Chemical Registration and Reregistration Fees

DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Part 1309

[DEA NUMBER 185-P]

RIN 1117-AA50

Chemical Registration and Reregistration Fees

AGENCY: Drug Enforcement Administration (DEA), Justice.

ACTION: Proposed rule.

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SUMMARY: The Drug Enforcement Administration (DEA) proposes to amend

its application fees for registration and reregistration of

manufacturers, distributors, importers, and exporters of List I

chemicals, as authorized by section 3(a) of the Domestic Chemical

Diversion Control Act of 1993 (DCDCA), reducing the fees from $595 to

$326 for initial registration, and the reregistration fees from $477 to

$171. Fees for retail registrants will increase from $255 to $326 for

registration, and from $116 to $171 for reregistration. Office of

Management and Budget (OMB) Circular A-25 requires a periodic review of

user charges for agency programs. This review will bring fees into

alignment with current changes in costs or market values.

DATES: Written comments or objections must be submitted on or before

January 31, 2000.

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: Patricia Good, Chief, Liaison and

Policy Section, Office of Diversion Control, Drug Enforcement

Administration, Washington, DC 20537. Telephone (202) 307-7297.

SUPPLEMENTARY INFORMATION:

Impact of the Proposed Rule

What Is the Effect of This Proposed Rule, and to Whom Does It Apply?

The Drug Enforcement Administration (DEA) proposes to reduce the

registration and

[[Page 67217]]

reregistration fees for persons manufacturing, distributing (non-

retail), importing and exporting List I chemicals. There are currently

3,685 such registrants. Fees are reduced from $595 to $326 for

registration, and from $477 to $171 for reregistration. Registration

and reregistration fees for the 47 current retail registrants increase

slightly, from $255 to $326 for registration, and from $116 to $171 for

reregistration. At this time, DEA is receiving, on average, fewer than

the new retail applications per year.

Legislative History

What is the Legal Basis for Registering Persons Manufacturing,

Distributing, Importing and Exporting List I Chemicals

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

passed by Congress to control the diversion of certain chemicals that

are necessary for the illicit manufacture of controlled substances. The

CDTA and its regulations, set forth in Title 21 Code of Federal

Regulations (CFR) parts 1310 and 1313, established a system of record

keeping and reporting requirements through which DEA and the chemical

industry could identify persons seeking to divert listed chemicals for

the manufacture of illicit controlled substances.

The Domestic Chemical Diversion Control Act of 1993 (DCDCA), which

became effective on April 16, 1994, established a number of new

requirements intended to close avenues used by illicit controlled

substance manufacturers to circumvent the CDTA. One of the main

provisions of the DCDCA was the requirement that manufacturers,

distributors, importers and exporters of List I chemicals obtain a

registration from DEA.

Concurrent with the establishment of the registration requirement,

DEA established, by regulations, the fees to be charged for

registration and reregistration of List I chemical handlers, as

required under the Independent Offices Appropriations act (IOAA) and

the guidelines set forth in the Office of Management and Budget (OMB)

Circular A-25.

OMB Circular A-25, Section 6 provides that ``[A] user charge * * *

will be assessed against each identifiable recipient for special

benefits derived from Federal activities beyond those received by the

general public.'' The section further requires that the user charge be

sufficient to ``* * * recover the full cost to the Federal Government

for providing the special benefit.'' A special benefit is described as

a Government service which ``Enables the beneficiary to obtain more

immediate or substantial gains or values (which may or may not be

measurable in monetary terms) than those that accrue to the general

public (e.g., receiving a patient, insurance, or guarantee provision,

or a license to carry on a specific activity or business [emphasis

added] or various kinds of public land use).''

Sections 822 and 957 of Title 21, United States Code, as amended by

the DCDCA, require that any person who manufactures, distributes,

imports or exports a List I chemical must obtain annually a

registration in accordance with DEA rules and regulations. A

registration to manufacture, distribute, import or export List I

chemicals is a special benefit under Circular A-25, in that it allows

the registrant to engage in certain activities while a member of the

general public may not. Therefore, the costs associated with DEA's

issuance of a registration to manufacture, distribute, import or export

a List I chemical; certain costs associated with advising registrants

of their responsibilities; and maintenance of the integrity of the

registration system must be recovered through assessment of a user fee.

Section 6(d) of Circular A-25 describes the requirements for

determining the full cost of a service or benefit. ``Full cost'' is

defined as all direct and indirect costs, including, but not limited

to: direct and indirect personnel costs, including salaries, fringe

benefits (such as life and health insurance and retirement) and travel;

physical overhead, including material and supply costs, rent and

utilities; management and supervisory costs; and the costs of

enforcement, collection, research, establishment of standards, and

regulations. Section 6(d)(1)(e) provides that the cost figures shall be

established utilizing ``the best available records of the agency, and

new cost accounting systems need not be established solely for this

purpose.'' The costs of the services provided by DEA were determined by

use of proven and accepted budget estimating techniques as outlined in

the DOJ budget guidelines and OMB Circular A-11.

Initial Fee Implementation

How did DEA Implement the Initial Fees

DEA established two distinct categories of chemical registrants:

retail distributors, such as convenience stores, gas stations, truck

stops, liquor stores, etc., whose regulated activities consist of the

direct sales to walk-in customers of drug products that are regulated

as List I chemicals; and non-retail registrants, such as manufacturers

which distribute, distributors, importers, and exporters of List I

chemicals. Each category of registrant was addressed independently

during the original establishment of the fees.

Establishment of the initial application fee was a simple matter

since the costs associated with the processing of each application for

registration were direct costs applicable to each individual

application; there were minimal general program costs that were

required to be averaged across the applicant population. For renewal

applications the calculation of the fee required identification of

general program maintenance costs which were to be averaged across the

registrant population. However, because List I chemical registration

was a new requirement, there was no existing registrant population and

the fees had to be calculated based on estimates of the potential

population. For purposes of calculating the fee DEA estimated 10,000

retail registrants and 1,500 non-retail registrants.

Full details regarding the calculation of the original fees are

contained in DEA's proposed rule regarding Implementation of the

Domestic Chemical Diversion Control Act of 1993 (Pub. L. 103-200) which

was published in the Federal Register on October 13, 1994 (59 FR

51887).

New Applications

What Factors Were Involved in Establishing New Application Fees

Due to industry comments regarding the financial impact of the

registration fee received at the time the requirements of the MCA were

implemented, DEA reviewed the preregistration process and waived a

significant portion of the initial registration fee for manufacturers,

distributors, importers, and exporters of regulated drug products,

requiring that only $116 of the $595 fee be paid. Notice regarding the

fee waiver was published in the Federal Register on October 17, 1997

(62 FR 53958). Since that time, DEA has continued to assess the

situation and has become aware of a number of incidents involving the

theft of significant quantities of drug products and raw materials from

persons distributing controlled substances and listed chemicals. At

least five million dosage units of drug products and 75 kilograms of

pseudoephedrine powder have been reported stolen. DEA is concerned that

with the emphasis placed on ``knowing the customer'' and ensuring that

all sales are legitimate, there may be

[[Page 67218]]

insufficient emphasis placed on maintaining security of the listed

chemicals that registrants have in their possession. It is clear that a

strong DEA presence at the time of initial registration remains

necessary to ensure that applicants are fully aware of all

requirements, not only in terms of ``knowing the customer'' and

ensuring that sales are legitimate, but also ensuring that appropriate

safeguards are in place to prevent theft or diversion of listed

chemicals from the regulated location. However, while DEA will continue

to conduct on-site activities as part of the preregistration

investigation, at this time, due to the demand on resources for the

pursuit of criminal investigations, DEA will only be able to allocate

six hours of investigative time for each preregistrant investigation.

However, DEA anticipates that, over time, these demands will lessen and

resources currently dedicated to criminal investigations will be

reallocated to other chemical regulatory activities, including

preregistration investigations. DEA will reexamine chemical

registration and reregistration fees when this reallocation of

resources occurs.

Reregistration Applications

What Factors Were Involved in Establishing Reregistration Application

Fees

Two factors have affected the calculation of the reregistration

fees. First, due to the continued demand for resources for the pursuit

of investigations, DEA anticipates dedicating a total of six

investigator work years to regulatory audits of both retail and non-

retail registrants. Second, the actual non-retail registrant population

is greater than the originally estimated population of 1,500

registrants, due in part to the expanded registration requirements of

the MCA. At the time of drafting of this notice, there are 47 retail

registrants and 3,685 non-retail registrants, for a total of 3,732

chemical registrants.

Fees

What Specific Costs Were Included in the Calculation of the Fees?

DEA utilized the standard modular costing method used throughout

the federal government to calculate fees. This methodology relates

costs to the number of personnel within the program and accounts for

inflationary increase. Funding for salaries, benefits, equipment,

training, and other position-related expenses is predicted on the

modular formula which is reviewed and revised each budget year by the

Department of Justice (DOJ) and OMB, the latter having ultimate

authority in finalizing the formula for each fiscal year.

As previously stated, the personnel costs listed below include all

direct and indirect costs, including salaries, fringe benefits (such as

life and health insurance and retirement) and travel; physical

overhead, including material and supply costs such as forms, postage,

equipment, rent and utilities. Direct costs are those costs which are

apportionable to a specific registration or reregistration application,

i.e., direct personnel and materials costs, whereas indirect costs are

costs not directly apportionable to a specific registration or

reregistration application, i.e., managerial, regulatory, and

supervisory costs.

In light of the minimal number of retail registrants (47), the fact

that direct costs are the same for retail and non-retail registrants,

and the indirect costs are averaged across the entire retail/non-retail

registrant population, DEA has determined that the initial fee for

retail and non-retail registrants can be calculated together rather

than separately, and that the renewal fee for retail and non-retail

registrants can be calculated together rather than separately.

Based on the costs as laid out in the following tables, the initial

registration fee will be $326.00, and the reregistration fee will be

$171.00.

Costs for Processing an Application and Issuing an Initial

Registration

Direct Costs:

Clerical Time \1\........................ .5 hour.......................................... $10.34

Material Costs: \2\

Application Form..................... ................................................. .043

Postage.............................. ................................................. .064

Chemical Handlers Manual............. ................................................. 0.30

Registration Certificate............. ................................................. 0.10

Investigator Time \3\.................... 6 hours.......................................... 237.44

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Total Direct Costs................... ................................................. 249.25

===============

Indirect Costs:

Management/Supervisory time \4\.......... ................................................. 23.87

Regulatory/Policy Development \5\........ ................................................. 7.82

Applicant/Registrant Support \6\......... ................................................. 44.26

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Total Indirect Costs................. ................................................. 75.95

===============

Total Direct and Indirect Costs...... ................................................. 325.20

Notes Regarding the Costs Associated With Issuance of an Initial

Registration

1. Clerical time includes the time required for preparing and

mailing application packages, time for processing applications

received, including computer data entry, encoding the application

form, filing, and transmitting a copy of the application to the

appropriate DEA field office for the registration review process.

Following the registration review, time is required to approve the

registration, initiate issuance of the registration certificate, and

file copies of the report and application.

2. The printing cost for application forms for chemical

registration is $4,500 for 20,000 forms or 22.5 cents per form. The

cost for the last printing of the Chemical Handlers Manual was

$2,250 for 7,500 copies, or 30 cents per copy.

3. DEA is including an average of six hours of investigator time

toward the following: travel, on-site visits, telephonic

communications, and paperwork processing.

4. Management/Supervisory time is that time spent by management

and supervisory personnel in the overall development and maintenance

of the registration program, including establishment of program

priorities and policy, resource allocation, and administrative

direction. The following positions are involved:

[[Page 67219]]

Deputy Assistant Administrator and Deputy Director of .05 work year each................... $22,304

the Office of Diversion Control.

Chief, Chemical Control Section...................... .1 work year......................... 13,067

Chief, Data Processing and Analysis Unit............. .25 work year........................ 29,030

Chief, Liaison and Policy Section.................... .1 work year......................... 13,067

Chief, Policy Unit................................... .1 work year......................... 11,612

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Total Costs...................................... ..................................... 89,080

Because the Management/Supervisory costs are related to the general

operation of the registration program, they must be averaged across

the entire applicant population. For 3,732 applicants, the average

cost would be $23.87.

5. Regulatory and policy development time consists of .5 work

year of a program analyst time for drafting new/amended regulations

and Federal Register notices, issuance of policy statements and

directives related to the registration program and responding to

registrant queries regarding registration matters. This time is for

general chemical registration program purposes and must be spread

equally across the applicant population. The cost of that time,

$29,192, divided by 3,732 applicants equals $7.82.

6. Applicant/Registrant Support time will consist of 2 work

years of Diversion Investigator time, which will be dedicated to

providing technical assistance, advice and informational materials

to the industry to assist in complying with the registration, record

keeping and reporting requirements. The total cost for 2 work years

of Diversion Investigator time is $165,178, divided by 3,732

applicants equals $44.26.

Cost for Processing a Reregistration Application

Direct Costs:

Clerical Time 1.......................... .25 hours........................................ $5.17

Material Costs 2 ................................................. .43

Forms................................ ................................................. .64

Postage.............................. ................................................. .64

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Total Direct Costs............... ................................................. 6.24

===============

Indirect Costs:

Management/Supervisory Time 3............ ................................................. 23.87

Regulatory/Policy Development 4.......... ................................................. 7.82

Regulatory Audit Time 5.................. ................................................. 132.78

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Total Indirect Costs................. ................................................. 164.47

===============

Total Direct and Indirect Costs...... ................................................. 170.71

Notes Regarding the Costs Associated With Reregistration

1. Clerical time includes the time required for preparing and

mailing application packages, time for processing applications

received, including computer data entry, encoding the application

form, filing, and preparing the fee for deposit.

2. The forms cost covers both the reregistration application

form and the registration certificate. Postage is for mailing the

reregistration application and the registration certificate.

3. Management/Supervisory time is that time spent by management

and supervisory personnel in the overall development and maintenance

of the registration program, including establishment of program

priorities and policy, resource allocation, and administrative

direction. The following positions are involved:

Deputy Assistant Administrator and Deputy Director of .05 work year each................... $22,304

the Office of Diversion Control.

Chief, Chemical Control Section...................... .1 work year......................... 13,067

Chief, Data Processing and Analysis Unit............. .25 work year........................ 29,030

Chief, Liaison and Policy Section.................... .1 work year......................... 13,067

Chief, Policy Unit................................... .1 work year......................... 11,612

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

Total Costs...................................... ..................................... 89,080

Because the Management/Supervisory costs are related to the general

operation of the registration program, they must be averaged across

the entire reregistration applicant population. DEA has received

3,732 retail and non-retail reregistration applications. The average

cost per applicant would be $23.87.

4. Regulatory and policy development time consists of .5 work

year of a program analyst time for drafting new/amended regulations

and Federal Register notices, issuance of policy statements and

directives related to the registration program and responding to

registrant queries regarding registration matters. This time is for

general chemical registration program purposes and must be spread

equally across the reregistration applicant population. The cost of

that time, $29,192, divided by 3,732 reregistration applicants,

equals $7.82.

5. DEA will conduct regulatory audits to ensure that registrants

are complying with the chemical control requirements and that

chemicals are not being distributed to persons seeking to divert

them. The investigations will consist of a comprehensive review of

each registrant's records, reporting systems, and security

provisions. Each investigation will require comprehensive on-site

review of the registrant's records; verification of transactions and

purchasers, including record checks of and visits to purchasers;

travel; and report preparation. DEA anticipates that all such

investigations combined will require 6 work years of Diversion

Investigator time. The total cost for 6 work years of Diversion

Investigator time is $495,534, divided by 3,732 reregistration

applicants equals $132.78.

Refund of Fees for Certain Registrants

Section 8(e) of OMB Circular A-25 requires periodic review of user

fees. DEA's initial review of these fees in 1997 was delayed due to

passage of the Comprehensive Methamphetamine Control Act of 1996 (MCA)

which significantly expanded the scope of the registration requirement.

DEA postponed the review of the fees until all persons affected by the

MCA had submitted their applications. Due to this delay, there are

registrants who have been required to pay the full reregistration fee

of $477.00. DEA will

[[Page 67220]]

be making arrangements to refund the difference between the current and

proposed reregistration fees. Refunds will be provided to those

registrants who have renewed their registration in the year preceding

the effective date of the final rule published in conjunction with this

notice. Refunds will only be provided to those registrants who renewed

their registration on time, not those applicants who, by virtue of

renewing late, fell into this payment period.

Regulatory Certifications

Regulatory Flexibility Act

The Deputy Assistant 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.). It

will not have a significant economic impact on a substantial number of

small business entities. This notice reduces the registration and

reregistration fee substantially for the larger portion of the

industry, i.e., those persons required to submit applications for

renewal of registration, reducing the registration fee from $595 to

$326, and the reregistration fee from $447 to $171, providing economic

relief to the small businesses affected. With respect to the one

category of fee that increased, for retail distributors, there are

currently less than 50 retail distributor registrants and DEA is

receiving, on average, less than 10 new applications from retail

distributors per year.

Executive Order 12866

The Deputy Assistant Administrator further certifies that this

rulemaking has been drafted in accordance with the principles of

Executive Order 12866 Section 1(b). DEA has determined that this is not

a significant regulatory action. As noted above, this proposed rule

reduces the existing fee structure for most registrants, thus providing

economic relief to the registrant population . DEA has determined that

this rulemaking is not significant. Therefore, it has not been

submitted to the Office of Management and Budget for review.

Executive Order 13132

This action has been analyzed with the principles and criteria in

Executive Order 13132, and it has been determined that this rule does

not have sufficient federalism implications to warrant the preparation

of a Federalism assessment.

Unfunded Mandates Reform Act of 1995

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

tribal governments in the aggregate, or by the private sector, of $100

million 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.

Small Business Regulatory Enforcement Fairness Act of 1996

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 million 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.

Plain Language Instructions

The Drug Enforcement Administration makes every effort to write

clearly. If you have suggestions as to how to improve the clarity of

these regulations, call or write Patricia Good, Chief, Liaison and

Policy Section, Office of Diversion Control, Drug Enforcement

Administration, Washington, DC 20537. Telephone (202) 307-7297.

List of Subjects in 21 CFR Part 1309

Administrative practice and procedure, Drug traffic control, List I

and List II chemicals, Security measures For the reasons set out above,

21 CFR Part 1309 is proposed to be amended as follows:

PART 1309--[AMENDED]

1. The authority citation for 21 CFR Part 1309 continues to read as

follows:

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

958.

2. Section 1309.11 is revised to read as follows:

Sec. 1309.11 Fee amounts.

(a) For each initial registration to manufacture for distribution,

distribute (either retail distribution or non-retail distribution),

import, or export a List I chemical, the applicant shall pay a fee of

$326 for an annual registration.

(b) For each reregistration to manufacture for distribution,

distribute (either retail distribution or non-retail distribution),

import, or export a List I chemical, the registrant shall pay a fee of

$171 for an annual registration.

3. Section 1309.12 is revised to read as follows:

Sec. 1309.12 Time and method of payment; refund.

(a) For each application for registration or reregistration to

manufacture for distribution, distribute (either retail distribution or

non-retail distribution), import, or export a List I chemical, the

applicant shall pay the fee when the application for registration or

reregistration is submitted for filing.

(b) Payment should be made in the form of a personal, certified, or

cashier's check or money order made payable to ``Drug Enforcement

Administration.'' Payments made in the form of stamps, foreign

currency, or third party endorsed checks will not be accepted. These

application fees are not refundable.

Dated: October 1, 1999.

John H. King,

Deputy Assistant Administrator, Office of Diversion Control.

[FR Doc. 99-30960 Filed 11-30-99; 8:45 am]

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