[Federal Register Volume 67, Number 116 (Monday, June 17, 2002)]
[Notices]
[Pages 41256-41264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15193]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
[Docket No. 00-41]
Mediplas Innovations; Suspension of Shipments
By Orders dated August 14, 2000, the Administrator of the Drug
Enforcement Administration (DEA) suspended two shipments, one for 518.5
kilograms of ephedrine, and another for 798.55 kilograms of
pseudoephedrine, from Getz Pharma, Karachi, Pakistan, to Mediplas
Innovations, Inc. of San Antonio, Texas. According to the two Orders To
Suspend Shipment (OTSS), the suspension was based on the facts that:
(1) Mediplas was disqualified as a regular importer pursuant to 21
U.S.C. 971(b)(2) on December 22, 1999, requiring it to provide the DEA
with a 15-day advance notification for each import of listed chemicals;
(2) Mediplas failed to timely notify DEA of these shipments, in
violation of 21 CFR 1313.31 (2000); (3) Mediplas's pseudoephedrine
products have been found at clandestine laboratories, and at laboratory
dumpsites; and (4) Mediplas's only customer for this product, Wholesale
Outlet, is the current subject of an active DEA investigation as a
possible source of diversion.
[[Page 41257]]
By letter dated September 8, 2000, Mediplas Innovations, Inc.
requested a hearing in this matter. A hearing was held before
Administrative Law Judge Gail A. Randall in Arlington, Virginia, on
December 20-21, 2000, and on January 31 and February 1, 2001, in
Houston, Texas. At the hearing, both parties called witnesses to
testify and introduced documentary evidence. After the hearing, both
parties filed Proposed Findings of Fact, Conclusions of Law, and
Argument. On October 4, 2001, Judge Randall issued her Recommended
Rulings, Findings of Fact, Conclusion of Law, and Decision,
recommending that the Administrator find DEA was not justified in
issuing the OTSS and that said OTSS should be terminated and the
chemicals released to Mediplas. On October 24, 2001, the Government
filed Exceptions to the Administrative Law Judge's Opinion and
Recommended Ruling (Exceptions). Thereafter, on November 20, 2001,
Judge Randall transmitted the record of these proceedings to the Deputy
Administrator for final decision.
The Deputy Administrator has considered the record in its entirety,
and pursuant to 21 CFR 1316.67, hereby issues his final order based
upon findings of fact and conclusions of law as hereinafter set forth.
The Deputy Administrator adopts in full the Findings of Fact of the
Administrative Law Judge, and rejects the Conclusions of Law, except as
hereinafter set forth. Furthermore, the Deputy Administrator rejects
the recommendation of the Administrative Law Judge.
Mr. Laeeq Ahmed is the proprietor of Mediplas Innovations, Inc.
(Mediplas). After a military career in the Pakistani Air Force, Mr.
Ahmed worked for two years as a consulting project manager in Pakistan.
In 1991, he came to the United States. Initially, he worked for his
brother in restaurant management in Texas. After approximately one and
one-half years, he established his own retail store, a convenience
store. While operating this convenience store, he began importing
novelty items. He also sold groceries, novelties, office supplies, and
over-the-counter medicines, to include an ephedrine product, ``Mini
Thins,'' in 60 count bottles. He only purchased Mini Thins from a
wholesaler in small quantities, however, usually one to two dozen
bottles at a time.
Mr. Ahmed has been an importer for approximately four or five
years. He wanted to enter the pharmaceutical manufacturing market.
After investigating the manufacturing process in Pakistan from Getz
Pharmaceutical. Prior to arranging the exportation of ephedrine or
pseudoephedrine from Pakistan, Mr. Ahmed obtained approval from the
Health Ministry, the Narcotics Division, the Customs Division, and the
Ministry of Exports in Pakistan. He also received approval from the
World Health Organization.
Mr. Ahmed worked closely with the San Antonio office of the DEA as
he created his new business. On December 12, 1998, Mediplas submitted
an application to the DEA for registration as an importer of ephedrine.
In March of 1999, the DEA conducted a pre-registration investigation,
inspecting Mediplas's proposed registered location, and providing Mr.
Ahmed with copies of the applicable provisions from the Code of Federal
Regulations. Mr. Ahmed was reminded by DEA personnel to report
suspicious orders of listed chemicals to the DEA. Mr. Ahmed was also
provided information regarding the illicit use of List I chemicals as
precursor chemicals in the illicit manufacture of methamphetamine.
Specifically, Mr. Ahmed was provided a ``Red Warning Notice'' that
advised him about the seizure at clandestine methamphetamine
laboratories of combination ephedrine and pseudoephedrine products. The
DEA subsequently identified the parent company of Getz Pharma,
identified its corporate officers, located its web site, and located
its Pakistan, U.S., and other overseas offices. On August 4, 1999,
representatives from the DEA again visited Mediplas's location to
obtain additional information. Mr. Ahmed fully cooperated with the
representatives.
Judge Randall found Mr. Ahmed credibly concurred in his testimony
that, prior to registered with the DEA, Mediplas had received
information about the importer registration process, the DEA rules,
regulations, and procedures pertaining to the importation and handling
of ephedrine and pseudoephedrine, and the procedures DEA used to
communicate with licensed importers. Also as part of the pre-
registration inspection of Mediplas, the DEA conducted criminal record
checks and state and local agency checks, with negative results.
Mr. Ahmed informed the DEA that Mediplas's entire business was
handling List I chemicals. Mediplas intended to import finished tablets
packaged in sealed bottles, shrink wrapped, boxed, and in cartons.
Mr. Ahmed also agreed to provide the DEA with a list of prospective
customers, and to keep this list accurate. Mr. Ahmed agreed not to
distribute any Mediplas products to entities not registered with the
DEA to handle listed chemicals. The record contains no evidence that
Mr. Ahmed has failed to adhere to his agreement.
On April 29, 1999, the DEA issued Mediplas DEA Certificate of
Registration number 004230MNX, that granted Mediplas authorization to
import ephedrine. Mediplas also obtained a permit from the State of
Texas to handle precursor chemicals.
Mediplas imported its first ephedrine products after April of 1999.
Initially, Mediplas's ephedrine product was labeled ``Mini Twin,'' but
this name was later changed to ``Min Twin.'' Mr. Ahmed credibly
testified that he had seen Mediplas products on display at convenience
stores and gas stations located in Houston, Texas and between Houston
and San Antonio, Texas.
On October 25, 1999, Mr. Ahmed submitted a letter to the DEA,
indicating his desire to add pseudoephedrine to his DEA registration.
Mr. Ahmed requested DEA provide guidance on the procedures he should
follow to add pseudoephedrine to his registration. Subsequently, in the
early part of 2000, Mr. Ahmed also spoke to a DEA representative at the
DEA Headquarters about modifying the Certificate of Registration so
that Mediplas could import pseudoephedrine. By letter dated January 4,
2000, Mr. Ahmed informed a DEA Diversion Investigator (DI) that
Mediplas's application for registration to handle pseudoephedrine had
been approved by the FDA.
Mediplas named its pseudoephedrine product Twin Pseudo. Mediplas
imported Twin Pseudo in 120 count bottles. Mediplas did not distributed
this product to retail outlets; it only sold this product to its sole
distributor, Wholesale Outlet, On April 10, 2000, DEA Report of
Investigation was prepared noting that Mediplas's registration was
modified to authorize it to import pseudoephedrine. By letter dated
February 15, 2000, however Mr. Ahmed informed the DI of the arrival of
an importation of pseudoephedrine and the subsequent sale of that
shipment to Wholesale Outlet. Mr. Ahmed enclosed a copy of the sales of
that shipment to Wholesale Outlet. Mr. Ahmed enclosed a copy of the
sales report concerning this shipment.
Further, from DEA reports of investigation, and based on Mediplas
invoices dated between November 1999, to April 6, 2000, the DEA
reported that, (1) on January 13, 2000, Mediplas purchased its first
shipment of Twin Pseudo, and the report noted the 11 batch numbers and
quantities purchased; (2) on January 25, 2000, Mediplas purchased its
second shipment of Twin Pseudo, and the
[[Page 41258]]
report noted the quantities and the 7 batch numbers of the product
purchased; (3) on February 7, 2000, Mediplas sold its first shipment of
Twin Pseudo to Wholesale Outlet; (4) on March 1, 2000, Mediplas sold
its second shipment of Twin Pseudo to Wholesale Outlet. On April 6,
2000, the DEA served an administrative subpoena upon Mediplas. DEA
representatives reviewed receiving and distribution records, and
conducted an on-site inspection. An inventory was also conducted and an
accountability audit was performed. Mr. Ahmed was advised that there
were no discrepancies found during this investigation.
Pseudoephedrine is a List I chemical pursuant to 21 CFR
1310.02(a)(11). A transaction involving more than one kilogram of
pseudoephedrine in a month requires a fifteen day advance notification
to the DEA. Pseudoephedrine is a legitimately imported and distributed
product used in the manufacture of nasal decongestants. Pseudoephedrine
is also a precursor chemical used in the illicit manufacture of
methamphetamine.
Ephedrine is a List I chemical pursuant to 21 CFR 1310.02(a)(3).
Any entity importing any quantity of ephedrine must notify the DEA
fifteen days in advance of the importation. Ephedrine is a legitimately
imported and distributed product used in the production of bronchial
dilators and asthma relief medication. Ephedrine is also a precursor
chemical used in the illicit manufacture of methamphetamine.
Methamphetamine is a Schedule II controlled substance having
approved uses when taken under a physician's supervision as an FDA-
approved treatment for attention deficit disorder with hyperactivity,
as a treatment for obesity as a short term adjunct in a regimen of
weight reduction, and as a treatment for narcolepsy. Methamphetamine
also has a high abuse potential, however, being ranked among the top
five controlled substances for abuse. Illicit methamphetamine is often
manufactured in clandestine laboratories, often organized by crime
groups. The record shows the majority of illicit methamphetamine
laboratories currently utilize tablets of ephedrine and pseudoephedrine
in the production process. These substances are interchangeable with
respect to the manufacture of methamphetamine.
Prior to importing ephedrine and over-the-threshold amounts of
pseudoephedrine products, each importer is required to provide the DEA
with notice 15 days prior to the importation of the product into the
U.S. The purpose of the 15-day notice is to allow the DEA time to
evaluate the proposed import and to determine whether there exits
grounds to believe that the proposed import may be diverted.
To accomplish this notification the importer must use the DEA Form
486 (Form 486). The DEA considers notification has occurred when the
agency physically receives the Form 486, as indicated by the agency
date stamp on the form. The importer may submit the form by mail or by
electronic facsimile, and approximately 99 percent of Form 486s are
received by the DEA via facsimile. In the event that the actual date of
the import does not match the date projected on the Form 486, the
importer is requested to file an amended Form 486, showing the actual
date of importation. Mediplas has filed such amended Form 486s.
When an importer fails to file the Form 486 in a timely manner, a
record is created and maintained by DEA. If these violations become
repetitive, then the local DEA office is notified, so that
representatives from the local office can address these violations with
the registrant.
On December 22, 1999, the DEA sent a notice to Mediplas, informing
Mediplas that it was required to provide 15-day advanced notice prior
to the importation of ephedrine, regardless of quantity, and
pseudophedrine, for all imports exceeding one kilogram.
The record contains fourteen Form 486s filed by Mediplas between
January and June of 2000. Six of these forms were filed in compliance
with the 15-day rule. Eight were not filed in compliance with the rule.
Judge Randall found Mr. Ahmed credibly testified that he had retained a
customs house broker, whom he had authorized to file the Form 486s with
DEA. The broker both faxed and mailed the forms to the DEA. Mr. Ahmed
credibly testified that he first learned that the DEA had not timely
received the faxed Form 486s from Mediplas's customs broker at this
suspension hearing. For the shipment of 518.5 kilograms of ephedrine,
the Form 486 was received by the DEA on June 5, 2000, noting that the
shipment was due to arrive in the U.S. on June 16, 2000. For the
shipment of 798.55 kilograms of pseudophedrine, the Form 486 was
received by the DEA on June 5, 2000, noting that the shipment was due
to arrive in the U.S. on June 16, 2000. For the shipment of 798.55
kilograms of pseudophedrine, the Form 486 was received by the DEA on
June 5, 2000, noting that the shipment was due to arrive in the U.S. on
June 16, 2000. Thus, the forms were not timely filed, because both
forms were received by the DEA 11 days in advance of the projected
import date, rather than the required 15 days.
The record contains no evidence that the DEA, prior to the OTSS,
had rejected or returned to Mediplas for errors, any of Mediplas's Form
486s, or had notified Mediplas of any untimely filings.
Wholesale Outlet is located in Beaumont, Texas. At the time of the
hearing, Wholesale Outlet held DEA Certificate of Registration,
001664WEY, valid until May 31, 2001, as a distributor of the List I
chemicals pseudoephedrine, ephedrine, and phenylpropanolamine. Mr.
Ahmed decided to distribute Mediplas ephedrine products to a single
distributor, Wholesale Outlet. In October of 1999, Mediplas and
Wholesale Outlet entered into a ``Distribution Contract,'' (Contract)
giving Wholesale Outlet the exclusive rights to buy and sell Mediplas
product brands. As of the date of the OTSS, the Contract was still in
effect between Mediplas and Wholesale Outlet. In November of 1999,
Mediplas and Wholesale Outlet agreed that Mediplas would also see
Wholesale Outlet pseudoephedrine products. Originally, the order was
500 cases of pseudoephedrine products a month.
In October of 1999, Mediplas sold Wholesale Outlet 432 bottles of
ephedrine 12.5 mg, totaling 25,290 tablets at a total price of $527.04.
In November of 1999, Mediplas sold Wholesale Outlet 72,000 bottles of
ephedrine 12.5 mg, totaling 4,320,000 tablets at a total price of
$90,000. In December of 1999, Mediplas sold Wholesale Outlet 5,760
bottles of ephedrine 12.5 mg, totaling 345,600 tablets at a price of
$7,200, and 36,000 bottles of ephedrine 25 mg, totaling 2,160,000
tablets at a price of $45,000. In January of 2000, Mediplas sold
Wholesale Outlet 21,600 bottles of ephedrine 12.5 mg, totaling
1,296,000 tablets at a price of $27,000, and 7,200 bottles of ephedrine
25 mg, totaling 432,000 tablets at a price of $9,000. In February of
2000, Mediplas sold Wholesale Outlet 43,200 bottles of ephedrine 12.5
mg, totaling 2,592,000 tablets at a price of $54,000, and 72,022
bottles of pseudophedrine 60 mg, totaling 8,642,640 tablets at a price
of $185,040. Finally, in March of 2000, Mediplas sold Wholesale Outlet
36,000 bottles of ephedrine 12.5 mg, totaling 2,160,000 tablets at a
price of $45,000, and 63,072 bottles of pseudophedrine 60 mg, totaling
7,568,640 tablets at a price of $162,095.04. Judge Randall found no
evidence that the lot numbers represented by these sales, or that any
[[Page 41259]]
of this product from these batch numbers, had been seized at illicit
laboratories or dump sites.
In a review of Mediplas's sales figures for a three-week period
from February 7, 2000, to March 1, 2000, a DEA DI with experience in
listed chemical investigations testified that the found such total
sales ``suspicious,'' and the highest totals he had ever seen for a
three-week period. Specifically, the DI noted that Mediplas had sold
16,211,280 pseudoephedrine tablets between February 7, 2000, and March
1, 2000. He noted that, for the entire year of 1997, Warner Lambert, a
national distributor of such products, sold 38,287,089 tablets of
product containing pseudoephedrine. The DI noted that Mediplas's sales
in an approximately three-week time period in the year 2000,
represented 42 percent of the amount of pseudoephedrine product Warner
Lambert distributed for the entire calendar year of 1997.
The DI also testified that he found Mediplas's packaging of
pseudoephedrine 60 mg single-entity product suspicious, because he had
never seen a 120-count bottle in any retail business establishment. Mr.
Ahmed agreed that he had not seen such bottles of 120-count
pseudophedrine tablets in a store. The Deputy Administrator concurs
with Judge Randall's finding that the record contains no evidence that
any DEA personnel communicated these specific packaging concerns to any
representatives of Mediplas prior to this hearing, however.
In May of 2000, DEA asked Mr. Ahmed to provide a customer list for
Wholesale Outlet. Mr. Ahmed complied with the DEA's request. The list
consists of fifteen pages. Specifically, for the ephedrine product,
``Mintwin,'' Wholesale Outlet lists 119 customers from Texas,
Louisiana, Michigan, Minnesota, and California. For the ephedrine
product, ``Twincare,'' Wholesale Outlet lists 8 customers, all in
Texas. For the ephedrine product, ``Minitwin,'' Wholesale Outlet lists
20 customers from Louisiana, Georgia, Michigan, Colorado, Texas,
Florida, and Washington.
For the pseudoephedrine product, ``Twin-Pseudo,'' Wholesale Outlet
lists 53 customers from Utah, Washington, Arkansas, Missouri, Nevada,
Oregon, Michigan, Colorado, Texas, Arizona, Montana, Ohio, Oklahoma,
and Florida. Wholesale Outlet's customer list is a mixture of wholesale
and retail establishments, including convenience stores, gasoline
stations, supermarkets, and wholesale grocers and distributors.
On August 3, 2000, the DEA obtained a criminal search warrant for
Wholesale Outlet. During the execution of this warrant, DEA
representatives obtained information for Wholesale Outlet's receiving
records indicating that, aside from Mediplas, Wholesale Outlet
purchased List I chemicals from at least six additional suppliers. This
warrant was the result of an ongoing DEA investigation into Wholesale
Outlet's listed chemical handling practices, as testified to by a
number of Government witnesses.
The DEA has implemented a Warning Letter program in response to
input provided by the chemical industry. The DEA Warning Letter program
is designed to notify manufacturers, distributors, and other handlers
of List I Chemicals of the diversion of their products to
methamphetamine laboratories or dump sites. Each Warning Letter
provides approximately the same information: the date and location of
the discovery, the name of the product discovered, the quantity of
product discovered, and the lot numbers of the product discovered, if
available. In addition, each Warning Letter is accompanied by an
attachment setting forth applicable statutes and regulations concerning
various aspects of handling listed chemicals. At least nine Warning
Letters were delivered by representatives from the DEA's San Antonio
office to Mr. Ahmed between approximately June through October, 2000,
regarding seizures of the company's imported listed chemical products
found ``involved in activities related to the illegal manufacturing
process of methamphetamine.'' The nine Warning Letters document the
diversion of over eleven thousand bottles of Mediplas's List I
chemicals products to the illicit manufacture of controlled substances.
In addition, four Warning Letters were delivered to Wholesale Outlet,
documenting the diversion of additional List I chemical products.
By letters dated June 13, 2000, and July 10, 2000, Mr. Ahmed
informed Wholesale Outlet of the products found in clandestine
laboratories as listed in the Warning Letters. In each letter, Mr.
Ahmed also requested that Wholesale Outlet ``stop sale to the above
locations immediately.'' Wholesale Outlet responded at least once,
stating that it would stop selling to those locations.
By letters dated November 11, 1999, December 7, 1999, February 15,
2000, March 15, 2000, March 28, 2000, April 28, 2000, and June 5, 2000,
Mr. Ahmed informed the DEA of shipments of listed chemicals, both
ephedrine and pseudoephedrine, he had received and subsequently sold to
Wholesale Outlet, and of the samples he had provided the DEA, as
requested. He noted that he had no shortages and no remaining stock of
listed chemicals.
Pursuant to 21 U.S.C. 971(c)(1), and delegations of authority
thereunder at 28 CFR 0.100(b) and 0.104, the Deputy Administrator ``may
order the suspension of any importation * * * of a listed chemical * *
* on the ground that the chemical may be diverted to the clandestine
manufacture of a controlled substance.'' To suspend a shipment pursuant
to 21 U.S.C. 971(c)(1), the DEA must provide written notice to the
regulated person, and include the legal and factual basis for the
suspension order.
According to 21 U.S.C. 971(a) and 21 CFR 1313.12(a), each
``regulated person'' who imports or exports a threshold quantity of a
listed chemical must notify the Attorney General ``not later than 15
days before the transaction is to take place.'' A ``regulated person''
is ``any * * * corporation * * * who manufactures, distributes,
imports, or exports a listed chemical[.]'' 21 CFR 1300.02(b)(27); see
also 21 U.S.C. 802(38). A ``chemical importer'' is a ``regulated
person'' responsible ``for determining and controlling the bringing in
or introduction of the listed chemical into the United States.'' See 21
CFR 1300.02(b)(8).
Further, pursuant to 21 U.S.C. 830(b)(1)(A) and 21 CFR
1310.05(a)(1), a regulated person is required to report to the DEA
``[a]ny regulated transaction involving an extraordinary quantity of a
listed chemical * * * or any other circumstance that the regulated
person believes may indicate that the listed chemical will be used in
violation of this part.''
The regulations also provide that ``the Agency shall have the
burden of proving that the requirements * * * for such suspension are
satisfied.'' 21 CFR 1313.55. The regulations state that the purpose of
a hearing regarding suspended shipments is for ``receiving factual
evidence regarding the issues involved in the suspension.'' 21 CFR
1313.52. Thus, the Government must prove by a preponderance of the
evidence that grounds exist to conclude that ``the chemical may be
diverted to the clandestine manufacture of a controlled substance.'' 21
U.S.C. 971(c)(1); see also 21 CFR 1313.41(a) (2000); Suspension of
Shipment Cases January 17, 1998 Shipment of 10,000 Kilograms of
Potassium Permanganate, December 16, 1997 Shipment of 20,000 Kilograms
of Potassium Permanganate and November 17, 1997 Shipment of 20,000
Kilograms of Potassium
[[Page 41260]]
Permanganate [hereinafter Suspension of Shipment Cases], 65 FR 51,333,
51,336-337 (2000). The test is whether or not the listed chemicals may
be diverted, not whether the listed chemicals actually will be
diverted.
The applicable statutory provisions and legislative history are
silent concerning what constitutes ``grounds'' for the Government to
believe a listed chemical may be diverted to clandestine manufacturing.
Likewise, the statute and the regulations are also silent as to the
factors to be considered to determine if ``grounds'' exist to conclude
that the shipment ``may be diverted.''
To date, past Deputy Administrators have decided three cases
concerning this issue. Suspension of Shipment Cases, 65 FR 51,333
(2000); Yi Heng Enters. Dev. Co., [hereinafter Yi Heng] 64 FR 2,234
(1999); Neil Laboratories, Inc., 64 FR 30,063 (1999). In each case, the
then-Deputy Administrator concluded that ``ample'' and ``substantial''
evidence existed to suspend the shipments at issue. In so concluding,
Judge Randall found past Deputy Administrators evaluated the following
six factors in determining whether a shipment may be diverted: (1) The
status of the shipper to ensure the requesting party is entitled to the
hearing, (2) the regulated person's compliance history as a handler of
listed chemicals, to include whether the advance notification
regulations had been fulfilled, (3) the regulated person's sales
practices, including the legitimacy of the names and addresses of each
proposed recipient of the shipment, (4) the quantities of chemical sold
by the regulated person to its immediate customers, (5) the legitimacy
of the proposed importation through consultation with the regulated
person's government to ensure the regulated person was authorized to
receive the proposed shipment, and (6) any relevant law enforcement
records concerning the regulated person.
The Deputy Administrator concurs with Judge Randall's finding that
these were factors considered in the previous suspension order cases.
The Deputy Administrator finds, however, that these factors are only
illustrative of the types of evidence relevant to justifying a
suspension order, and the enumeration of these factors herein does not
exhaust the range of evidence or factors that can be used to justify a
suspension order pursuant to 21 U.S.C. 971(c)(1). The Deputy
Administrator finds that a totality of the circumstances test is
appropriate in determining whether a suspension order is justified.
The DEA provided notice for these suspended shipments by way of the
Orders to Suspend Shipment. The Orders outlines several grounds for the
DEA's belief that the two shipments, one of ephedrine, and one of
pseudoephedrine, would be diverted to the clandestine manufacture of
controlled substances. Thus, the 21 U.S.C. 971(c)(1) notice requirement
has been met.
A second preliminary determination is whether the requesting party
is entitled to a hearing, 21 U.S.C. 971(c)(2) and 21 CFR 1313.52. The
DEA previously has held that a principal party in interest of a
shipment of a listed chemical would be the ``importer'' for purposes of
21 U.S.C. 971. Essentially, ``if the title to the [listed chemical]
passed to [the regulated person] before the chemical entered the United
States, then the regulated person] is the principal party in
interest.'' Suspension of Shipment Cases, 65 FR at 51,336; Yi Heng, 64
FR at 2,235.
In this proceeding, there was no dispute that as the DEA-registered
importer with title to the chemicals, Mediplas was the principal party
in interest in the suspended chemicals. Thus, the Deputy Administrator
concurs with Judge Randall's conclusion that Mediplas is considered the
regulated person for the purposes of 21 U.S.C. 971, and is entitled to
this hearing.
As a further preliminary matter, a past Administrator previously
has ruled that the purpose of a hearing regarding the suspension of a
chemical shipment ``is to determine whether DEA had evidence at the
time to support its finding that the chemical may be diverted, thereby
warranting the suspension of the shipment.'' Suspension of Shipment
Cases, 65 FR at 51,337. In addressing the scope of the hearing,
however, the then-Administrator found relevant evidence justifying an
order to suspend a chemical shipment must be limited to ``the evidence
available to DEA at the time of the suspensions and to the evidence
presented by [the regulated person] of its business practices prior to
the suspensions and its reputation as a law-abiding company.'' Id.
Likewise, in the present case, both the Government and Mediplas
were limited to evidence acquired or generated prior to the date of the
OTSS. At the hearing in this matter, both the Government and counsel
for Mediplas sought to introduce into evidence various exhibits that
were either discovered or generated subsequent to the date of the OTSS.
Judge Randall adhered to the Suspension of Shipment Cases, evidentiary
ruling, and did not accept into evidence any proposed exhibit
discovered or generated subsequent to the date of the OTSS, as being
beyond the scope of the hearing. Pursuant to the requests of the
parties, however, Judge Randall appended the rejected exhibits to the
record for consideration by the Deputy Administrator, should he choose
to reconsider the evidentiary ruling. Subsequently, the Government in
its Exceptions specifically requested such reconsideration. For the
reasons stated below, the Deputy Administrator hereby reconsiders the
evidentiary ruling rendered in the Suspension of Shipment Cases, and
finds instead that relevant evidence is not limited to that discovered
or generated prior to the date of issuance of the suspension order.
In finding that the purpose and scope of the 21 U.S.C. 971(c)(2)
hearing is to determine whether DEA had evidence at the time of the
issuance of the suspension order to support its finding that the
chemicals may be diverted, the then-Administrator compared the
suspension of shipment hearing provisions with those regarding
revocation of DEA registrations pursuant to 21 U.S.C. 824. The then-
Administrator found that since there was no provision in 21 U.S.C. 971
for the institution of proceedings to determine disposition of the
suspended chemicals, it was reasonable to conclude the focus of the
hearing was whether the suspension order was justified. Since the then-
Administrator found the focus of the hearing was justification of the
suspension order, he limited his review to the evidence available to
the DEA at the time of issuance of the suspension order.
The Deputy Administrator disagrees, and concludes as follows. 21
U.S.C. 971(c)(2) states in relevant part that ``[u]pon written request
to the [DEA], a regulated person to whom an [suspension] order applies
is entitled to an agency hearing on the record[.]`` Such hearings, as
set forth at 21 CFR 1313.52, are ``for the purpose of receiving factual
evidence regarding the issues involved in the suspension of
shipments[.]'' The Deputy Administrator finds the cited language does
not serve to limit his review to any given stage in the proceedings. To
the contrary, the plain language of 21 CFR 1313.52 permits review of
``factual evidence regarding issues involved in the suspension[.]`` The
Deputy Administrator finds the public interest, as well as the
interests of both the DEA and regulated persons, are best served by
consideration of evidence regarding the most current issues involved in
the suspension, not just those frozen at the time of the issuance of
the suspension order. The Deputy Administrator thus
[[Page 41261]]
finds the purpose of the 21 U.S.C. 971(c)(2) hearing is to address
issues involved in the suspension as they stand at the time of the
hearing. Therefore, factual evidence in the instant case regarding the
issues involved in the suspension should not be limited only to that
generated or discovered up to the time of issuance of the OTSS.
Moreover, contrary to the Suspension of Shipments Cases ruling at
issue, the Deputy Administrator finds 21 U.S.C. 971(c)(1) adequately
addresses the disposition of the suspended shipments. In relevant part,
that provision states ``[f]rom and after the time when the [DEA]
provides written notice of the [suspension] order to the regulated
person, the regulated person may not carry out the transaction.'' The
Deputy Administrator finds the intent of 21 U.S.C. 971(c) is not to
permanently deprive the regulated person of the suspended chemicals.
Indeed, the very use of the word ``suspensions'' in that subsection
indicates the intent for a temporary detention. This conclusion is
strengthened by the lack of any language in 21 U.S.C. 971 concerning
the availability of forfeiture proceedings allowing DEA to permanently
dispose of the suspended chemicals. Forfeiture of List I chemicals is
addressed at 21 U.S.C. 824(f), and can only take place in conjunction
with proceedings to suspend or revoke a DEA registration. Forfeiture of
other listed chemicals suspended pursuant to 21 U.S.C. 971 is available
pursuant to 21 U.S.C. 881(a). The record indicates that as of the time
of the hearing, Mediplas's DEA registration was neither suspended nor
revoked.
Therefore, if the suspension order is found to be justified,
pursuant to the language of 21 U.S.C. 971(c)(1), ``the regulated person
may not carry out the transaction.'' (Emphasis added). The focus of
this language is upon the specific transaction underlying the
suspension order. The Deputy Administrator finds this language permits
the regulated person to carry out other transactions regarding the
suspended chemicals, however, provided the regulated person complies
with the requirements of 21 U.S.C. 971(a) by filing a substitute Form
486, providing DEA 15 days notice of a proposed alternative
transaction. If the DEA objects to the proposed alternative
transaction, then the process can start over, and a new suspension
order issued. If the suspension order is found not to be justified at
the time of the hearing, however, then the suspended chemicals can
immediately be released to the regulated person and the original
transaction allowed to take place. The Deputy Administrator therefore
finds disposition of the suspended chemical shipments is adequately
addressed, and thus that the ultimate purpose and scope of the 21
U.S.C. 971(c)(2) hearing is to determine whether the OTSS is justified
at the time of the hearing.
As a result of his reconsideration of the Suspension of Shipment
Cases evidentiary ruling, the Deputy Administrator has considered the
entire record, including the previously rejected but appended exhibits
of both parties, in reaching the conclusions set forth herein.
Judge Randall concluded that the Government had failed to carry its
burden of proof in this matter, upon findings that the violations set
forth by the Government did not support a conclusion that the shipments
``may be diverted,'' and also considering Mediplas's ``extraordinary
and voluntary efforts * * * to comply with DEA's regulations and
guidance[.]'' The Deputy Administrator disagrees, and finds as follows.
In interpreting 21 U.S.C. 971(c)(1), the Deputy Administrator finds
that the plain language of the statute focuses solely upon whether the
chemical shipment ``may be diverted[.]'' The culpability of any
regulated person to whom a suspension order applies appears to be
irrelevant to this determination. The Deputy Administrator notes that
the Controlled Substances Act (CSA) distinguishes between regulatory
actions involving DEA applicants and registrants that require a finding
of culpability, such as the denial of an application for or the
revocation of a DEA Certificate of Registration, in contrast to the
issuance of a suspension order to a regulated person involving a
temporary, limited detention that may be imposed without a finding of
fault. Compare 21 U.S.C. 823 and 824 with 21 U.S.C. 971(c)(1). Only
upon a finding of culpability can a DEA registrant permanently be
deprived of controlled substances or List I chemicals, or a regulated
person permanently be deprived of listed chemicals. 21 U.S.C. 824(f)
and 881(a). The Deputy Administrator finds that in using such broadly
drawn language, Congress has invited the use of the widest possible
range of relevant evidence in determining whether a shipment ``may be
diverted[.]''
A broad interpretation of 21 U.S.C. 971(c)(1) is also supported by
DEA precedent. The Deputy Administrator notes that, in one of the
previously cited DEA suspension of shipment cases, the then-Deputy
Administrator significantly relied upon evidence of misconduct in
handling listed chemicals by the regulated person's customers in
finding the suspension order justified. In Yi Heng, it was argued that
evidence of the activities of the regulated person's customers was
irrelevant to the administrative proceeding regarding suspended
shipments of a listed chemical. Specifically, counsel for the regulated
person argued in Yi Heng that the regulated person engaged in a
legitimate business; that there was no evidence that the regulated
person had knowledge of the improper conduct of its customers; that the
regulated person could not be held responsible for the bad acts of its
customers; and that the regulated person had no control over the
chemical once it was sold to its customers. The then-Deputy
Administrator rejected these arguments, and considered evidence
regarding the activities of both the regulated person and its
customers. Specifically, the then-Deputy Administrator found that
``[t]he prior conduct of [the regulated person's] customers regarding
[the chemicals] is clearly relevant in determining whether the
shipments may be diverted.'' 64 FR at 2,235-6.
Such an interpretation is further supported by the policy behind
the enactment of the Controlled Substances Act: ``The Congress makes
the following findings and declarations * * * (2) The illegal
importation, manufacture, distribution, and possession and improper use
of controlled substances have a substantial and detrimental effect on
the health and general welfare of the American people.'' 21 U.S.C. 801.
``Congress [in enacting the CSA] was particularly concerned with the
diversion of drugs from legitimate channels to illegitimate channels.
It was aware that registrants, who have the greatest access to
controlled substances and therefore the greatest opportunity for
diversion, were responsible for a large part of the illegal drug
traffic.'' United States v. Moore, 423 U.S. 122, 135 (1975) (citations
omitted). This reasoning applies with equal force to the diversion of
listed chemicals by DEA registrants and regulated persons. The
interpretation of 21 U.S.C. 971(c)(1) set forth herein advances the
purposes of the CSA by providing the DEA with the increased ability to
thwart the threatened diversion of listed chemical importations and
exportations by allowing consideration of the widest-possible range of
relevant evidence. Moreover, the culpability of affected parties has
been found irrelevant in criminal and civil actions involving the
public health, safety, and welfare and carrying far more serious
consequences
[[Page 41262]]
that the relatively brief and limited detention authorized by 21 U.S.C.
971. Cf. United States v. Dotterweich, 320 U.S. 277 (1943) (upholding
the Constitutionality of strict criminal liability for ``public welfare
offenses'' involving drugs); United States v. Balint, 258 U.S. 250
(1922) (same); United States v. Green Drugs, 905 F.2d 694, 697-8 (3d
Cir. 1990) (applying strict civil liability to CSA recordkeeping
violations and affirming assessment of monetary penalty). In
determining whether the OTSS in this case were justified, the Deputy
Administrator therefore rejects Judge Randall's factor-by-factor
analysis for a much simpler test: whether the totality of the
circumstances provides grounds to believe that the suspended chemical
shipments may be diverted.
In the instant case, the record shows the following: the nine
Warning Letters issued to Mediplas provided substantial evidence
documenting the diversion of thousands of bottles of its previously
imported List I chemical products to ``clandestine manufacture of a
controlled substance.'' 21 U.S.C. 971(c)(1). In addition, the
Government provided evidence showing that Wholesale Outlet (1) was
under DEA investigation related to its handling of listed chemical
products; (2) was the subject of an August 3, 2000, DEA criminal search
warrant related to the handling of its listed chemical products; and
(3) was the subject of a DEA audit, discussed infra, documenting
numerous and enormous shortages and overages of inter alia Mediplas
List I chemical products running into the millions of dosage units. The
Deputy Administrator finds this evidence provides ample justification
for sustaining the OTSS in this case.
While there was no evidence in the record that Wholesale Outlet had
a record of criminal convictions, the Deputy Administrator finds that
evidence in support of grounds to believe the suspended chemicals may
be diverted is not restricted to conclusive legal judgments. The Deputy
Administrator concurs with the finding in the Suspension of Shipment
Cases, where the then-Deputy Administrator concluded that ``[e]vidence
of a violation of law is not necessary to demonstrate that the
suspensions were lawful.'' Id. at 51,337.
In addition to this evidence, the record shows Mediplas violated
applicable law and regulations with regard to its late-filed 486 forms
and premature importations and distributions of the List I chemical
pseudoephedrine, as set forth below.
The responsibilities of a regulated person include the obligation
to file an advance notification to the DEA of the import of a listed
chemical that meets the threshold amounts triggering the notification
requirement. 21 U.S.C. 971(a); 21 CFR 1313.12. Although the record
shows Mediplas filed such notifications for every shipment imported,
the record contains eight Form 486s that Mediplas did not timely file
during 1999 and 2000. The DEA previously has held that ``failure to
file [advanced notification] by itself, does not justify the suspension
of the shipments.'' Suspension of Shipment Cases, 65 FR at 51,336.
Thus, failure to notify in itself does not justify the suspension, but
it may be a factor to be considered in the analysis of whether there is
the potential for diversion. The record demonstrates that Mediplas
failed to provide timely notification using the Form 486 procedure in
eight instances during the time period of January through June 2000,
prior to importing listed chemicals into the United States. The Form
486s for the two suspended shipments at issue were each filed
approximately four days late.
Judge Randall found it significant that Mr. Ahmed was unaware of
the untimely filing of the forms. He had hired a customs house broker
to prepare and submit this paperwork, and the broker had assured Mr.
Ahmed that the forms were faxed and mailed to the DEA. Since Mr. Ahmed
had not heard from the DEA concerning these untimely filings prior to
this suspension hearing, he was not aware of his broker's errors. Judge
Randall concluded that this lack of knowledge logically negated any
inference that Mediplas was intentionally failing to inform the DEA of
the incoming shipments. Judge Randall noted Mediplas did not fail to
notify the DEA of the two shipments at issue, but that the
notifications were late. Thus, Judge Randall found it significant that
Mediplas's obvious intent was compliance rather than deception in
response to this legal requirement.
The Government agrees in its Exceptions that in a prior DEA case,
the Deputy Administrator found a DEA registrant responsible for the
unlawful actions of its employee, even though the registrant claimed it
had no knowledge of the unlawful acts, citing Leonard Merkow, M.D., 60
FR 22,075 (1995). The Deputy Administrator agrees with the Government,
and finds in the context of this case that Mediplas is liable for the
negligent acts of its agent occurring within the scope of the agent's
authority where Mediplas as principal had a statutory and regulatory
duty to give 15-day advance notice of importation of a listed chemical.
21 U.S.C. 971(a); 21 CFR 1313.12. See Restatement (Second) of Agency,
Sections 272, 275, and 277 (1958). See also W. Seavey, Law of Agency,
Section 98 (1964). Since the Deputy Administrator finds Mediplas is
liable in this case for its agent's failure to timely file eight 486
forms, the late-filed forms must weigh negatively in assessing
Mediplas's compliance with the obligations of a DEA registrant.
Pursuant to the Suspension of Shipments Cases ruling, however, these
late-filed 486 forms do not in themselves justify issuance of the
suspension orders in this case.
The record also contains evidence that Mediplas imported
pseudoephedrine without a modified Certificate of Registration from the
DEA. Specifically, Mediplas was authorized by DEA on April 10, 2000, to
import pseudoephedrine. Yet Mediplas's pseudoephedrine product was
found at clandestine methamphetamine laboratory sites as early as March
28, 2000. Further, the DEA had a letter from Mediplas dated February
15, 2000, recording the arrival and sale of Mediplas's pseudoephedrine
product. Thus, Judge Randall found Mediplas initially imported its
paragraph product with the DEA's knowledge that it lacked DEA's
authorization, in the form of a modified Certificate of Registration
reflecting the addition of pseudoephedrine to the list of controlled
chemicals Mediplas was authorized to import. Judge Randall noted the
record contains no evidence that the DEA informed Mediplas of (1) its
failure timely to obtain the appropriate registration or (2) of the
fact that the DEA found Mediplas's pseudoephedrine product at
clandestine laboratory sites prior to Mediplas obtaining the requisite
registration. The record does contain letters from Mr. Ahmed,
voluntarily informing the DEA of his importation and sales of
pseudoephedrine product between February and April of 2000. Judge
Randall concluded that Mr. Ahmed was not trying to avoid DEA regulatory
requirements or in any way to deceive the DEA.
Looking at the totality of these circumstances, Judge Randall
concluded that Mediplas's failure to timely modify its registration,
balanced by Mediplas's voluntary compliance efforts, did not justify
the suspension of these two shipments. The Government in its Exceptions
argues inter alia that it should not share the responsibility for a
registrant's actions taken outside the scope of the registrant's
authority.
[[Page 41263]]
The Deputy Administrator finds that evidence of voluntary
communications received by DEA from a registrant are admissible to show
attempted compliance with applicable DEA registrant obligations. Lack
of a DEA response to such voluntary communications, however, does not
serve to ratify or to otherwise authorize illicit or unauthorized acts
by the registrant. DEA regulations clearly state that ``[e]very person
who * * * imports * * * any List I chemical * * * shall obtain annually
a registration specific to the List I chemicals to be handled[.]'' 21
CFR 1309.21(a). In addition, ``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.'' 21 CFR 1309.22(b). Finally, ``[n]o person required to be
registered shall engage in any activity for which registration is
required until the application for registration is approved and a
Certificate of Registration is issued by the Administrator to such
person.'' 21 CFR 1309.31(a). Mediplas violated these regulations by
importing and distributing pseudoephedrine on two occasions without
being properly registered to do so.
The Deputy Administrator concurs with Judge Randall's conclusion
that Mediplas was not trying to avoid DEA regulatory requirements or to
deceive the DEA. Mediplas's efforts to comply with the obligations of a
DEA chemical registrant were both extensive and laudable. The Deputy
Administrator finds, however, that the record shows the violations set
forth above were attributable to a lack of proper care and attention on
the part of Mediplas. The Deputy Administrator is therefore forced to
conclude that the untimely Form 486 filing violations attributable to
Mediplas, together with Mediplas's multiple regulatory violations
regarding its premature importations and distributions of
pseudoephedrine, ultimately contribute to the finding herein that the
suspended shipments at issue may be diverted.
The Deputy Administrator further notes with regard to the instant
case that efforts at compliance are ultimately irrelevant to the
specific determination of whether a chemical shipment may be diverted.
As previously stated, a suspension order may be justified without
regard to culpability. Remedial efforts by a regulated person to whom
such an order applies, however, could well be relevant to this
determination. The Deputy Administrator notes Judge Randall found Mr.
Ahmed credibly testified that, in a letter sent to the DEA Headquarters
dated July 12, 2002, he had sought guidance from DEA concerning how to
respond to the Warning Letters he received. Specifically, Mr. Ahmed
provided a number of proposals for the DEA's approval, to include (1)
Mediplas would discontinue the sale and import of pseudoephedrine, (2)
Mediplas would reduce its imported amount of ephedrine per month, (3)
Mediplas would repackage its product into ``pouch packs,'' and (4)
Mediplas would discontinue sales to Wholesale Outlet, selling instead
to another distributor. In addition, pursuant to his reconsideration of
the Suspension of Shipments evidentiary ruling, the Deputy
Administrator has considered a letter dated August 15, 2000, from Mr.
Ahmed to DEA wherein Mr. Ahmed states he is holding the sale of the two
shipments, and that he has stopped the importation of his Twin-Pseudo
product. The Deputy Administrator finds that, while this evidence shows
that Mediplas appears to be willing to take extensive remedial actions
in an effort to thwart future diversion, without additional evidence
establishing concrete remedial steps taken, this evidence is
insufficient to mitigate the conclusion that the suspended shipments at
issue may be diverted.
Pursuant to his reconsideration of the evidentiary ruling in the
Suspension of Shipment Cases above, the Deputy Administrator has also
considered a Government exhibit representing he results of the
previously-mentioned DEA audit of Wholesale Outlet's List I chemical
products that was conducted subsequent to the date of the OTSS. The
audit covered the time period from September 22, 1998, to September 22,
2000, and focused on the accountability of List I chemicals supplied to
Wholesale Outlet by Mediplas, as well as List I chemicals supplied to
Wholesale Outlet by at least six additional suppliers. The audit
revealed numerous dosage unit shortages and overages of various List I
chemical products supplied to Wholesale Outlet by Mediplas. The audit
also revealed numerous shortages and overages of List I chemical
products supplied to Wholesale Outlet by the other six suppliers. There
were shortages and overages in every List I chemical product audited,
including each of Mediplas's List I chemical products supplied to
Wholesale Outlet. Wholesale Outlet failed to account for various List I
chemical products ranging from the hundreds to almost two million
dosage units, depending on the product. The recordkeeping discrepancies
for Mediplas products alone reached almost to eleven million dosage
units of List I chemical products.
List I chemical recordkeeping discrepancies constitute violations
of 21 U.S.C. 830(a) and 842(a)(10) and 21 CFR 1310.03 and 1310.06. The
Deputy Administrator finds that the results of this audit constitute
substantial evidence showing Wholesale Outlet's significant failures to
comply with applicable recordkeeping requirements, creating a grave
risk of diversion. See Alexander Drug Company, Inc. 66 FR 18,299,
18,303 (2001). Therefore, the Deputy Administrator finds that the
results of this audit weigh heavily in favor of a determination that
the suspended chemicals may be diverted.
As further justification in issuing the OTSS in this case, the
Government provided data concerning Mediplas's sales figures and the
sales figures of a major distributor of pseudoephedrine products,
Warner Lambert. The record shows that Mediplas distributed to Wholesale
Outlet 135,094 bottles, or 16,211,280 dosage units, of List I chemical
products between February 7 and March 1, 2000; while Warner Lambert
distributed 38,287,089 dosage units of List I chemical products for the
entire year of 1997. Judge Randall construed the Government's argument
to suggest that, because Mediplas's sales figures seemed so
disproportionately high compared to Warner Lambert's figures, that the
sales were ``suspicious'' or otherwise led to a conclusion that
Mediplas product were more likely to be diverted than Warner Lambert's
product. Judge Randall concluded that this logic is not supported by
the record because the Government provided no data of diverted product
from Warner Lambert and therefore the basis for a complete comparison
does not exist.
In its Exceptions, the Government states that the purpose of this
evidence is not to make a relative comparison of the likelihood of
diversion of Mediplas versus Warner Lambert products. Rather, the
Government seems to argue that this evidence is relevant to the ``may
be diverted'' standard because of the large amount of chemicals sold by
a relatively small company over a short period of time could saturate
the market and create an environment conducive to diversion.
The Deputy Administrator concurs with Judge Randall's finding that
the statute and regulations provide quantity amounts of List I
chemicals to define a ``regulated transaction.'' See 21 U.S.C.
802(39)(a); 21 CFR 1300.02(28) and 1310.04. If a ``regulated person''
engages in a ``regulated transaction,'' then such
[[Page 41264]]
a transaction triggers recordkeeping and reporting requirements. See 21
CFR 1310.04 and 1310.05. Neither the statute nor the regulations
provide limitations on the amount of List I chemicals a registered
importer may sell to a registered distributor in the normal course of
business.
The Deputy Administrator disagrees with the Government, and concurs
with Judge Randall's determination that there is insufficient evidence
in the record to find that the quantity of List I chemical products
distributed by Mediplas over the above-referenced time period was an
``extraordinary quantity.'' The Deputy Administrator also concurs with
judge Randall's finding that the record contains no evidence that the
quantities of List I chemicals sold to Wholesale Outlet by Mediplas
violated any published regulations or other materials distributed by
DEA to its business registrants. The Deputy Administrator notes the
Government does not argue that Mediplas had any specific recordkeeping
or reporting discrepancies, even though Government witnesses asserted
that Mediplas engaged in ``excessive quantity'' sales.
The Deputy Administrator notes that nowhere in the law,
regulations, or in DEA guidelines is ``extraordinary quantity'' defined
or discussed. The Deputy Administrator further notes that, while
Mediplas may be a small company distributing to a single customer, that
customer, Wholesale Outlet, had in turn approximately 200 of its own
customers across the United States. The record shows that a number of
these customers were distributors and wholesalers in their own right.
The record further shows that Mr. Ahmed was aware of Wholesale Outlet's
extensive distribution network, and this was a significant reason why
he chose to do exclusive business with Wholesale Outlet. As to the
Government's ``market saturation'' argument, the Government presented
no evidence purporting to show that Wholesale Outlet's distribution
network was inadequate to legitimately absorb the quantity of List I
chemical products received from Mediplas.
Likewise, the record contains no evidence that Mediplas sold
unauthorized quantities of List I chemicals to Wholesale Outlet.
Although several Government witnesses testified that Mediplas engaged
in sales of excessive quantities, the Deputy Administrator concurs with
Judge Randall's finding that the bases of their conclusions are
speculative. The Government has provided insufficient evidence to
support its conclusion that such sales of listed chemicals in such a
business setting would equate to ``excessive quantities.'' Therefore,
the Deputy Administrator concurs with Judge Randall's finding that the
Government's ``excessive quantities'' arguments are not persuasive
under the circumstances of this case. Accordingly, the Deputy
Administrator further agrees with Judge Randall's conclusion that the
quantities Mediplas sold in the normal course of business do not serve
as grounds to believe that the two shipments at issue ``may be
diverted.''
As additional justification for the OTSS, several Government
witnesses testified concerning the ``traditional'' market and the
``non-traditional'' market for products containing ephedrine and
pseudoephedrine. This testimony, supported only by anecdotal evidence,
is as follows. The ``traditional'' market includes outlets where a
consumer of such legitimate over-the-counter products containing
ephedrine or pseudoephedrine would be expected to purchase them. Such
outlets would include pharmacies, or pharmacy sections of grocery
stores, or discount stores such as Wal Mart. In contrast, the ``non-
traditional market'' includes outlets where a consumer of such
legitimate over-the-counter products containing ephedrine or
pseudoephedrine would be less likely to purchase them. Such market
outlets would include convenience stores, liquor stores, and gas
stations. The ``traditional'' market and the ``non-traditional'' market
also differ in the packaging of over-the-counter ephedrine and
pseudoephedrine products. Outlets in the ``traditional'' market
typically sell such over-the-counter products packaged in blister
packs, in 24-count or 48-count packages sizes. The ``non-traditional''
market outlets, on the other hand, tend to sell over-the-counter
products containing ephedrine and pseudoephedrine in bottles, typically
of 60-count or 120-count size. Several Government witnesses testified
that ephedrine and pseudoephedrine products found at larger illicit
methamphetamine laboratories are usually packaged in the 60-count and
120-count bottles. The DEA therefore concludes that the source of these
bottles is the ``non-traditional'' market outlets. The DEA has also
found such packaged pseudoephedrine products at methamphetamine
laboratory dump sites.
The Deputy Administrator notes, however, that a Government witness
also testified that List I chemical products distributed through the
traditional market, such as through Wal-Mart, have also be diverted.
Upon cross examination, a Government witness admitted that the
``traditional'' versus ``non-traditional'' outlet distinction was an
informal, internal DEA use only. As of the date of the hearing, the DEA
had not recorded such distinctions in any of its regulations. The
Deputy Administrator finds the probative weight of this evidence is
minimal without some form of further extrinsic evidence to support
these arguments.
Upon reviewing the totality of the circumstances of this case, the
Deputy Administrator finds the OTSS justified. In reaching this
conclusion, the Deputy Administrator has carefully considered
Mediplas's exemplary efforts to comply with its obligations as a DEA
chemical registrant, as well as its extensive record of cooperation
with the DEA. The Government provided ample evidence to show these
shipments may be diverted, however. The record shows that at the time
of the hearing, Mediplas's immediate and sole customer, Wholesale
Outlet, was under investigation by DEA regarding suspected misconduct
in its handling of List I chemicals, and was also the subject of a DEA
criminal search warrant, based upon probable cause to believe it was
engaged in misconduct in handling List I chemicals. A DEA audit of
Wholesale Outlet found numerous and enormous shortages and overages of
inter alia Mediplas's List I chemical products. In addition, the nine
Warning Letters issued to Mediplas documented thousands of bottles of
Mediplas's List I chemical products being diverted to the clandestine
manufacture of controlled substances.
The record shows, moreover, that Mediplas significantly violated
applicable law and regulations by, first, failing to timely file eight
Form 486 advanced notifications of importations; and second, by
importing and distributing the List I chemical pseudoephedrine on two
occasions, without obtaining proper registration.
Accordingly, the Deputy Administrator of the Drug Enforcement
Administration, pursuant to the authority vested in him by 21 U.S.C.
971 and 28 CFR 0.100(b), hereby orders that the suspensions of the
subject shipments be, and hereby are, sustained.
This final order is effective immediately.
Dated: May 30, 2002.
John B. Brown III,
Deputy Administrator.
[FR Doc. 02-15193 Filed 6-14-02; 8:45 am]
BILLING CODE 4410-09-M