subject to the controls of the CDTA. Thus, while the traffickers

found their access to supplies of bulk ephedrine, pseudoephedrine, and

other chemicals restricted by the new chemical controls, they were able

to circumvent the controls and obtain the necessary source material for

manufacturing methamphetamine through the purchase of ephedrine in drug

product form, which remained exempt from the chemical controls.

Since passage of the CDTA, the principal focus of Federal and State

legislative/regulatory activities with respect to domestic chemical

control has been on closing the ``drug product'' loophole that

clandestine methamphetamine manufacturers and traffickers have

exploited.

As noted earlier, with the establishment of controls over

transactions involving bulk pseudoephedrine, ephedrine, and other

chemicals, the methamphetamine traffickers turned to single-entity

ephedrine drug products for their source material. In the years

following the implementation of the CDTA, ephedrine, in drug product

form, became the principal source of methamphetamine precursor

material. By 1993, domestic clandestine laboratory seizure data showed

that 79 percent of the laboratories seized were using ephedrine. During

the same period, the use of phenyl-2-propanone (P2P), also a popular

source material in early laboratories, declined from a high of 31

percent in 1990 to 16 percent in 1993, and the use of pseudoephedrine

as a precursor was virtually non-existent.

The primary source of supply of ephedrine for the traffickers was

from mail order and wholesale distributions of single-entity ephedrine

tablets. One manufacturer of a popular brand of single-entity ephedrine

drug products indicated in interviews with DEA personnel that from

January 1991 through September 1992, the company purchased 35 metric

tons of ephedrine for the manufacture of its drug products. The company

reported that it was producing 40 million 25mg ephedrine tablets per

ton of ephedrine. Based on that figure, the company could manufacture

1.4 billion 25mg ephedrine tablets from the 35 tons of ephedrine

purchased between the beginning of 1991 and September 1992. During the

same period, a rival company purchased 27.5 metric tons of ephedrine,

also for the manufacture of ephedrine tablets. The enormous volume of

product and the lack of controls over its distribution provided the

traffickers with a convenient source of supply.

DEA's initial domestic chemical control efforts focused on stemming

the flow of material from the wholesale/mail order industry to the

traffickers. While some investigations ultimately resulted in

conviction of some of the more eregious violators of the law, DEA and

State efforts were hampered by the exemption from regulation granted to

the drug products, the lack of other controls under the CDTA, such as

registration, and the increasing knowledge of the traffickers and their

suppliers in how to shelter themselves from the criminal sanctions of

the CDTA.

The Domestic Chemical Diversion Control Act of 1993 (DCDCA) was

enacted, in part, to address these shortcomings in the CDTA. Two major

elements in the DCDCA were the removal of the exemption from List I

controls for single-entity ephedrine drug products and establishment of

the registration requirement for distributors, importers, and exporters

of List I chemicals. The DCDCA did establish control of the diversion

of single-entity ephedrine drug products to clandestine laboratories

(combination ephedrine products remained exempt); however, the

traffickers switched to pseudoephedrine drug products, which remained

exempt from chemical controls and are directly interchangeable with

ephedrine drug products in the manufacture of methamphetamine.

Companies that had previously been identified as distributors of large

volumes of single-entity ephedrine drug products became distributors of

large volumes of pseudoephedrine drug products, which has become the

primary source material of choice in clandestine laboratories.

In 1993, the year the DCDCA was passed, ephedrine was identified as

the source material in 79 percent of the methamphetamine laboratories

seized and pseudoephedrine was identified as the source material in

less than 2 percent of the seized laboratories. As is shown in the

following chart, both the number of clandestine laboratories seized and

number of laboratories using pseudoephedrine increased significantly

between 1993 and 1996. In 1996, DEA seized 879 methamphetamine

laboratories, of which 422 were positively identified as using

pseudoephedrine. Of the remainder, there are 246 laboratories for which

analysis of the source material has not yet been received, however it

is anticipated that most, if not all, were using pseudoephedrine. In

all of the identified cases, pseudoephedrine drug products were the

source material.

For 1997, 392 clandestine methamphetamine laboratories have been

seized as of April 30th, as compared to the 327 laboratories that were

seized in all of 1995. At that rate, the total seizures for 1997 could

exceed 1300 methamphetamine laboratories. The dramatic increase in

seizures is due, in part, to the expansion of the methamphetamine

laboratories into the Midwest.

BILLING CODE 4410-09-M

[[Page 52296]]

[GRAPHIC] [TIFF OMITTED] TP07OC97.023

BILLING CODE 4410-09-C

Pseudoephedrine Regulations

By 1995, it had become clear that action would have to be taken to

stem the flow of pseudoephedrine drug products to the clandestine

laboratories. DEA proposed regulations to control certain types of

pseudoephedrine drug products on October 31, 1995 (60 FR 55348),

including reduction of the threshold for pseudoephedrine from 1

kilogram to 24 grams and removal of the exemption from the chemical

controls for certain drug products containing pseudoephedrine. DEA's

proposal limited the controls to those products which could be readily

used for the clandestine manufacture of methamphetamine. The exemption

remained in place for gel capsules, liquids, and solid dosage form

products containing pseudoephedrine in combination with acetaminophen,

aspirin, or ibuprofen in therapeutically significant quantities.

Further, DEA proposed to exempt retail distributors from the

registration requirement if their activities were restricted to sub-

threshold (24 grams) sales of pseudoephedrine drug products. Following

comment, DEA published a Final Rule in the Federal Register on August

7, 1996 (61 FR 40981). In response to comments, the threshold for

pseudoephedrine was raised from the proposed 24 grams to 48 grams and,

for retail distributors, application of the cumulative transaction

provision was lifted.

The Final Rule was scheduled to become effective on October 7,

1996, however, as discussed below, the rule did not go into effect and

was superseded by the provisions of the MCA.

Comprehensive Methamphetamine Control Act of 1996

Paralleling DEA's rulemaking process, the United States Congress,

also concerned with the illicit traffic in methamphetamine, introduced

legislation to control the diversion of chemicals to clandestine

laboratories. The result was the Comprehensive Methamphetamine Control

Act of 1996 (Pub. L. 104-237) (MCA), which was enacted on October 3,

1996. The MCA superseded DEA's Final Rule, discussed above, declaring

that the regulations were ``* * * null and void, and of no force and

effect.'' (MCA, Section 210.)

The MCA legislatively replaced DEA's proposed rulemaking action

with a more comprehensive system of controls relating to the

distribution, importation, and exportation of pseudoephedrine,

phenylpropanolamine, and combination ephedrine drug products, along

with other strong tools to attack the illicit traffic. The MCA retained

the existing Controlled Substances Act (CSA) requirements for

distributors of List I chemicals and added the following changes to the

CSA with respect to regulation of drug products containing these three

chemicals:

Removal of Certain Drug Product Exemptions

The definition of ``regulated transaction'' (21 U.S.C. 802(39)) is

amended in paragraph (A)(iv)(I)(aa) to provide that the exemption for

drug products that contain ephedrine, pseudoephedrine, or

phenylporpanolamine is removed. The new definition also provides that

the sale of ``ordinary over-the-counter

[[Page 52297]]

pseudoephedrine or phenylproanolamine'' products by ``retail

distributors'' shall not be a regulated transaction. The definition is

also amended in paragraph (A)(iv)(II) to provide that the threshold for

the sale of pseudoephedrine or phenylpropanolamine products by a retail

distributor or a distributor required to submit reports by section

310(b)(3) of the CSA (21 U.S.C. 830(b)(3)) shall be 24 grams of

pseudoephedrine base or 24 grams of phenylporpanolamine base in a

single transaction. This threshold does not affect the reports required

to be filed under 21 U.S.C. 830(b)(3) and 21 CFR 1310.03(c),

1310.05(e), and 1310.06(i), as amended herein.

Creation of a New Category of Distributor and Category of Product To

Which Certain Exceptions Apply

Two new definitions are added under section 102 of the CSA (21

U.S.C. 802), as follows:

The term ordinary over-the-counter pseudoephedrine or

phenylpropanolamine product is defined in section 102(45) of the Act

(21 U.S.C. 802(45)) as a product containing pseudoephedrine or

phenylpropanolamine that is regulated pursuant to the CSA and, except

for liquids, packaged with not more than 3 grams of pseudoephedirne or

phenylpropanolamine base per package, contained in blister packs, with

not more than two dosage units per blister, or where the use of blister

packs is not technically feasible, packaged in unit dose packets or

pouches. For liquids, the product is sold in package sizes of not more

than 3 grams of pseudoephedrine or phenylpropanolamine base. In the

context of sales by retail distributors, this has been referred to as

the ``safe harbor'' provision, because of the exemption from the

definition of ``regulated transaction'' in section 102(39) of the Act

(21 U.S.C. 802(39)).

The term retail distributor is defined in section 102(46) of the

Act (21 U.S.C. 802(46)) as a grocery store, general merchandise store,

drug store, or other entity or person whose activities as a distributor

relating to pseudoephefrine or phenylpropanolamine products are limited

almost exclusively to sales for personal use, both in number of sales

and volume of sales, either directly to walk-in customers or in face-

to-face transactions by direct sales. Sale for personal use is defined

by the MCA as the sale of below-threshold quantities in a single

transaction to an individual for legitimate medical use. Further,

certain entities are defined by reference to the following Standard

Industrial Classification (SIC) codes: a grocery store is an entity

within SIC code 5411, a general merchandise store is an entity within

SIC codes 5300 through 5399 and 5499, and a drug store is an entity

within SIC code 5912.

It is worth noting at this point that while the definition of

``retail distributor'' specifically references general merchandise

stores, grocery stores, and drug stores and their respective SIC codes,

it also refers to ``* * * or other entity or person * * *'' who engages

in the described activities. As a result, a retail distributor is any

person (not just a general merchandise store, grocery store, or drug

store) whose activities as a distributor relating to pseudoephedrine or

phenylpropanolamine products are limited almost exclusively to sales

for personal use, both in number of sales and volume of sales, either

directly to walk-in customers or in face-to-face transactions by direct

sales.

Expands the Opportunities for Product Specific Exemptions

The MCA amends the CSA to provide that the exemption with respect

to a particular ephedrine, pseudoephedrine or phenylpropanolamine drug

product shall be reinstated if it is determined that the drug product

is manufactured and distributed in a manner that prevents diversion.

Defines Specific Controls for ``Combination Ephedrine Products''

The MCA defines combination ephedrine product as a drug product

containing ephedrine or its salts, optical isomers, or salts of optical

isomers and therapeutically significant quantities of another active

medicinal ingredient; and establishes a 24-gram single transaction

limit, notwithstanding the form in which the product is packaged, for

sales by retail distributors and by distributors required to submit a

report under section 310(b)(3) of the CSA (21 U.S.C. 830(b)(3)), and a

1-kilogram threshold for transactions by other distributors, importers

and exporters.

Requires Reporting of Certain Distributions by Mail or Carrier

The MCA amends section 310 of the CSA (21 U.S.C. 830) to add a new

paragraph (b)(3), which requires that each regulated person who engages

in a transaction with a nonregulated person (that is, someone who does

not further distribute the product) which involves ephedrine,

pseudoephedrine or phenylpropanolamine, including drug products, and

uses or attempts to use the Postal Service or any private or commercial

carrier shall submit a report of all such transactions each month. The

reports shall reflect the name of the purchaser, the quantity and form

of the ephedrine, pseudoephedrine or phenylpropanolamine purchased, the

address to which the chemicals were shipped, and such other information

as is established by regulation.

Effective Dates

The MCA provides that the requirements with respect to the

regulation of combination ephedrine products and the reporting

requirement became effective on October 3, 1996. The requirements with

respect to pseudoephedrine and phenylpropanolamine products become

effective on October 3, 1997.

Regulatory Changes To Implement the MCA

Many of the legislative details of the MCA are provided in

sufficient detail to be self-implementing without additional

regulation. Thus, many of the regulatory amendments to implement the

MCA are conforming amendments by which the definitions of ``regulated

transaction'' and ``retail distributor'' are updated to parallel the

new language in the MCA and the definitions of 1 ``ordinary over-the-

counter pseudoephedrine or phenylpropanolamine product'' and

``combination ephedrine product'' are inserted in the regulations; 21

CFR 1310.04 is updated to reflect the new record retention period of

two years for List I chemical transactions and the thresholds for

transactions involving regulated drug products; and 21 CFR 1310.04-06

are updated to reflect the new reporting requirement. Finally, 21 CFR

1309.71 is being amended to reflect that in retail settings open to the

public only ephedrine drug products, in both single-entity and

combination form, just be stored behind a counter where only employees

will have access; pseudoephedrine and phenylpropanolamine products are

not required to be kept behind the counter.

In addition to the above amendments, DEA is proposing to amend 21

CFR Part 1309 to consolidate the various exemptions from the

registration requirement into one section, expand the current exemption

for retail distributors of combination ephedrine products to include

retail distributors of pseudoephedrine and phenylpropanolamine

products, and to add a temporary exemption from the registration

requirement for persons who distribute, import, or export

pseudoephedrine or phenylpropanolamine drug products, provided that

they submit an

[[Page 52298]]

application for registration on or before December 3, 1997. Any person

who engages in such activities and is not subject to an existing or

proposed exemption from the registration requirement should submit an

application for registration at the earliest possible time, to ensure

that they may continue to distribute these products pending issuance of

their registration.

Effect of the MCA

While the regulatory changes necessary to implement the MCA are

primarily conforming regulations, the scope of the effect of the MCA's

requirements is quite broad. The removal of the exemption for

pseudoephedrine, phenylpropanolamine, and combination ephedrine drug

products makes any person who distributes, imports, or exports them

subject to the established chemical registration, recordkeeping, and

reporting requirements already in effect for List I chemical handlers,

as set out in 21 CFR parts 1309, 1310, and 1313. The MCA, however,

created an exemption from the existing chemical controls for sales of

ordinary over-the-counter pseudoephedrine and phenylpropanolamine

products by retail distributors. Additionally, following the MCA's

creation within the law of the category of ``retail distributor'', DEA

has provided an exemption from registration for retail distributors

whose activities are limited to the activities provided for by the MCA.

With respect to no-retail distributors, various segments of the

affected distribution industry have offered varying interpretations of

the law, proposing that distributors that only engage in sub-threshold

transactions, or distributors that only supply corporately owned retail

outlets are not subject to registration and concomitant controls. The

CSA requires a registration for activities as a distributor. These two

issues are addressed in the final rulemaking entitled ``Comprehensive

Methamphetamine Control Act of 1996; Possession of List I Chemicals,

Definitions, Record Retention, and Temporary Exemption From Chemical

Registration for Distributors of Combination Ephedrine Products'',

which will by published in the Federal Register on or about October 3,

1997. Interest persons are encouraged to obtain a copy of the final

rule, which contains a detailed discussion of the issues.

Within this framework, importers, exporters, and distributors

(other than retail distributors) of pseudoephedrine and

phenylpropanolamine drug products (including ordinary over-the-counter

pseudoephedrine and phenylpropanolamine products) become subject to the

registration requirement of the MCA on October 3, 1997, and also the

recordkeeping requirements for those transactions that either singly or

cumulatively meet the threshold requirements in a calendar month.

However, the allow for implementation of these regulations and issuance

of the registrations, DEA is providing a temporary exemption from the

registration requirement for persons who submit their applications on

or before December 3, 1997. For combination ephedrine products, the

requirements became effective on October 3, 1996.

Retail distributors of ordinary over-the-counter products are not

subject to the registration, recordkeeping and reporting requirements.

For retail distributors whose sales of other pseudoephedrine and

phenylpropanolamine products, or combination ephedrine products remain

exclusively below the single transaction limit, DEA has established an

exemption from the registration requirement in 21 CFR 1309.29. However,

retail distributors are subject to the registration, recordkeeping, and

reporting requirements to the extent that their transactions equal or

exceed the single transaction limit of 24 grams. Additionally, the

existing provision that any person who is registered with DEA to

distribute or dispense controlled substances is not required to obtain

a separate chemical registration applies to distributions of

pseudoephedrine, phenylpropanolamine, or combination ephedrine

products, as set forth in 21 CFR 1309.25.

They are, however, still subject to the recordkeeping requirements.

Reports of `Mail Order' Transactions

The MCA requires that a regulated person must report, on a monthly

basis, all transactions with non-regulated persons (those persons who

do not redistribute the product) that involve ephedrine,

pseudoephedrine, or phenylpropanolamine (including drug products that

contain these chemicals), and who use or attempt to use the Postal

Service or any private or commercial carrier. Each report must contain

the name of the purchaser, the quantity and form of the material

purchased, and the address to which the material was sent, as well as

such other data as may be established by regulation. MCA, Section 401,

21 U.S.C. 830(b)(3). The language of the requirement clearly

establishes that all persons engaging in any such transactions must

report them. There is no statutory provision for exclusion of any class

of person or transaction from the requirement.

DEA is proposing to amend 21 CFR 1310.03, 1310.05, and 1310.06 to

incorporate the new reporting requirement. Section 1310.03 reflects who

must file, Section 1310.05 reflects when and where the reports shall be

filed, and Section 1310.06 reflects the information the report must

contain.

The MCA requires monthly reports. DEA is proposing that the reports

shall be submitted on or before the 15th day of the month following the

month in which the reportable transaction took place; shall be

submitted to the Drug Enforcement Administration, Office of Diversion

Control, Chemical Operations Section, Washington, D.C. 20537; and shall

contain the following information.

1. Supplier's Name and Registration Number

2. Purchaser's Name and Address

3. Name/Address Shipped To (if different from purchaser's name/

address)

4. Name of the Chemical Shipped

5. Product Name

6. Dosage Form (if any)

7. Dosage Strength (if any)

8. Number of Dosage Units (if applicable)

9. Package Type

10. Package Quantity

11. Lot Number (for drug products)

12. Date of Shipment

As noted earlier, the MCA requires the name of the purchaser (item

2), the quantity and form of the material (items 4-10), and the address

to which the material was shipped (item 3). In addition to the required

information, DEA is proposing to include the supplier name and

registration number (item 1), to identify the person making the report

and their authority to distribute the material; the address of the

purchaser (item 2), to assist in identifying the party; the name of the

person to which the material is shipped (item 3), if different from the

purchaser, to identify the actual recipient of the material in

instances where drop-shipment is requested; the lot number of the

product (item 11), if a drug product, to assist DEA in tracking

products that are diverted; and, the date of the shipment (item 12) to

identify when the specific transaction occurred.

While submission of a hard copy report will be adequate to satisfy

the requirement, DEA is proposing that electronic reporting, initially

via computer disk, also be allowed. Electronic reporting would minimize

the burden by eliminating the time and expense necessary to print,

package, and mail hard copy reports and would allow for more efficient

processing of the data reported. DEA is proposing that persons

interested in submitting reports by

[[Page 52299]]

electronic means contact the Chemical Operations Section, Office of

Diversion Control, DEA at (202) 307-7204 to arrange for submission of

electronic reports.

It is important to keep in mind that the reporting requirement

applies only to distributions of ephedrine, pseudoephedrine, and

phenylpropanolamine via the postal service or private or commercial

carrier to nonregulated persons. A distributor does not have to report

distributions to regulated persons. In this regard, it is critical that

distributors take the appropriate steps to ascertain whether their

customers are regulated or nonregulated persons. The failure of a

distributor to report a transaction based on a customer's mere

representation that they are a regulated person, without further

inquiry to confirm that status, may be grounds for administrative,

civil, or criminal action. Therefore, the distributor should take

appropriate steps to confirm the customer's status as a regulated

person. Steps may include verification of the customer's DEA

registration status or, if they are not a registrant, inquiry as to

whether the products are being obtained solely for use by the customer

or whether they will be distributed to others.

Clarification of MCA and CSA Chemical Control Requirements

The MCA's removal of the exemption for pseudoephedrine,

phenylpropanolamine, and combination ephedrine products makes a new

segment of industry, which is not familiar with DEA's programs and

requirements, subject to the chemical controls under the CSA. DEA has

received numerous contacts from, and engaged in substantial discussions

with, both individual companies and associations regarding the

requirements of the MCA and of the chemical controls under the CSA with

respect to combination ephedrine products. The upcoming control of

pseudoephedrine and phenylpropanolamine products on October 3, 1997,

will probably result in further questions and need for clarification of

the requirements. DEA remains, as always, available to affected persons

to clarify the requirements of the MCA and of the existing chemical

controls. Inquiries should be addressed to DEA in writing to the

attention of: G. Thomas Gitchel, Chief, Liaison and Policy Section,

Office of Diversion Control, Drug Enforcement Administration,

Washington, D.C. 20537.

Small Business Impact and Regulatory Flexibility Concerns

The MCA mandates a system of controls (including registration,

recordkeeping, and reporting) over the distribution, importation, and

exportation of pseudoephedrine, phenylpropanolamine, and combination

ephedrine products. Within this system of controls, the MCA does

provide an exemption for retail sales of ordinary over-the-counter

pseudoephedrine and phenylpropanolamine products; however, wholesale

distributions, importations, and exportations of these products are

subject to the controls.

The specific mandates of the MCA, if applied as written, would have

a far-reaching and significant impact. Pseudoephedrine and

phenylpropanolamine over-the-counter products are a common part of

every-day life, available in most supermarkets, drug stores,

convenience stores, and other retail outlets. Combination ephedrine

products are somewhat less common, due to their limited use as a

bronchodilator for the treatment of asthma.

DEA consulted with industry organizations associated with over-the-

counter drug manufacture and marketing in an effort to determine the

potential size of the impacted industry. According to industry sources

there are approximately 750,000 retail distributors of pseudoephedrine,

phenylpropanolamine, and combination ephedrine products. Accurate

identification of the number of wholesale distributors has been

somewhat more difficult; however, following consultations with

representatives of the food marketing, drug wholesale, and retail

supplier industries, DEA estimates that there are approximately 3,000

to 3,500 wholesale locations distributing the products.

In considering the implementation of the MCA, DEA considered the

impact of applying various levels of controls, from no application

through full application of the requirements of the law, from the

perspective of their impact on the industry, on the public health and

safety,and on the ability of both industry and the government to

administer the controls.

Of the available options, it is readily apparent that imposition of

either no controls or the full level of controls would be unrealistic.

With respect to no controls, the simple fact that the legislation was

deemed necessary is recognition enough of the threat to the public

health and safety that the diversion of pseudoephedrine,

phenylpropanolamine, and combination ephedrine products to the illicit

manufacture of methamphetamine represents and the intent to impose

restrictions and monitoring controls on the distribution. At the same

time, full application of the controls of the MCA would result in

monetary and administrative burdens on the industry and DEA that would

be out of proportion with the benefits to be derived and may

unnecessarily interfere with legitimate public access to the products.

Therefore, alternatives that avoided unnecessary burdens while still

accomplishing the mandate of the MCA were explored.

Exploring the alternatives and exceptions required consideration of

the scope of commerce, business practices, and capabilities of the

different segments of the industry; the scope of diversion from each

segment of industry; the activities of the traffickers; and the

relative impact of different controls, both on the industry and DEA.

The MCA recognizes two distinct segments within industry: retail

distributors, who, by definition, sell small amounts of product in

face-to-face transactions to individuals for their personal use; and

manufacturers/wholesalers (including importers/exporters), who

introduce generally larger quantities of the products into commerce and

distribute to other commercial concerns for further distribution, and

some of whom also distribute larger quantities to non-commercial

concerns without regard or consideration of the intended use.

Collectively, retail distributors are responsible for as great a

scope of distribution as manufacturers/wholesalers, serving as they do

as the principal source of supply for the individual consumers of the

products. Individually, however, their scope of commerce, by

definition, is very small, due to the fact that their activities are

restricted to sales to individuals of small, personal use quantities of

the products. Despite the collective volume of commerce at the retail

level, the new controls of the MCA should, as a practical matter,

significantly reduce the potential for major diversion from this level

(provided retailers comply with the law and are alert to attempts to

circumvent the controls). Because to the limited amount of product

permitted to be distributed in an individual transaction, attempts to

divert the products by the retail distributors should be noticeable,

given that the volume of material required is out of proportion with

any reasonable amount that might be purchased for personal use.

However, traffickers have, on occasion, succeeded in obtaining tens of

[[Page 52300]]

thousands of dosage units of products by preying upon unsophisticated

or negligent owners or employees of retail establishments who are not

aware of, or are unconcerned with, the illicit use to which the

products can be put. In addition, there are those unscrupulous

individuals who will always be eager to profit from a transaction,

capitalizing on the fact that, even with a 24 gram threshold for retail

distributors, many of the smaller clandestine laboratories which DEA

and state and local authorities are encountering could adequately

satisfy their needs for precursor material be obtaining legal drug

products at the retail level. This is a situation in which voluntary

industry programs to prevent diversion at the retail level will be an

important factor in achieving the goals of the MCA.

While far fewer in number (est. 3,000-3,500) and engaging in a

lesser number of transactions, manufacturer/wholesalers account for as

great a part of the distributions as retail distributors through the

volume of products moved in each transaction. The significantly larger

transaction sizes, which would be cause for concern at the retail level

but are commonplace at the wholesale level, coupled with the relative

anonymity of the transaction, have resulted in this segment of industry

becoming the source of choice for the traffickers. Through conspiracy

and deception, as well as carelessness on the part of some wholesalers,

traffickers have been able to obtain large volumes of product without

having their transactions stand out against the normal commerce.

Against this backdrop, and in recognition of the effectiveness of

the new controls provided by the MCA, chemical controls for the

consumer drug products should be focused on the wholesale level, and

the retail level should be granted additional exemption as long as they

operate within the new limits of the MCA. However, given the

opportunistic nature of the traffickers and their preference for an

unregulated source of supply, there exists the potential that, with the

control of the wholesale distributors, traffickers may intensely focus

on the retail level as a source of supply. Therefore, the exemption

from the registration requirement applies to retail distributors that

limit their activities exclusively to sales below the 24 gram threshold

established by the MCA for those products. Retail distributors that

engage in the distribution of ordinary over-the-counter pseudoephedrine

and phenylpropanolamine products are also exempt from the registration

requirement. Thus, it is likely that most, if not all, of the estimated

750,000 retail distributor will qualify and be exempt from

registration.

The final element to be addressed was the impact that the controls

would have on the industry and DEA. The determining factor in this

assessment proved to be the types of transactions conducted and the

business practices in the different segments of the industry.

The principal controls required under the MCA are recordkeeping and

registration. The recordkeeping requirement applies to any person who

engages in a regulated transaction involving a pseudoephedrine,

phenylpropanolamine, or combination ephedrine product, other than a

retail distribution of an ordinary over-the-counter pseudoephedrine or

phenylpropanolamine product. The registration requirement applies to

any person who distributes imports, or exports a pseudophedrine,

phenylpropanolamine, or combination ephedrine product, except for the

exemptions previously discussed.

The recordkeeping requirement would represent a minimal burden for

both segments of industry. While retail distributors do not keep

records of their sales to individuals as a matter of business practice,

their sales are almost exclusively sub-threshold; therefore, the

recordkeeping requirement would not apply for their distributions.

Wholesale distributors, on the other hand, often engage in transactions

that would be subject to the recordkeeping requirement. However, such

distributors generally do keep detailed records of their transactions

as a matter of good business practice. Such records can be made readily

retrievable through the marking of the transactions involving regulated

products with an asterisk or other unique code. Further, under the MCA,

the record retention period for List I records has been reduced from

four years to two years, thus reducing the regulatory burden of List I

chemical controls. Additionally, recordkeeping at the wholesale level

is further mitigated by a threshold of one kilogram for ephedrine

combination and pseudoephedrine products, and 2.5 kilograms for

phenylpropanolamine products. Transactions below these thresholds do

not require records.

The registration requirement, on the other hand, would have a

significant financial impact if applied across the board. The cost of

initial registration (at $255.00 each) for 750,000 retail distributors

would be over $190 million; annual reregistration (at $116.00 each)

would cost approximately $87 million. For the estimated 3,500

manufacturers/wholesalers the cost for initial registration (at $595.00

each) would be slightly more than $2 million; annual reregistration (at

$477.00 each) would cost approximately $1.7 million. The respective

annual paperwork burdens associated with filing the applications for

registration would be 150,000 hours for all retail distributors and 700

hours for all manufacturers/wholesalers. Further, the administrative

burden for DEA of having to receive and process over 750,000

applications per year would be enormous.

The cost and administrative burden of requiring registration at the

retail level, which is predominantly small business, would be

significant, while the potential of large scale diversion at the retail

level following implementation of the MCA is greatly reduced given the

limited amounts of products being distributed in face-to-face sales to

individuals.

Therefore, to best achieve the intended results of the MCA, while

minimizing the burden on industry, DEA has determined to propose that:

(a) the registration and recordkeeping provisions will apply at the

manufacturer/wholesale level, and (b) the exemptions will apply to

retail distributors who operate exclusively within the retail quantity

limits established by the MCA, irrespective of whether the form of

packaging meets the definition of ``ordinary over-the-counter

pseudoephedrine or phenylpropanolamine product'' under Section 102(45)

of the Act (21 U.S.C. 802(45)). The large volumes of products per

transaction at wholesale, the opportunity for relatively anonymous

transactions, and the existing history of diversion point to the need

for adequate registration and recordkeeping at this level of industry.

As noted earlier, the cost of imposing the full controls of the MCA on

this segment of the industry will consist of slightly more than $2

million for initial registration, approximately $1.7 million for annual

reregistration, and an estimated 700 burden hours per year. The

recordkeeping requirement will not result in substantial additional

burden due to the fact that the information required can be found in

the normal business records (provided they are marked in such a way as

to make them readily retrievable) that would be maintained as part of

good business practice.

With respect to retail distributors, the determination was made to

provide a waiver from the registration, and, thus, recordkeeping,

requirement due to the small size and face-to-face nature of the

transactions and the limited future potential of diversion from this

segment of the industry. The waiver of the registration applies,

regardless of the

[[Page 52301]]

form of packaging of the drug product, only to those retail

distributors whose activities are restricted to below threshold

transactions, to ensure that this segment of industry does not become

the source of supply for the traffickers. If a retail distributor

intends to engage in above-threshold transactions in the course of

business, then a registration should be obtained. However, it is

understood that unintentional sales which exceed the threshold are

possible. In that regard, DEA wishes to note that the chemical control

program is focused on preventing the diversion of chemicals to

clandestine laboratories and not on identification of an action against

the rare, inadvertent, non-egregious above-threshold sale of drug

products by a checkout clerk or similar employee of an unregistered

retail distributor in the normal course of legitimate business. Firms

should, however, to protect their registration exemption, maintain

programs to guard against such inadvertent sales.

In total, the proposed regulations, coupled with the existing

exemption from chemical registration for controlled substances

registrants and the exception from the regulations provided for

distributors of prescription drug products that contain List I

chemicals, provide a system of controls that minimize the financial and

administrative burden on the industry while still allowing effective

enforcement of the requirements of the MCA.

The Acting Deputy Administrator hereby certifies that this proposed

rulemaking has been drafted in a manner consistent with the principles

of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). As discussed

in the preceding section regarding Small Business Impact And Regulatory

Flexibility Concerns, consideration was given to the potential impact

of varying levels of regulation, the population that would be impacted,

and the nature of the problem to be addressed by the regulations. These

proposed regulations will provide a system of controls to prevent the

diversion of the drug products to clandestine laboratories that is

consistent with the intent of the MCA, while providing regulatory

relief for the approximately 750,000 retail distributors, most of whom

are small businesses. For the remaining 3,000 to 4,000 wholesale

distributors, importers, and exporters that will be subject to

regulation, the primary impact will be the requirement that they obtain

an annual registration from DEA and make occasional reports. A copy of

this proposed rulemaking has been provided to the Chief Counsel for

Advocacy at the Small Business Administration.

This proposed rulemaking has been drafted and reviewed in

accordance with Executive Order 12866. This proposed rulemaking has

been determined to be a significant action because the requirements of

the MCA affect a broad spectrum of businesses distributing widely used

products to the public. This proposed rule would establish specific

exemptions to significantly reduce that impact. Therefore, this

proposed rulemaking has been reviewed and approved by the Office of

Management and Budget.

This action has been analyzed in accordance with the principles and

criteria in Executive Order 12612, and it has been determined that this

rule does not have sufficient federalism implications to warrant the

preparation of a Federalism Assessment.

This rule will not result in the expenditure by State, local, and

tribal governments, in the aggregate, or by the private sector, of

$100,000,000 or more 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.

This rule is not a major rule as defined by Section 804 of the

Small Business Regulatory Enforcement Fairness Act of 1996. 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.

List of Subjects

21 CFR Part 1300

Definitions, Drug traffic control.

21 CFR Part 1309

Administrative practice and procedure, Drug traffic control, List I

and II chemicals, Security measures. 21 CFR Part 1310

Drug traffic control, List I and II chemicals, Reporting and

recordkeeping requirements.

For the reasons set out above, 21 CFR Parts 1300, 1309, and 1310

are proposed to be amended as follows:

PART 1300--[AMENDED]

1. The authority citation for Part 1300 continues to read as

follows:

Authority: 21 U.S.C. 802, 871(b), 951, 958(f).

2. Section 1300.02 is proposed to be amended by revising paragraphs

1300.2(b)(28)(i)(D)(1) and (2) and by adding new paragraphs 1300.02(b)

(31) and (32) to read as follows:

Sec. 1300.02 Definitions relating to listed chemicals.

* * * * *

(b) * * *

(28) * * *

(i) * * *

(D) * * *

(1)(i) The drug contains ephedrine or its salts, optical isomers,

or salts of optical isomers, pseudoephedrine or its salts, optical

isomers, or salts of optical isomers, or phenylpropanolamine or its

salts, optical isomers, or salts of optical isomers unless otherwise

exempted under Sec. 1310.11 of this chapter, except that any sale of

ordinary over-the-counter pseudoephedrine or phenylpropanolamine

products by retail distributors shall not be a regulated transaction;

or

(ii) The Administrator has determined pursuant to the criteria in

Sec. 1310.10 of this chapter 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

(2) The quantity of ephedrine, pseudoephedrine,

phenylpropanolamine, or other listed chemical contained in the drug

included in the transaction or multiple transactions equals or exceeds

the threshold established for that chemical, except that the threshold

for any sale of products containing pseudoephedrine or

phenylpropanolamine by retail distributors or by distributors required

to submit reports by Sec. 1310.03(c) shall be 24 grams of

pseudoephedrine or 24 grams of phenylpropanolamine in a single

transaction.

* * * * *

(31) The term ordinary over-the-counter pseudoephedrine or

phenylpropanolamine product means any product containing

pseudoephedrine or phenylpropanolamine that is--

(i) Regulated pursuant to the Act; and

(ii)(A) Except for liquids, sold in package sizes of not more than

3.0 grams of pseudoephedrine base or 3.0 grams of phenylpropanolamine

base, and that is packaged in blister packs, each blister containing no

more than two dosage units, or where the use of blister packs is

technically infeasible, that is packaged in unit dose packets or

pouches, and

[[Page 52302]]

(B) For liquids, sold in package sizes of not more than 3.0 grams

of pseudoephedrine base or 3.0 grams of phenylpropanolamine base.

(32) The term combinaiton ephedrine product means a drug product

containing ephedrine or its salts, optical isomers, or salts of optical

isomers, and therapeutically significant quantities of another active

medicinal ingredient.

PART 1309--[AMENDED]

1. The authority citation for part 1309 continues to read as

follows:

Authority: 21 U.S.C. 821, 822, 823, 824, 830, 871(b), 875, 877,

958.

2. Section 1309.22 is proposed to be amended by revising paragraph

(b) to read as follows:

Sec. 1309.22 Separate registration for independent activities.

* * * * *

(b) Every person who engages in more than one group of independent

activities shall obtain a separate registration for each group of

activities, unless otherwise exempted by the Act or Secs. 1309.24

through 1309.26, except that a person registered to import any List I

chemical shall be authorized to distribute that List I chemical after

importation, but no other chemical that the person is not registered to

import.

3. Section 1309.24 is proposed to be revised to read as follows:

Sec. 1309.24 Waiver of registration requirement for certain

activities.

(a) The requirement of registration is waived for any agent or

employee of a person who is registered to engage in any group of

independent activities, if such agent or employee is acting in the

usual course of his or her business or employment.

(b) The requirement of registration is waived for any person who

distributes a product containing a List I chemical that is regulated

pursuant to Sec. 1300.02(b)(28)(i)(D), if that person is registered

with the Administration to manufacture, distribute or dispense a

controlled substance.

(c) The requirement of registration is waived for any person who

imports or exports a product containing a List I chemical that is

regulated pursuant to Sec. 1300.02(b)(28)(i)(D), if that person is

registered with the Administration to engage in the same activity with

a controlled substance.

(d) The requirement of registration is waived for any person who

distributes a prescription drug product containing a List I chemical

that is regulated pursuant to Sec. 1300.02(b)(28)(i)(D) of this

chapter.

(e) The requirement of registration is waived for any retail

distributor whose activities with respect to List I chemicals are

limited to the distribution of below-threshold quantities of a

pseudoephedrine, phenylpropanolamine, or combination ephedrine product

that is regulated pursuant to Sec. 1300.02(b)(28)(i)(D) of this

chapter, in a single transaction to an individual for legitimate

medical use, irrespective of whether the form of packaging of the

product meets the definition of ``ordinary over-the-counter

pseudoephedrine or phenylpropanolamine product'' under

Sec. 1300.02(b)(31) of this chapter. The threshold for a distribution

of a product in a single transaction to an individual for legitimate

medical use is 24 grams of pseudoephedrine, phenylpropanolamine, or

ephedrine base.

(f) The requirement of registration is waived for any manufacturer

of a List I chemical, if that chemical is produced solely for internal

consumption by the manufacturer and there is no subsequent distribution

or exportation of the List I chemical.

(g) If any person exempted under paragraph (b), (c), (d), or (e) of

this section also engages in the distribution, importation or

exportation of a List I chemical, other than as described in such

paragraph, the person shall obtain a registration for such activities,

as required by Sec. 1309.21.

(h) The Administrator may, upon finding that continuation of the

waiver would not be in the public interest, suspend or revoke a waiver

granted under paragraph (b), (c), (d), or (e) of this section pursuant

to the procedures set forth in Secs. 1309.43 through 1309.46 and

1309.51 through 1309.57. In considering the revocation or suspension of

a person's waiver granted pursuant to paragraph (b) or (c) of this

section, the Administrator shall also consider whether action to revoke

or suspend the person's controlled substance registration pursuant to

21 U.S.C. 824 is warranted.

(i) Any person exempted from the registration requirement under

this section shall comply with the security requirements set forth in

Secs. 1309.71 through 1309.73 and the recordkeeping and reporting

requirements set forth under parts 1310 and 1313 of this chapter.

4. Section 1309.25 is proposed to be revised to read as follows:

Sec. 1309. Temporary exemption from registration for chemical

registration applicants.

(a) Each person required by section 302 of the Act (21 U.S.C. 822)

to obtain a registration to distribute, import, or export a combination

ephedrine product is temporarily exempted from the registration

requirement, provided that the person submits a proper application for

registration on or before July 12, 1997. The exemption will remain in

effect for each person who has made such application until the

Administration has approved or denied that application. This exemption

applies only to registration; all other chemical control requirements

set forth in parts 1309, 1310, and 1313 of this chapter remain in full

force and effect.

(b) Each person required by section 302 of the Act (21 U.S.C. 822)

to obtain a registration to distribute, import, or export a

pseudoephedrine or phenylpropanolamine drug product is temporarily

exempted from the registration requirement, provided that the person

submits a proper application for registration on or before December 3,

1997. The exemption will remain in effect for each person who has made

such application until the Administration has approved or denied that

application. This exemption applies only to registration; all other

chemical control requirements set forth in parts 1309, 1310, and 1313

of this chapter remain in full force and effect.

5. Sections 1309.27, 1309.28 and 1309.29 are proposed to be

removed.

6. Section 1309.71 is proposed to be amended by revising paragraph

(a)(2) to read as follows:

Sec. 1309.71 General security requirements.

(a)* * *

(2) In retail settings open to the public where drug products

containing ephedrine or its salts, optical isomers, or salts of optical

isomers are distributed, such drugs will be stocked behind the counter

where only employees have access.

* * * * *

PART 1310--[AMENDED]

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

follows:

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

2. Section 1310.03 is proposed to be amended by adding a new

paragraph (c) to read as follows:

Sec. 1310.03 Persons required to keep records and file reports.

* * * * *

(c) Each regulated person who engages in a transaction with a

[[Page 52303]]

nonregulated person which involves ephedrine, pseudoephedrine, or

phenylpropanolamine (including drug products containing these

chemicals), and uses or attempts to use the Postal Service or any

private or commercial carrier shall file monthly reports of each such

transaction as specified in Sec. 1310.05.

3. Section 1310.04 is proposed to be amended by removing paragraph

(g) and revising paragraph (f)(1) to read as follows:

Sec. 1310.04 Maintenance of records.

* * * * *

(f) * * *

(1) List I chemicals:

(i) Except as provided in paragraph (f)(1)(ii) of this section, the

following thresholds have been established for List I chemicals:

------------------------------------------------------------------------

Chemical Threshold by base weight

------------------------------------------------------------------------

(A) Anthranilic acid, its esters, and its 30 kilograms.

salts.

(B) Benzyl cyanide......................... 1 kilogram.

(C) Ephedrine, its salts, optical insomers, No threshold-All

and salts of optical isomers. transactions Regulated.

(D) Ergonovine and its salts............... 10 grams.

(E) Ergotamine and its salts............... 20 grams.

(F) N-Acetylanthranilic acid, its esters, 40 kilograms.

and its salts.

(G) Norpseudoephedrine, its salts, optical 2.5 kilograms.

isomers, and salts of optical isomers.

(H) Phenylacetic acid, its esters, and its 1 kilogram.

salts.

(I) Phenlpropanolamine, its salts, optical 2.5 kilograms.

isomers, and salts of optical isomers.

(J) Piperidine and its salts............... 500 grams.

(K) Pseudoephedrine, its salts, optical 1 kilogram.

isomers, and salts of optical isomers.

(L) 3, 4-Methylenedioxyphenyl-2-propanone.. 4 kilograms.

(M) Methylamine and its salts.............. 1 kilogram.

(N) Ethylamine and its salts............... 1 kilogram.

(O) Propionic anhydride.................... 1 gram.

(P) Isosafrole............................. 4 kilograms.

(Q) Safrole................................ 4 kilograms.

(R) Piperonal.............................. 4 kilograms.

(S) N-Methylephedrine, its salts, optical 1 kilogram.

isomers, and salts of optical isomers (N-

Methylephedrine.

(T) N-Methylpseudoephedrine, its salts, 1 kilogram.

optical isomers, and salts of optical

isomers.

(U) Hydriodic Acid......................... 1.7 kilogrmas (or 1 liter

by volume.

(V) Benzaldehyde........................... 4 kilograms.

(W) Nitroethane............................ 2.5 kilograms.

------------------------------------------------------------------------

(ii) Notwithstanding the thresholds established in paragraph

(f)(1)(i), the following thresholds will apply for the following List I

chemicals that are contained in drug products that are regulated

pursuant to Sec. 1300.02(b)(28)(i)(D) (Retail distribution thresholds

are for a single transaction; the cumulative threshold provision does

not apply. All other distributions are subject to the cumulative

threshold provision.):

------------------------------------------------------------------------

Chemical Threshold by base weight

------------------------------------------------------------------------

(A) Ephedrine, its salts, optical isomers, No threshold-All

and salts of optical isomers as the sole transactions Regulated.

therapeutically significant medicinal

ingredient.

(B) Ephedrine, its salts, optical isomers,

and salts of optical isomers in

combination with therapeutically

significant amounts of another medicinal

ingredient:

(1) Distributions by retail 24 grams.

distributors.

(2) Distributions by person required to 24 grams.

report under Sec. 1310.03(c).

(3) All other domestic distributions 1 kilogram.

(other than (B) (1) and (2)).

(4) Imports and Exports................ 1 kilogram.

(C) Pseudoephedrine, its salts, optical

isomers, and salts of optical isomers

(other than ordinary over-the-counter

products):

(1) Distributions by retail 24 grams.

distributors.

(2) Distributions by person required to 24 grams.

report under Sec. 1310.03(c).

(3) All other domestic distributions 1 kilogram.

(other than (C) (1) and (2)).

(4) Imports and Exports................ 1 kilogram.

(D) Pseudoephedrine, its salts, optical

isomers, and salts of optical isomers

(Ordinary over-the-counter products):

(1) Distributions by retail Exempt.

distributors.

(2) Distributions by person required to 24 grams.

report under Sec. 1310.03(c).

(3) All other domestic distributions 1 kilogram.

(other than (D) (1) and (2)).

(4) Imports and Exports................ 1 kilogram.

(E) Phenylpropanolamine, its salts, optical

isomers, and salts of optical isomers

(other than ordinary over-the-counter

products):

(1) Distributions by retail 24 grams.

distributors.

(2) Distributions by person required to 24 grams.

report under Sec. 1310.03(c).

(3) All other domestic distributions 2.5 kilograms.

(other than (E) (1) and (2)).

(4) Imports and Exports................ 2.5 kilograms.

(F) Phenylpropanolamine, its salts, optical

isomers, and salts of optical isomers

(Ordinary over-the-counter products):

(1) Distributions by retail Exempt.

distributors.

[[Page 52304]]

(2) Distributions by person required to 24 grams.

report under Sec. 1310.03(c).

(3) All other domestic distributions 2.5 kilograms.

(other than (F) (1) and (2)).

(4) Imports and Exports................ 2.5 kilograms.

------------------------------------------------------------------------

4. Section 1310.05 is proposed to be amended by adding a new

paragraph (e) to read as follows:

Sec. 1310.05 Reports.

* * * * *

(e) Each regulated person required to report pursuant to

Sec. 1310.03(c) shall either:

(1) Submit a written report, containing the information set forth

in Sec. 1310.06(i), on or before the 15th day of each month following

the month in which the distributions took place. The report shall be

submitted under company letterhead, signed by the person authorized to

sign the registration application forms on behalf of the registrant, to

the Chemical Operations Section, Office of Diversion Control, Drug

Enforcement Administration, Washington, D.C. 20537; or

(2) Upon request to and approval by the Administration, submit the

report in electronic form, either via computer disk or direct

electronic data transmission, in such form as the Administration shall

direct. Requests to submit reports in electronic form should be

submitted to the Chemical Operations Section, Office of Diversion

Control, Drug Enforcement Administration, Washington, D.C. 20537, ATTN:

Electronic Reporting.

5. Section 1310.06 is proposed to be amended by adding a new

paragraph (i) to read as follows:

Sec. 13.10.06 Content of records and reports.

* * * * *

(i) Each monthly report required by Sec. 1310.05(e) shall provide

the following information for each distribution:

(1) Supplier's name and registration number;

(2) Purchaser's name and address;

(3) Name/address shipped to (if different from purchaser's name/

address);

(4) Name of the Chemical and total amount shipped;

(5) Date of shipment;

(6) Product name (if drug product);

(7) Dosage form (if drug product);

(8) Dosage strength (if drug product);

(9) Number of dosage units (if drug product);

(10) Package type (if drug product);

(11) Package quantity (if drug product);

(12) Lot number (if drug product).

6. Section 1310.10 is proposed to be amended by revising paragraph

(d) introductory text to read as follows:

Sec. 1310.10 Removal of the exemption of drugs distributed under the

Food, Drug, and Cosmetic Act.

* * * * *

(d) Any manufacturer seeking reinstatement of a particular drug

product that has been removed from an exemption may apply to the

Administrator for reinstatement of the exemption for that particular

drug product on the grounds that the particular drug product is

manufactured and distributed in a manner that prevents diversion. In

determining whether the exemption should be reinstated the

Administrator shall consider:

* * * * *

Dated: September 26, 1997.

James S. Milford,

Acting Deputy Administrator.

[FR Doc. 97-26150 Filed 10-6-97; 8:45 am]

BILLING CODE 4410-09-M