[Federal Register: February 6, 2008 (Volume 73, Number 25)]
[Rules and Regulations]
[Page 6843-6851]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06fe08-6]
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DEPARTMENT OF JUSTICE
Drug Enforcement Administration
21 CFR Part 1312
[Docket No. DEA-282F]
RIN 1117-AB03
Authorized Sources of Narcotic Raw Materials
AGENCY: Drug Enforcement Administration (DEA), Department of Justice.
ACTION: Final rule.
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SUMMARY: The Drug Enforcement Administration (DEA) is amending the list
of non-traditional countries authorized to export narcotic raw
materials (NRM) to the United States by removing Yugoslavia and adding
Spain. This rule provides DEA registered importers with another
potential source from which to purchase NRM that are used in the
production of controlled substances for medical purposes in the United
States.
DATES: Effective Date: This rule is effective March 7, 2008.
FOR FURTHER INFORMATION CONTACT: Christine A. Sannerud, PhD, Chief,
Drug and Chemical Evaluation Section, Office of Diversion Control, Drug
Enforcement Administration, Washington, DC 20537, telephone (202) 307-
7183.
SUPPLEMENTARY INFORMATION:
Background and Legal Authority
DEA enforces the Comprehensive Drug Abuse Prevention and Control
Act of 1970, often referred to as the Controlled Substances Act (CSA)
and the Controlled Substances Import and Export Act (21 U.S.C. 801, et
seq.), as amended. DEA regulations implementing these statutes are
published in Title 21 of the Code of Federal Regulations (CFR), Parts
1300 to 1316. These regulations are designed to ensure that there is a
sufficient supply of controlled substances for legitimate medical,
scientific, research, and industrial purposes and to deter the
diversion of controlled substances to illegal purposes. The CSA and its
implementing regulations are consistent with United States treaty
obligations that, among other things, address the production, import,
and export of controlled substances.
Controlled Substances
Controlled substances are drugs that have a potential for abuse and
psychological and physical dependence, including opiates, stimulants,
depressants, hallucinogens, anabolic steroids, and drugs that are
immediate precursors of these classes of substances. DEA lists
controlled substances in 21 CFR Part 1308. The substances are divided
into five schedules. Schedule I substances have a high potential for
abuse and have no accepted medical use in treatment in the United
States. These substances may only be used for research, chemical
analysis, or manufacture of other drugs. Substances listed in schedules
II--V have accepted medical uses but also have potential for abuse and
psychological and physical dependence. Narcotic raw materials (opium,
poppy straw, and concentrate of poppy straw (CPS)) are in schedule II
and are the materials from which morphine, codeine, thebaine and
oripavine are extracted for purposes of manufacturing a number of
schedule II and III controlled substances.
Sources of Narcotic Raw Materials
In May 1979, the United Nations' Economic and Social Council
(ECOSOC) adopted Resolution 471, which called on importing countries
such as the United States to support traditional suppliers of NRM and
to limit imports from non-traditional supplying countries. The
resolution, which was reaffirmed by ECOSOC in 1981, was
[[Page 6844]]
adopted to limit overproduction of NRM, to restore a balance between
supply and demand, and to prevent diversion to illicit channels. The
United States, based on long-standing policy, does not cultivate or
produce NRM, but relies solely on opium, poppy straw, and CPS produced
in other countries for the NRM necessary to meet the legitimate medical
needs of the United States. In response to Resolution 471, on August
18, 1981, DEA published a final rule specifying certain source
countries of NRM (46 FR 41775); the rule is frequently referred to as
the 80/20 rule. Under the final rule, currently codified at 21 CFR
1312.13(f) and (g), NRM can be imported from only seven countries.
Traditional suppliers India and Turkey must be the source of at least
80 percent of the United States' requirement for NRM. Five non-
traditional supplier countries--France, Poland, Hungary, Australia, and
Yugoslavia--may be the source of not more than 20 percent. The 80/20
rule is calculated based on the amount of morphine alkaloid contained
in the NRM. The United States continues to reaffirm its support of the
original resolution by supporting similar resolutions each year at the
Commission on Narcotic Drugs.
Just as with DEA's 1979 Federal Register publication first
proposing the 80/20 rule (44 FR 33695), it is important to recite here
some of the central principles of Resolution 471, which remain crucial
today:
Noting that in recent years there has been considerable stepping
up of morphine producing capacity for export, leading to a situation
of substantial overproduction of opiates,
* * * * *
Recognizing that it is essential to bring about a proper balance
between the global supply and demand,
Taking note of the continued reliance placed by the world
community on countries constituting the traditional sources of
supply for its medical needs of opiate raw materials and the
positive response of these countries in meeting the world
requirements and their contribution in the maintenance of effective
control systems;
Bearing in mind that the treaties which establish this system
are based on the concept that the number of producers of narcotic
materials for export should be limited in order to facilitate
effective control; * * *
In view of these principles underlying Resolution 471, DEA stated
in proposing the 80/20 rule in 1979:
The United States is a significant importer of narcotic raw
materials. Its manufacturers account for one-third of the world
morphine manufacturing capacity, most of which is consumed within
the United States in the form of codeine.\1\ The worldwide over-
production of narcotic raw materials and [Resolution 471] make it
necessary for the United States to reevaluate past and present
narcotic policies.
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\1\ Today, the United States remains a significant importer of
narcotic raw material. Its manufacturers currently account for one-
fourth of the world morphine manufacturing capacity, with roughly
two-thirds being utilized for the production of codeine, which is
consumed as either codeine or hydrocodone.
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Historically, the United States has relied exclusively upon
imports of opium gum to manufacture our narcotic medical supplies
instead of cultivating opium poppies in the United States. The
rationale behind this 57-year-old policy, which foregoes [sic] U.S.
self-sufficiency, was to set an example to the world community to
refrain from overproduction and to limit the number of opium-
producing nations to a minimum.
[44 FR 33696, June 12, 1979]
The foregoing principles remain central to United States drug
control policy and this final rule amending the 80/20 rule.
Of the countries included in the 80/20 rule, India is the only
country that cultivates poppies for production of opium. All other
exporting countries use the CPS method of NRM production, a method that
allows the plant to go to seed; portions of the plant are then
processed into a concentrate. It is generally believed that CPS is less
divertible than opium. CPS may be rich in morphine (CPS-M), rich in
thebaine (CPS-T), or rich in oripavine (CPS-O). The United States
imports the majority of its CPS-M from Turkey, with Australia supplying
the vast majority of the balance. The vast majority of CPS-T and all
CPS-O are imported from Australia.
The 80/20 rule was established based on traditional import amounts
and on the United Nations resolution calling on member nations to
support traditional sources that have been reliable suppliers and to
take measures that curtail diversion. The United States allowed a
limited number of non-traditional suppliers to have access to the
United States market based on past commercial relationships and on the
desirability of preserving alternative sources. This approach was
consistent with the United Nations Resolution because it supported
India and Turkey and ensured an adequate and uninterrupted supply of
NRM while limiting the number of supplying countries. Over the last ten
years, pursuant to the 80/20 rule, DEA registered importers of NRM have
imported 90 percent of United States NRM requirements from traditional
suppliers India and Turkey. DEA continues its support of the intent of
the 80/20 rule.
On June 6, 2005, the Kingdom of Spain (hereinafter referred to as
Spain) petitioned DEA seeking to be added to the list of non-
traditional suppliers. Spain stated four reasons that granting its
petition would be consistent with United States interests:
The change would be consistent with the 80/20 rule because
it maintains India and Turkey as the two traditional supplier
countries, that is, Spain does not seek to be added to the list of
traditional suppliers.
The change would ensure adequate supplies of NRM.
The change would not result in diversion because Spain
maintains strict control and oversight over the cultivation and
distribution of NRM.
The change would allow DEA to monitor diversion and
maintain cost-effective supplies.
In its petition, Spain explained that in the early 1970s, Spanish
pharmaceutical firms sought authorization to cultivate opium poppies to
produce NRM. In 1973, the Government of Spain authorized a single firm,
Alcaliber, S.A., to cultivate, harvest, store, and prepare extracts
from the opium poppy. Spain is now the fifth largest cultivator of
opium poppies; Spain is the fourth largest producer of CPS and the
third largest exporter of CPS-M.\2\ Spain has ratified international
agreements to control production and commerce in opium products. As
stated in its petition, Spain has implemented a comprehensive
regulatory regime for controlling the cultivation, production, and
export of NRM in accordance with international treaty requirements. The
petition stated that this control ensures that NRM produced in Spain
are not diverted to illicit uses.
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\2\ ``Narcotic Drugs: Estimated World Requirements for 2005--
Statistics for 2003'', Tables II and XIII; International Narcotics
Control Board (E/INCB/2004/2).
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After review of the petition, DEA published a Notice of Proposed
Rulemaking (NPRM) in the Federal Register on October 4, 2006 (71 FR
58569) to amend the list of non-traditional countries authorized to
export NRM to the United States. Specifically, the proposed rule sought
to revise the list of non-traditional suppliers by removing Yugoslavia
and replacing it with Spain. At that time, DEA had determined that the
successor states to Yugoslavia no longer produced NRM for export beyond
Yugoslavia's prior border (e.g., Serbia and Montenegro reported exports
to the Republic of Macedonia (hereinafter referred to as Macedonia)
only). Therefore, DEA concluded that
[[Page 6845]]
replacing Yugoslavia with Spain would continue to limit the number of
non-traditional suppliers to the United States while ensuring the
availability of an adequate number of sources of NRM for United States
manufacturers. The proposed change would not otherwise affect the
implementation of the 80/20 rule.
Comments Received
Following publication of the Notice of Proposed Rulemaking on
October 4, 2006, DEA received a request for a 60-day extension to the
comment period. On December 1, 2006, DEA extended the comment period of
the proposed rule to January 3, 2007 (71 FR 69504).
During the comment period, DEA received 14 comments from 13
interested parties. Five comments were received from the following
countries: Australia, Spain, Macedonia, and Turkey. One of the comments
received from a foreign Government was a joint comment with a foreign
control board. Three comments were received from three DEA-registered
importers of NRM; one comment was received from a DEA-registered opiate
manufacturer; one comment was received from a non-DEA registered firm;
two comments were received from two foreign NRM manufacturers; and two
comments were received from one individual. As part of the above-listed
comments, DEA also received a request to extend the comment period, and
four requests for a hearing.
After the comment period had ended, DEA received an additional
comment from a foreign NRM manufacturer. This prompted two additional
late comments, one from the foreign control board which previously
commented on the NPRM and the other from the foreign government
associated with that foreign control board. Specifically, both
commenters sought clarification from DEA on the status of the late
comment, which DEA had administratively added to the docket. The
Administrative Procedure Act (APA) does not address the issue of late
comments, and the United States courts generally defer to federal
agencies in their handling of late comments. It is the policy of the
DEA that comments not properly filed, e.g., comments postmarked after
the close of a comment period, will not be considered by the agency in
its deliberative process. Accordingly, the late comment from the
foreign NRM manufacturer was not considered by DEA in this Final Rule.
All comments received during the comment period are summarized here and
discussed further below.
Comments in Support of DEA's NPRM
Four of the commenters supported the proposed rule. These
commenters included the Government of Spain, a DEA registered NRM
importer, one foreign NRM manufacturer, and a DEA-registered opiate
manufacturer. One of the DEA registrants commented that the need to
ensure an adequate number of sources of NRM for DEA-registered NRM
importers is ``most keenly felt in CPS-T and CPS-O, for which the U.S.
demand is rapidly growing and in which global supply sources to the
U.S. are currently quite limited.''
Comments Raising Concerns to DEA's NPRM
Nine of the commenters raised various concerns regarding the NPRM.
These commenters included the Government of Australia, the Government
of Macedonia, and the Government of Turkey; a foreign NRM control
board; two DEA-registered importers of NRM; one non-DEA-registered
firm; one foreign NRM manufacturer; and one individual.
Four commenters claimed that the proposed rule would exacerbate
current global oversupplies of NRM and therefore disrupt the balance
between the supply of and demand for NRM. Three commenters claimed that
the proposed rule was not consistent with the intent of the 80/20 rule
or international resolutions. Three commenters claimed that the
proposed rule was not necessary to assist the United States in
maintaining cost effective supplies of NRM. Three commenters questioned
DEA's decision to replace Yugoslavia with Spain.
The following additional concerns were raised. One commenter
believed that the addition of Spain to the list of non-traditional NRM
producing countries would lead to a proliferation of NRM-producing
countries. The commenter, however, did not provide further information
as to how this rulemaking would specifically lead to a proliferation of
NRM-producing countries. Additionally, one commenter claimed that Spain
has diversion occurring within its borders and that it could not be
proven that the addition of Spain to the list of non-traditional
countries would not lead to an increase in diversion within Spain.
While the commenter provided a general statement regarding the
diversion of controlled substances, the commenter did not provide any
specific evidence regarding the diversion of narcotic raw material
specifically cultivated for lawful purposes in Spain. Due to the lack
of substantiation for the claims discussed above, these comments are
not addressed further in this rulemaking.
Request for Hearing
Four commenters requested that DEA hold an administrative hearing
in this matter. Two of these commenters requested a hearing prior to
the issuance of the final rule. One of these commenters stated that a
hearing was appropriate ``given the gravity and complexity of the
issues involved.'' The other commenter stated that a hearing would
``provide interested parties with the fullest opportunity to make their
views known and have their positions considered.'' These commenters did
not proffer any specific information beyond that submitted in the
written comments, however, that would be brought to light if their
requests for a hearing were granted. DEA has determined that an oral
hearing prior to the issuance of this rule is unnecessary. The
amendment of the 80/20 rule to substitute one non-traditional country
for another that no longer exists in the form it did at the time of the
promulgation of the original rule does not represent a major change in
DEA policy or procedure. Moreover, DEA has carefully considered all of
the comments received in connection with the proposal, and finds that
the comments fully set forth the issues relevant to this rulemaking.
Based on information provided in the comments, information provided in
technical reports by the International Narcotics Control Board (INCB),
and information provided by U.S. importers of NRM pursuant to DEA
regulations, DEA has been able fully to address the relevant issues set
forth in the comments and has determined that conducting a hearing
would not materially add to the administrative record. DEA has
concluded, therefore, that such a hearing would be unnecessary.
Two other commenters requested a hearing following the issuance of
the final rule, if it is issued. Such a request does not conform
procedurally with traditional rulemaking procedures under the APA,
under which--if an agency holds a hearing in connection with a proposed
rule--it is held prior to the issuance of the final rule. Moreover,
neither the CSA nor DEA regulations provide for an administrative
hearing to ``appeal'' the promulgation of a final rule. Pursuant to 21
U.S.C. 877, exclusive jurisdiction for appeals of DEA final decisions
such as this rule rests with the United States Courts of Appeals.
Accordingly, the requests for a hearing if the final rule is issued are
denied.
[[Page 6846]]
Other Comments Received
One of the commenters wrote that if the proposal sought to change
the method by which the 80/20 rule was calculated, then the commenter
would object to the proposed rule. As noted previously, the 80/20 rule
is calculated based on the amount of morphine alkaloid contained in the
NRM. Since DEA's proposed rule and this rulemaking do not affect how
the 80/20 rule is calculated, this matter is not addressed further in
this rulemaking.
One commenter submitted two comments. One of these comments stated,
``So we are deciding who to allow to do the exporting of substances
that are used to make heroin? We allow this? And then kick down the
doors of terminally ill patients who smoke marijuana just to ease their
pain. * * *'' The other comment promoted the use of hallucinogens. NRM
imported into the United States pursuant to this rule are used to make
legitimate medicines that are used to treat pain, not to manufacture
heroin. Heroin production and the use of marijuana and hallucinogens
are not the subject of this rulemaking; these matters are therefore not
addressed further in this rulemaking.
Support for DEA's NPRM
Adequate Supply of NRM
Three commenters addressed the need to ensure adequate supplies of
NRM for United States markets. One commenter noted that the need to
ensure an adequate number of sources of NRM for DEA registered NRM
importers was ``most keenly felt in CPS-T and CPS-O, for which the U.S.
demand is rapidly growing and in which global supply sources to the
U.S. are currently quite limited.''
DEA Response: DEA agrees that United States sources of NRM are
limited based on data it collects quarterly from DEA registered
importers pursuant to 21 CFR 1304.31. The data collected in these
reports include the relative amounts of morphine, codeine, thebaine and
oripavine contained in each individual NRM import to the United States
as reported by each of the five DEA registered NRM importers. In
response to this comment, DEA conducted an analysis of the source of
each of the primary alkaloids available in current NRM: morphine,
thebaine and oripavine. DEA notes that, in 2006, imports of NRM had as
their source, four of the seven countries authorized to export NRM to
the United States, specifically India, Turkey, Australia and France.
United States importers have not imported NRM from Poland or Yugoslavia
since at least 1985, and imports from Hungary were minimal in the mid
to late 1990s and have ceased altogether since 2002. No imports from
Poland, Yugoslavia, or Hungary are anticipated in 2007. Since NRM
contain a mixture of these alkaloids, DEA's review of the NRM import
situation (below) is expressed in terms of the amount of morphine,
thebaine, and oripavine contained in imported NRM.
Morphine: Morphine is the principal alkaloid in Indian opium and
Turkish CPS-M and has historically been the principal alkaloid
extracted from NRM in the United States. Morphine continues to be
utilized in the United States for the manufacture of morphine-based
pharmaceutical products; the manufacture of codeine, which is utilized
to manufacture codeine-based pharmaceutical preparations and
hydrocodone; and the manufacture of hydromorphone. Based on an analysis
of information received for 2006, imports of NRM totaled 124,000 kg of
morphine (124.0 metric tons (MT)), having the following countries as
its source: Turkey (59.9 MT morphine; 48.3 percent), India (43.9 MT
morphine; 35.4 percent), and Australia (20.4 MT morphine; 16.5
percent).\3\ When reviewing imports of morphine over the last 10 years
(1997-2006), United States importers obtained commercial quantities of
morphine from India, Turkey, and Australia, with lesser amounts
obtained from France and Hungary. DEA concludes as a result that the
United States has at least three geographically distinct countries from
which morphine is obtained, each with large production capacity on
which the United States could rely if any of those countries were to
experience a hardship (i.e., crop failure, labor strife, etc.). Adding
Spain would provide DEA registered importers with a fourth country from
which to purchase NRM.
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\3\ Percentages may not add to 100 percent due to rounding.
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Thebaine: Thebaine is the principal alkaloid in CPS-T. CPS-T is
available to the United States market from Australia and France.
Thebaine is also present in Indian opium at approximately one sixth the
level of morphine, thus the amount of thebaine obtained from India is
directly related to the amount of morphine that United States importers
import from India. In the United States, thebaine is utilized for the
manufacture of oxycodone, a schedule II controlled substance. More
recently, oxycodone has been utilized for the manufacture of
oxymorphone, another schedule II controlled substance.
Oxycodone use in the United States has increased tremendously over
the last 10 years. For example, the aggregate production quota for
oxycodone, which represents the maximum amount that may be manufactured
in the United States to meet the estimated medical, industrial,
scientific, and research needs of the United States; for lawful export
requirements; and the maintenance of reserve stocks, has increased over
the last decade from 5,275 kg in 1997 to 49,200 kg in 2006. The large
increase in oxycodone use in the United States followed the approval
and marketing in 1995 of a high dose, single-entity, extended-release
drug formulation known as OxyContin. Although DEA remains concerned
over the diversion and abuse of OxyContin and other formulations that
contain high doses of potent schedule II controlled substances, the
Food and Drug Administration continues to advise DEA of double-digit
growth in the oxycodone market through 2008. This provides evidence
that the demand for thebaine-rich NRM that must be imported into the
United States for this purpose will also continue to increase.
When the same 2006 quarterly statistical import data was reviewed
for thebaine, DEA noted that 78.2 MT of thebaine was imported into the
United States in 2006, having as its source the following countries:
Australia (66.8 MT of thebaine; 85.4 percent), India (7.1 MT of
thebaine; (9.1 percent), and France (4.1 MT of thebaine; 5.2
percent).\4\ Thus, Australia was the source of 85 percent of United
States thebaine requirements in 2006.\5\ For comparison, in 2005, 73
percent of the 65.4 MT of thebaine imported into the United States had
Australia as it source, and, in 2004, 75 percent of the 66.8 MT were
imported from Australia. In 2007, United States importers have reported
their plans to import 92 percent of their thebaine requirements from
Australia; they planned to import the remaining 8 percent solely from
India.
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\4\ Ibid.
\5\ As discussed previously, The 80/20 rule is calculated based
on the amount of morphine alkaloid contained in the NRM. As this
discussion relates to the amount of thebaine alkaloid in the NRM,
not morphine, the 85 percent obtained by the United States from
Australia does not violate principles of the 80/20 rule.
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DEA notes that Australia has a stellar record in providing
thebaine-rich NRM to the United States, with little (if any) record of
diversion. DEA further notes that the United States and Australia have
excellent relations in this area, and contrary to comments made by some
commenters to this NPRM, DEA's proposed rule and this final rule in no
[[Page 6847]]
way suggest that Australia has ``not ensured an adequate and
uninterrupted supply'' of NRM to the United States. DEA remains
mindful, however, of the potential impact of a hardship (i.e., crop
failure, labor strife, etc.) in Australia that could lead to a
temporary lack of availability of thebaine to the United States market.
In this circumstance, the United States would be required to obtain
much larger volumes of NRM from either India or France in order to meet
thebaine demand. Although France has demonstrated the capability of
exporting up to 16 MT of thebaine in a single year to the United
States, India's capacity to export thebaine, as mentioned above, is
directly related to the amount of morphine that importers wish to
import from India consistent with the 80/20 rule. Therefore, importing
vast quantities of Indian opium to meet United States thebaine demands
would be impractical because it would result in the importation into
the United States of excessive amounts of morphine, which could then be
the subject of diversion and abuse. Thus, the amount of thebaine that
could be derived from India, consistent with United States requirements
for morphine contained in Indian opium, is likely to be 6-8 MT
annually. DEA concludes that the United States has limited sources from
which to obtain thebaine derived from NRM. The United States relies on
three countries for thebaine, but two of these countries have a limited
capacity to support the increasing size of the United States' market
for thebaine. DEA notes that, in 2004, the Government of Spain reported
for the first time commercial production of CPS-T, so Spain would
represent a fourth country from which CPS-T could be imported. As a
result, this rule will provide DEA registered importers with another
source from which to purchase CPS-T for the production of medicines.
Oripavine: Oripavine, a schedule II controlled substance, is the
principal alkaloid found in Australian CPS-O and is a minor constituent
in French CPS-T. Oripavine is becoming an increasingly important
intermediate in the United States for the manufacture of buprenorphine,
a schedule III controlled substance, oxymorphone, and a number of
controlled and non-controlled substances referred to generally as
``opiate antagonists'' (naltrexone for example, and its derivatives).
Using the same import data, DEA notes that, in 2006, 9.7 MT of
oripavine was imported into the United States having Australia as its
source, virtually 100 percent of the United States' oripavine
requirements. In 2005, 4.1 MT were imported from Australia and in 2004,
9.4 MT were imported with roughly 86 percent imported from Australia.
United States importers have reported their plans to import 100 percent
of the 9.7 MT of oripavine from Australia in 2007. DEA therefore
concludes that the United States has limited sources from which to
obtain oripavine derived from NRM.
Objections to DEA's NPRM
Global Oversupply of Narcotic Raw Materials
The Government of Australia's primary concern regarding DEA's
proposed rule is that this rule would ``exacerbate global oversupply''
of NRM. In its comment, the Government of Australia pointed to
statistical data published by the INCB in its report, ``Narcotic Drugs:
Estimated World Requirements for 2006--Statistics for 2004,'' which the
Government of Australia characterized as demonstrating that global
production of both morphine-rich and thebaine-rich NRM have been in
excess of global utilization since at least 2001. As a result of
overproduction, the Government of Australia argued, global supplies
have increased.
The DEA-registered NRM importer stated that ``Alcaliber [the sole
Spanish poppy cultivator] made a significant investment in capacity,
dramatically increased production contributing significantly to global
overproduction and excess stocks, and now wants access to the U.S.
market to allow it to increase production further to help recover its
investment.'' The importer further stated that the Notice of Proposed
Rulemaking sent the message that ``If a country adds production
capacity, uses it aggressively and thereby contributes to the world's
build up of excess stocks, the U.S. will accommodate this behavior and
reward it with access to the U.S. market. The U.S. will simply delete a
smaller producer from the list.'' This commenter also stated that
``Spain was arguably the primary source of this build up in excess
morphine stocks.''
Finally, the foreign opiate manufacturer stated that ``Spain's
rapid expansion of its domestic industry, its aggressive approach to
building export markets, its building of clearly excessive stockpiles
and capacity, and supply into a market already in over-supply is not *
* * broadly in accordance with the obligations under the Single
Convention, or the Resolutions.''
DEA Response: DEA disagrees that Spain is the ``primary'' source of
any build-up of global excesses in morphine stocks. Instead, DEA
concludes that all countries that produce NRM contribute to the current
global excess of NRM.
Among many of the requirements of NRM-producing countries, in
accordance with the Single Convention on Narcotic Drugs, 1961, is a
requirement to provide annual statistics to the INCB, including
estimated amounts of NRM to be cultivated and the amount of NRM to be
produced therefrom. The INCB utilizes these estimates along with other
statistical data it collects, in accordance with the Single Convention,
to monitor and analyze the global supply of and demand for NRM. The
results of this analysis are published in a technical report series,
which in 2004 was entitled, ``Narcotic Drugs: Estimated World
Requirements for 2006; Statistics for 2003.'' The analysis conducted by
the INCB and the statistical reports published continue to be an
excellent resource for governments of consumer countries such as the
United States. A review of this report series for 2004 and 2005 was
conducted with relevant statistical data provided in Tables 1 and 2.
Analysis for Morphine-Rich Poppies
Table 1.--``Global Cultivation of Morphine-Rich Poppies (Hectares) for Licit Purposes Other Than Production of
Opium''
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2005 (ha- 2006 (ha-
Country 2003 (ha) 2004 (ha) est.) est.)
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Australia................................................... 9,811 6,644 6,700 4,900
People's Republic of China.................................. 1,250 1,000 1,300 1,200
Czech Republic.............................................. 21,045 16,030 25,000 38,000
France...................................................... 7,919 8,312 8,500 9,100
Hungary..................................................... 2,937 7,084 14,000 12,000
Slovakia.................................................... 332 326 550 ...........
[[Page 6848]]
Spain....................................................... 5,732 5,986 7,002 6,002
Republic of Macedonia....................................... 51 91 1,500 1,500
Turkey...................................................... 99,430 30,343 70,000 70,000
United Kingdom.............................................. 1,534 1,534 1,500 ...........
---------------------------------------------------
Total................................................... 150,041 77,350 136,052 142,702
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Neither DEA, nor any commenter, identified a single instance in
these reports in which the INCB raised concerns over Spain's purported
role in the global excess of production and the resulting oversupply of
NRM presently on hand. According to this publication, Spain was one of
eleven countries that cultivated morphine-rich poppies in 2003 for
licit pharmaceutical purposes (i.e. non-culinary use). Spain planted
5,732 hectares of poppies and produced roughly 4.7 percent of the
world's morphine-rich poppy straw. Spain's share of world production of
poppy straw increased in 2004 to 10.7 percent; the increase was
attributed to both an increase in 2004 acreage sown in Spain and a
large decrease in acreage sown by the primary cultivator of poppies for
this purpose, Turkey. Estimates for the ``area to be cultivated'' for
2005 and 2006 suggest that Spain will be responsible for 5.1 percent of
the area under cultivation and had plans to decrease its area under
cultivation in 2006 to 4.2 percent.
Although Spain remains one of the five largest cultivators of
morphine-rich poppies in the world, DEA concludes that Spain, like all
other producer and consumer countries, contributes to what the INCB
qualifies as a ``high'' level of stocks of raw materials rich in
morphine.
Analysis of Thebaine-Rich Poppies
Table 2.--``Global Cultivation of Thebaine-Rich Poppies (Hectares) for Licit Purposes Other Than Production of
Opium''
----------------------------------------------------------------------------------------------------------------
2005 (ha- 2006 (ha-
Country 2003 (ha) 2004 (ha) est.) est.)
----------------------------------------------------------------------------------------------------------------
Australia................................................... 7,637 5,578 6,500 5,300
People's Republic of China.................................. 34 ........... 40 50
France...................................................... 1,499 1,007 1,100 1,000
Spain....................................................... ........... 996 500 1,000
---------------------------------------------------
Total................................................... 9,170 7,581 8,140 7,350
----------------------------------------------------------------------------------------------------------------
Australia is the principal cultivator of thebaine-rich poppies and
is responsible for the vast majority of thebaine-rich CPS that is
produced and imported into the United States. Although the INCB notes
that production of thebaine-rich NRM exceeded demand substantially
until 2002, DEA notes that the primary cultivators, Australia and
France, began decreasing areas under cultivation in 2003 and have made
significant decreases since that time in order to bring production in
line with utilization. Although Spain noted cultivation of thebaine-
rich poppies for the first time in 2004, it is not responsible for
excess production that resulted in excess supplies before then.
Consistency With the 80/20 Rule and International Resolutions
As stated in DEA's Notice of Proposed Rulemaking, the 80/20 rule
was promulgated following a resolution adopted by the United Nations'
Economic and Social Council (ECOSOC) in 1979. In response to the
resolution in 1979, DEA published an Advance Notice of Proposed
Rulemaking (44 FR 33695, June 12, 1979) and then a Notice of Proposed
Rulemaking (45 FR 9289, February 12, 1980). The comments resulting from
the Notice of Proposed Rulemaking led to an administrative hearing. On
August 18, 1981, DEA published a final rule promulgating the 80/20 rule
(46 FR 41775).
Objections to the current Notice of Proposed Rulemaking pointed to
specific comments in the 1979 resolution, the Notice of Proposed
Rulemaking, the transcript of the administrative hearing, and
considerations made by then-Acting Administrator Francis Mullen, Jr.,
in DEA's 1981 Final Rule.
The foreign opiate manufacturer stated that the 1979 ECOSOC
resolution called on ``importing countries to * * * take effective
steps to support their traditional supplier countries'' and urged
``major producing and manufacturing countries to which have set up
[sic] additional capacity in recent years to take effective measures to
restrict substantially their production levels to assure a lasting
balance between supply and demand and to prevent drug diversion to
illicit channels.'' The commenter believed that ``[a]llowing Spain to
now enter the market directly contradicts and undermines the objective
of the Current 80/20 Rule, and rewards a country for engaging in the
very conduct the Current 80/20 Rule, and the Resolutions, were intended
to discourage or stop.''
The DEA-registered NRM importer who filed objections to the NPRM
provided a summary of the determinations of fact made by Francis Young,
the Administrative Law Judge (ALJ) who presided over the hearing in
1980; these findings were adopted by then-Acting Administrator Mullen
when the final rule was promulgated. The DEA-registered importer
provided the following summary of ALJ Young's determinations of fact:
``(1) DEA could lawfully promulgate the regulatory amendments limiting
the importation of narcotic raw materials; (2) the Administrator of DEA
could lawfully
[[Page 6849]]
require that a major portion of the [NRM] imported into the United
States be produced in India and Turkey while permitting the remainder
of the U.S. needs to be imported from other countries which maintain
adequate control; (3) such allocation would be in harmony with U.S.
trade agreements and would not be inconsistent with Resolution 471 and
497; and (4) DEA staff should determine an allocation ratio based upon
world market shares during a recent representative period.'' This
commenter further noted that the 1981 final rule ``established clearly
stated criteria for selecting the other countries that could supply the
United States market with NRM: (a) France, Hungary, Poland, and
Yugoslavia `provided the United States with [NRM] during the period
1975 through 1979 and present alternate sources' and Australia `was the
source of material for which import permits had been requested during
the time period' and (b) Each country did `impose adequate controls
over their production of narcotic raw materials in adherence to their
obligations under the Single Convention'.''
DEA Response: DEA disagrees with the commenters' assessments that
this rule is inconsistent with the intent of the 80/20 rule and
international resolutions. DEA finds that the proposed rule is
consistent with both the 1979 resolution and the 80/20 rule.
Consistency with 1979 Resolution: The text of the 1979 resolution
contained separate and distinct operative language for Governments of
importing countries (i.e., the United States) and Governments of
producer countries. The operative paragraph for importing countries:
``Urge[d] the Governments of the importing countries that have
not already done so to take effective steps to support the
traditional supplier countries and to give those countries all the
practical assistance they can in order to prevent the proliferation
of sources of production of narcotic raw materials for export[.]''
\6\
---------------------------------------------------------------------------
\6\ Resolution 1979/8 of the Economic and Social Council.
``Maintenance of a world-wide balance between the supply of narcotic
drugs and the legitimate demand for those drugs for medical and
scientific purposes.''
Neither DEA nor the commenters disagree that the United States
meets the first prong of this operative paragraph, i.e., the support of
``traditional supply countries,'' by providing India and Turkey with
access to at least 80 percent of the United States market for morphine
contained in NRM. As has been stated throughout this rule, DEA remains
committed to this obligation through its continued support of the 80/20
rule. The commenter's objections would, therefore, fall under United
States' obligations under the second prong of this operative paragraph,
namely to give all practical assistance in preventing the proliferation
of producing countries. Since it is not refuted that the Government of
Spain has been engaged in the production of NRM since 1974, prior to
international calls to prevent proliferation, DEA concludes that the
Government of Spain is not a new or emerging participant in the global
production of NRM. The addition of Spain to the 80/20 rule will not
result in a proliferation of producer countries. DEA therefore
concludes that this action is consistent with the 1979 resolution.
Consistency with the 80/20 rule: As stated in the proposed
rulemaking and reaffirmed in this final rule, DEA concludes that adding
Spain to the list of countries authorized to export NRM to the United
States is consistent with the 80/20 rule. Specifically, adding Spain is
consistent with the criteria established by then-Acting Administrator
Mullen when establishing Yugoslavia, France, Poland, Hungary, and
Australia as the list of non-traditional suppliers in 1981. In the 1981
Final Rule, then-Acting Administrator Mullen stated:
However, in view of the past commercial relations with certain
other countries as sources of narcotic raw material supply and the
desirability of preserving alternate sources of narcotic raw
materials, it is appropriate to allow certain specific countries to
compete for the U.S. narcotic raw materials market on a limited
basis. These countries, France, Poland, Hungary and Yugoslavia have
provided the United States with supplies of narcotic raw materials
during the period 1975 and 1979 and represent appropriate alternate
sources. Australia is included as well since it was the source of
material for which import permits had been requested during that
time period. In addition, we are presently persuaded that the
nations mentioned above impose adequate controls over their
production of narcotic raw materials in adherence to their
obligations under the Single Convention. (46 FR 41775).
Then-Acting Administrator Mullen reaffirmed DEA's obligations to
preserve alternate sources of NRM for the United States market. In an
effort to determine the sources from which NRM could be derived, he
established the following two criteria in designating the list of
alternate sources: (1) The country had to have supplied the United
States with NRM for a period of five years prior to the resolution's
passage in 1979 and (2) the country had to have imposed adequate
controls over the production of NRM consistent with its obligations
under the Single Convention. In his decision, then-Acting Administrator
Mullen created an exception to the first criterion; this exception
allowed the Government of Australia to be added to the list of non-
traditional suppliers. Specifically, then-Acting Administrator Mullen
found that, if a country was not the source of imports during the
period 1975-1979, then the country had to be a source from which DEA-
registered importers of NRM had requested authority to import. Although
Australia did not export NRM to the United States during the period
1975-1979, it was added because DEA-registered NRM importers had
expressed interest in importing from Australia and had submitted to DEA
the required ``Application for Permit to Import Controlled Substances
for Domestic and/or Scientific Purposes'' (DEA-357) from Australia.
Based on this exception, one could conclude that Spain, despite not
having been a source of NRM to the United States from 1975-1979, could
qualify consistent with the 80/20 rule if a DEA-registered importer had
expressed its interest in importing from Spain by filing a DEA-357,
requesting authorization to do so. DEA notes, however, that the filing
of such an application by a DEA-registered importer at present would be
inconsistent with DEA regulations, specifically the 80/20 rule, and
would therefore be impractical. Instead, interest in importing NRM from
Spain arose through this rulemaking; DEA notes that one DEA-registered
NRM importer expressed its interest in importing NRM from Spain during
the comment period. DEA also notes that, during routine annual
discussions with its five DEA-registered NRM importers before the
receipt of the petition from the Government of Spain, the majority
expressed some degree of interest in importing from Spain.
Neither the commenters nor DEA disagree with the statements of fact
made by the Government of Spain that it has implemented a system of
domestic controls for the handling of NRM that are consistent with the
Single Convention; DEA concludes, as a result, that the second
criterion has been satisfied.
DEA finds that adding Spain to the list of non-traditional
suppliers is consistent with the criteria established in 1981 by then-
Acting Administrator Mullen and is therefore consistent with the 80/20
rule.
Cost of Narcotic Raw Materials
One DEA-registered importer of NRM stated that DEA's Notice of
Proposed
[[Page 6850]]
Rulemaking ``will do little or nothing to improve adequacy of supply or
the cost of NRMs for the U.S.'' The Government of Australia, in its
comments to the DEA's proposed rule stated that ``Spain's petition
presents no evidence to justify a need for change on the basis of
adequacy of supply nor the cost effectiveness of that supply'' and that
``there is no real issue with cost.'' Finally, the foreign opiate
manufacturer stated that there is no evidence that the proposed rule
would maintain cost-effective supplies and that there is ``no
suggestion that current supplies are not cost effective.''
DEA Response: DEA agrees that there is no evidence provided in the
petition from Spain that the addition of Spain to the 80/20 rule would
lead to more cost-effective supplies of NRM. This remains an open
question. DEA does not routinely collect information relating to the
cost of NRM or the opiates manufactured therefrom. Some of the
commenters, however, provided data that demonstrate that the costs of
NRM have steadily declined over the last five years and are presently
at ``record lows.'' For example, the DEA-registered importer of NRM
that objected to the NPRM stated that the price of CPS-M from Turkey
was $660 per kilogram in 2001 and will be $300 per kilogram in 2007.
The same commenter noted that CPS-T was $825 per kilogram in 2001 and
will be $500 per kilogram in 2007. The foreign opiate manufacturer
stated that, ``taking the United States supply price in 2001 as a
benchmark, the 2006 average price of Thebaine to the United States has
declined over 20%.'' Given the increasing demand for thebaine, the
foreign opiate manufacturer contends that a decrease in price suggests
a ``robust competitive environment.''
DEA disagrees with the implication made by the Government of
Australia, however, in its statement that ``Spain's assertion that its
inclusion would further an underlying policy objective of the 80/20
Rule by ensuring an adequate and reliable supply at a stable price is
based on a premise that prices of NRM have not been stable.'' DEA
concludes instead that the prices of NRM are directly related to the
global stocks of these materials, which for more than the last 5 years
have been in excess of global demand. For example, in the 2005 INCB
publication, ``Narcotic Drugs: Estimated World Requirements for 2006--
Statistics for 2004,'' the INCB reported that ``global production of
opiate raw materials rich in morphine exceeded global demand
considerably during the period 2002-2004.'' For opiate raw materials
rich in thebaine, the INCB reported that ``the total supply (production
and stocks) continued to be above global demand also for thebaine-rich
raw materials * * * and that the balance between supply and demand will
continue to be positive.'' DEA therefore concludes that the decrease in
price noted by the commenters is more a function of excess supply
rather than evidence of ``robust competition,'' for, as noted,
Australia supplies the vast majority of the United States' demand for
thebaine.
DEA further concludes that maintaining cost-effective supplies of
NRM to the United States equates to striking a global balance between
supply of and demand for NRM. For producer countries such as India,
Turkey, Australia, France and Spain, this means reducing areas of
cultivation in times when global supplies are in excess and increasing
production (to the extent possible) if and when hardship arises in a
producer country that results in global demand being in excess of
supply. For consumer countries, such as the United States, this equates
to: (1) Ensuring that there are an adequate number of sources from
which to procure NRM during times in which supplies are not in excess,
(2) communicating accurate estimates of United States requirements for
NRM to authorized exporting countries, and (3) working with the
international community, including the INCB, to ensure a global balance
between supply and demand.
Replacing Yugoslavia With Spain
The Republic of Macedonia (Macedonia) forwarded a letter prepared
by the only company licensed in Macedonia to purchase poppy straw and
manufacture opiate alkaloids. The company raised concerns regarding
DEA's comment in the NPRM that ``the successor states to the former
Yugoslavia no longer produce NRM for export.'' The company disagreed
with this observation, stating that Macedonia has been ``enjoying the
rights arising out of the 80/20 rule for more than 25 years.'' The
company therefore insisted that ``Yugoslavia can only be replaced on
the list with its legitimate successor state Macedonia.'' A second
commenter stated that DEA's proposed rule sought to ``replace Macedonia
with Spain.'' Finally, a third commenter stated that DEA ignored ``the
position of its [Yugoslavia's] clear successor state, namely
Macedonia.''
DEA Response: DEA disagrees with those commenters that suggest that
Macedonia is the de facto successor to Yugoslavia for purposes of the
80/20 rule. Macedonia became a sovereign country only after the
dissolution of Yugoslavia. As a new country, Macedonia cannot
automatically replace Yugoslavia in the 80/20 rule. Macedonia is but
one of five countries that were created after the dissolution of
Yugoslavia in the early 1990s. Any one of the five countries would be
required to petition DEA if it wished to be added to the list of
countries authorized to export NRM. DEA would then be required to
review the merits of any such petition in a manner consistent with
DEA's review of the petition filed by Spain.
DEA also disagrees with Macedonia's assessment that its
manufacturers have ``enjoyed'' the rights arising from the 80/20 rule
for the last 25 years. The company did not provide any statistical data
to demonstrate previous sales to the United States or anticipated sales
to the United States. In this regard, DEA conducted a review of import
permits issued for NRM over the last five years and did not identify an
occasion in which a United States importer requested authority to
import NRM from Macedonia. Instead, according to the most recent
statistics available from the INCB (statistics for 2004), Macedonia did
not export opium, poppy straw, or concentrate of poppy straw from 2002
through 2004. Instead, Macedonia reported the exportation of small
quantities of morphine and codeine, schedule II controlled substances
whose importation into the United States is generally regarded as being
prohibited by DEA regulations unless specifically requested in limited
quantities for use exclusively in scientific research (21 CFR 1312.13).
Conclusion
Based on the comments received, statistical data on imports of NRM
collected and analyzed by DEA pursuant to the Code of Federal
Regulations, and reports from the INCB, DEA concludes that in order to
continue to ensure an adequate supply of NRM necessary to meet the
estimated medical, industrial, scientific, and research needs of the
United States, for lawful export requirements, and for the maintenance
of adequate stocks, it is appropriate to add Spain to the list of non-
traditional countries permitted to export NRM to the United States.
Regulatory Certifications
Regulatory Flexibility Act
The Deputy Assistant Administrator, Office of Diversion Control,
hereby certifies that this rulemaking has been drafted in accordance
with the Regulatory Flexibility Act (5 U.S.C. 601-612), that he has
reviewed this regulation, and by approving it certifies
[[Page 6851]]
that this regulation will not have a significant economic impact on a
substantial number of small business entities. This rule imposes no new
costs or burden on small entities. Rather, this rule adds Spain to the
list of non-traditional countries permitted to export NRM to the United
States, helping to ensure that United States importers and
manufacturers will have access to, and be able to procure, supplies of
NRM to meet legitimate United States medical, scientific, research, and
industrial needs, to ensure maintenance of adequate reserve stocks, and
to meet lawful export requirements. Additionally, this rule provides
DEA registered importers with another source from which to purchase NRM
which are utilized for the production of controlled substances used in
the United States for medical purposes.
Executive Order 12866
The Deputy Assistant Administrator, Office of Diversion Control,
further certifies that this rulemaking has been drafted in accordance
with the principles in Executive Order 12866 Section 1(b). It has been
determined that this is a significant regulatory action. Therefore,
this action has been reviewed by the Office of Management and Budget.
Executive Order 12988
This rule meets the applicable standards set forth in Sections 3(a)
and 3(b)(2) of Executive Order 12988.
Executive Order 13132
This rule does not preempt or modify any provision of State law;
nor does it impose enforcement responsibilities on any State; nor does
it diminish the power of any State to enforce its own laws.
Accordingly, this rulemaking does not have federalism implications
warranting the application of Executive Order 13132.
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
$120,000,000 or more (adjusted for inflation) 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.
Congressional Review Act
This rule is not a major rule as defined by Section 804 of the
Small Business Regulatory Enforcement Fairness Act of 1996
(Congressional Review Act). This rule will not result in an annual
effect on the economy of $100,000,000 or more; a major increase in
costs or prices; or significant adverse effects on competition,
employment, investment, productivity, innovation, or on the ability of
United States-based companies to compete with foreign-based companies
in domestic and export markets.
List of Subjects in 21 CFR Part 1312
Administrative practice and procedure, Drug traffic control,
Exports, Imports, Reporting and recordkeeping requirements.
0
For the reasons set out above, 21 CFR part 1312 is amended as follows:
PART 1312--IMPORTATION AND EXPORTATION OF CONTROLLED SUBSTANCES
0
1. The authority citation for part 1312 continues to read as follows:
Authority: 21 U.S.C. 952, 953, 954, 957, 958.
0
2. Section 1312.13 is amended by revising paragraphs (f) and (g) to
read as follows:
Sec. 1312.13 Issuance of import permit.
* * * * *
(f) Notwithstanding paragraphs (a)(1) and (a)(2) of this section,
the Administrator shall permit, pursuant to section 1002(a)(1) or
1002(a)(2)(A) of the Act (21 U.S.C. 952(a)(1) or (a)(2)(A)), the
importation of approved narcotic raw material (opium, poppy straw and
concentrate of poppy straw) having as its source:
(1) Turkey,
(2) India,
(3) Spain,
(4) France,
(5) Poland,
(6) Hungary, and
(7) Australia.
(g) At least eighty (80) percent of the narcotic raw material
imported into the United States shall have as its original source
Turkey and India. Except under conditions of insufficient supplies of
narcotic raw materials, not more than twenty (20) percent of the
narcotic raw material imported into the United States annually shall
have as its source Spain, France, Poland, Hungary and Australia.
Dated: January 30, 2008.
Joseph T. Rannazzisi,
Deputy Assistant Administrator, Office of Diversion Control.
[FR Doc. E8-2142 Filed 2-5-08; 8:45 am]
BILLING CODE 4410-09-P