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Importer of Controlled Substances; Correction to Notice of Application

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Information about this document as published in the Federal Register.

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The Drug Enforcement Administration (DEA) is hereby correcting a notice of application that appeared in the Federal Register on April 17, 2006 (71 FR 20729). That document announced the application of Rhodes Technologies to be registered as an importer of raw opium and concentrate of poppy straw. This is the second correction to the original notice of application. This document augments the correction which was published in the Federal Register on May 22, 2006 (71 FR 29354).

The April 17, 2006, notice of application incorrectly stated that “[a]ny manufacturer who is presently, or is applying to be, registered with DEA to manufacture such basic classes of controlled substances may file comments or objections to the issuance of the proposed registration and may, at the same time, file a written request for a hearing on such application pursuant to 21 CFR 1301.43 and in such form as prescribed by 21 CFR 1316.47.” Correctly stated, under the Controlled Substances Act (CSA) and DEA regulations, applications to import narcotic raw materials, including raw opium and concentrate of poppy straw, are not required to be published in the Federal Register. Further, the notice of application, although not required to be published at all, should have stated that “bulk manufacturers” of raw opium or concentrate of poppy straw may file a written request for a hearing. As explained below, since there are no domestic bulk manufacturers of narcotic raw materials registered with DEA, no registrant has a statutory or regulatory right to a hearing on the application.

In response to the notice, several importers of narcotic raw materials who also hold manufacturing registrations (but not as “bulk manufacturers” of narcotic raw materials) requested a hearing on the application. DEA's Administrative Law Judge (ALJ) accepted the requests for hearings and placed the case on DEA's administrative hearing docket. This correction notifies the applicant, the public, and those importers/manufacturers that requested a hearing that DEA is denying the requests for hearing and dismissing the case on the agency's administrative docket.

Statutory and Regulatory Provisions

As set forth in 21 U.S.C. 958(i), the Attorney General (by delegation, the Administrator and Deputy Administrator of DEA) [1] shall, prior to issuing an importer registration to a bulk manufacturer of a controlled substance in schedule I or II, and prior to issuing a regulation under 21 U.S.C. 952(a) authorizing the importation of such a substance, provide “manufacturers holding registrations for the bulk manufacture of the substance an opportunity for a hearing.” (Emphasis added.) Thus, the CSA contemplates that only “bulk manufacturers” shall be entitled to hearing on an application to import a schedule I or II controlled substance and, further, that only those who are registered to bulk manufacture the particular substance that the applicant seeks to import. Accordingly, if no one is registered to bulk manufacture the substance that the applicant seeks to import, no one is entitled to a hearing on that application.

DEA's registration database confirms that no person holds a registration as a bulk manufacturer of raw opium, concentrate of poppy straw, or any of the other narcotic raw materials listed in 21 U.S.C. 952(a)(1).[2] Accordingly, the Start Printed Page 3418CSA provides no right to a hearing to any person seeking to challenge the application of another to become registered to import such narcotic raw materials.

Consistent with the CSA, the DEA regulations provide that the only persons who are entitled to a hearing on an application for a registration to import a schedule I or II controlled substance are those who are either “registered as a bulk manufacturer of that controlled substance” or an “applicant therefor.” 21 CFR 1301.34(a).[3]

In sum, neither the CSA nor the DEA regulations provide a right to a hearing for anyone seeking to contest the application of Rhodes Technologies to import narcotic raw material.

Historical Agency Practice and Other Statutory Considerations

DEA is aware that the agency has, in some prior cases of applications to import narcotic raw materials, granted requests for hearings made by persons that were not bulk manufacturers of the narcotic raw material—despite the fact that no such hearing right is contemplated by the governing statute or implementing regulations. See, e.g., Penick Corp.; Importation and Manufacture of Controlled Substances, Objections, Requests for Hearing, and Hearing, 42 FR 82760 (1980); Mallinckrodt, Inc.; Approval of Registration, 46 FR 24747 (1981); Johnson Matthey, Inc.; Conditional Grant of Registration to Import Schedule II Substances, 67 FR 39041 (2002); Penick Corporation, Inc.; Grant of Registration to Import Schedule II Substances, 68 FR 6947, 6948 (2003); Chattem Chemicals, Inc.; Grant of Registration to Import Schedule II Substances, 71 FR 9834 (2006). In these past cases, the agency did not state that such non-bulk-manufacturers were entitled to a hearing under 21 U.S.C. 958(i) or 21 CFR 1301.34(a). Rather, the agency either granted the hearing without explanation or did so based on what it termed its “discretionary authority.” See, e.g., Penick Corporation, Inc.; Grant of Registration to Import Schedule II Substances, 68 FR 6947, 6948 (2003). Without addressing whether the agency indeed has the theoretical legal authority to grant such hearing requests, I now conclude that the most sound reading of the statute and regulations is that which limits the right to a hearing to those situations in which Congress expressly provided such a right.

As stated above, 21 U.S.C. 958(i), by its plain terms, gives the right to request a hearing not in the case of all applications for a registration to import, but only in those in which the applicant for the import registration is a “bulk manufacturer” and only where the person seeking the hearing is a “bulk manufacturer” of the substance the applicant is seeking to import. Because there are no registered bulk manufacturers of narcotic raw materials,[4] the facts triggering the right to a hearing under section 958(i) are not present in cases in which the applicant for an import registration is seeking to import narcotic raw materials under section 952(a)(1). In contrast, the facts needed to invoke the hearing right of section 958(i) will be present when the applicant is seeking to import the substances referred to in section 952(a)(2), since there are registered bulk manufacturers of the substances referred to in section 952(a)(2) (substances which are not narcotic raw materials).[5]

Congress could have extended the hearing right under 958(i) to importers of narcotic raw materials. That it instead chose to limit that right to bulk manufacturers indicates a determination on its part that extending the hearing right to others is not necessary to advance the goals of the CSA. Among other considerations, invocation of the hearing right by a competitor can add considerable time (months and sometimes years) to the process by which the agency determines whether to grant the application. An existing registrant could ask for a hearing simply to delay a competitor's entry into the market—particularly given that DEA has not promulgated any criteria for deciding whether to grant these types of hearing requests. Such a delay would tend to run counter to the obligation of an agency under the Administrative Procedure Act requires to conclude adjudications “with due regard to the convenience and necessity of the parties * * * and within a reasonable time.” 5 U.S.C. 555(b). Moreover, if DEA were to maintain a policy (not contemplated by the CSA) whereby a competitor could simply request a hearing without making any showing that the hearing either would assist the agency in deciding whether to grant the application or otherwise advance the goals of the CSA, it would be difficult to envision how the agency could act on such hearing requests other than on arbitrary basis. Basic principles of fairness dictate against such an outcome.

Of course, the consideration of delay to the applicant also exists when a bulk manufacturer seeks a hearing on the application of a potential competitor as allowed under section 958(i). However, that Congress expressly provided for a hearing right in such circumstances indicates that Congress weighed the consideration of delay and, on balance, determined the goals of the CSA were advanced by providing a hearing right in such circumstances. Again, that Congress expressed clear criteria as to when the hearing right applied reflects a clear delineation by Congress as to when such hearing right does—or does not—advance the overall goals of the Act.

The mere fact that the agency has followed a procedural practice in the past does not, by itself, compel that the agency repeat the procedure in perpetuity. Finding no valid justification for the past practice, and finding such practice inconsistent with the particular criteria for a hearing rights set forth in the CSA and implementing regulations, I decline to follow this practice.

It should be emphasized, however, that this decision to disallow a hearing right beyond that stated in the statute or regulations by no means should be construed as an indication that this application will be approved without the appropriate scrutiny. As mandated by the CSA, DEA will—prior to deciding whether to issue an order to show cause to deny this application—evaluate the application in accordance with the applicable statutory criteria (21 U.S.C. 952(a)(1) and 958(a)). Section 958(a) requires DEA to evaluate the application under the six public interest factors set forth in 21 U.S.C. 823(a). See Penick Corporation, 68 FR 6947 (2003); Roxane Laboratories, Inc., 63 FR 55891 (1998).Start Printed Page 3419

Conclusion

For the reasons and in the manner set forth above, I correct the Notice of Application dated April 17, 2006. I direct the ALJ to remove from the agency's administrative docket the hearing on the application of Rhodes Technologies to register as an importer of narcotic raw materials.

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Dated: January 18, 2007.

Michele M. Leonhart,

Deputy Administrator.

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Footnotes

1.  21 U.S.C. 871(a); 28 CFR 0.100(b) and 0.104, appendix to subpart R, sec. 12.

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2.  When applying for registration, manufacturers are required to complete DEA Form-225, which requires the applicant to specify the nature of the proposed manufacturing activity. The categories include, among others, “bulk synthesis/extraction” and “dosage form manufacture.” Likewise, the registration database maintained by DEA indicates the specific type of manufacturing activity that is authorized by each registration.

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3.  Moreover, as set forth in 21 CFR 1301.34(a), the right to a hearing is limited to cases in which the applicant is seeking to import a controlled substance pursuant to 21 U.S.C. 952(a)(2)(B).

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4.  Since well before the CSA was enacted (beginning with the Narcotic Drugs Import and Export Act of 1922), it has been the policy of the United States (reflected in legislation enacted by Congress) to favor the importation of narcotic raw materials for conversion in the United States into finished narcotic drug products over domestic production of the raw materials and over the importation of processed narcotic materials and finished narcotic products. This is currently reflected in part by in 21 U.S.C. 952(a) and, in particular, by comparing subsection 952(a)(1) with subsection 952(a)(2) (the latter being more restrictive than the former).

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5.  Section 958(i) expressly excludes from the hearing right applications pursuant to section 952(a)(2)(A) (emergency situations).

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[FR Doc. E7-1053 Filed 1-24-07; 8:45 am]

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