Federal Register Notices > Rules - 2004 > Clarification of the Exemption of Sales by Retail Distributors of Pseudoephedrine and Phenylpropanolamine Products Rules - 2004FR Doc 04-722 [Federal Register: January 14, 2004 (Volume 69, Number 9)] [Rules and Regulations] [Page 2062-2066] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr14ja04-3] DEPARTMENT OF JUSTICE Drug Enforcement Administration 21 CFR Parts 1300, 1309, 1310 [Docket No. DEA-239T] Clarification of the Exemption of Sales by Retail Distributors of Pseudoephedrine and Phenylpropanolamine Products AGENCY: Drug Enforcement Administration (DEA), Justice. [[Page 2063]] ACTION: Interpretive rule. SUMMARY: By this interpretive rule, DEA is providing guidance to retail distributors for compliance with the law and DEA regulations regarding the exemption of sales of pseudoephedrine or phenylpropanolamine regulated products. Pseudoephedrine and phenylpropanolamine, which are regulated as List I chemicals, are components of many over-the-counter cold and allergy products. This rule does not change DEA's regulations and will have no impact on individual retail customers of such products who have been purchasing them from retailers which have been properly following DEA's regulations. DEA regulations already provide--and this rule clarifies--that an exemption from being a regulated transaction exists for sales of ordinary over-the-counter pseudoephedrine and phenylpropanolamine products ("safe harbor'' products) by retail distributors. However, some sellers have failed to adequately understand that this exemption must be considered in the context of the definition of a "retail distributor.'' A retail distributor is one whose sales of regulated pseudoephedrine and phenylpropanolamine products are limited almost exclusively to quantities below the 9 gram threshold--whether these products are defined as "safe harbor'' products or not--to individuals for legitimate medical use. Therefore, a person who sells more than an occasional amount of pseudoephedrine or phenylpropanolamine product at or above the 9 gram threshold for these products does not fit the definition of a retail distributor on which the exemption is based. FOR FURTHER INFORMATION CONTACT: Patricia M. Good, Chief, Liaison and Policy Section, Office of Diversion Control, Drug Enforcement Administration, Washington, DC 20537, Telephone (202) 307-7297. SUPPLEMENTARY INFORMATION: Special Notice Due to concerns regarding possible harmful side effects from the use of phenylpropanolamine, the Food and Drug Administration (FDA) initiated action in November, 2000, to remove products containing it from the market. As a result, many firms voluntarily discontinued marketing products containing phenylpropanolamine and removed them from the shelves for disposal. However, since some products containing phenylpropanolamine are still available, and since the regulations specifically address products containing phenylpropanolamine, DEA has written this interpretive rule to include drug products containing phenylpropanolamine as well as drug products containing pseudoephedrine. Introduction DEA is publishing this Interpretive Rule to clarify its policies and procedures regarding the exemption of sales of ordinary over-the- counter pseudoephedrine and phenylpropanolamine products ("safe harbor'' products) by retail distributors from being regulated transactions and to provide guidance for compliance with the law and DEA regulations. The Controlled Substances Act (CSA), which is found in Title 21 of the United States Code (21 U.S.C.), sections 801 et seq., sets forth the law for controlled substances and listed chemicals. Implementing regulations are found in Title 21 of the Code of Federal Regulations (21 CFR). Pertinent implementing regulations pertaining to the distribution of List I chemicals are found in 21 CFR 1300.02-- definitions relating to listed chemicals; part 1309--information on the requirements for registration and security; and part 1310--requirements for recordkeeping and reports for listed chemicals. This interpretive rule does not change the regulations. Also, this rule does not have an impact on individual retail customers of regulated pseudoephedrine and phenylpropanolamine products who have been purchasing them from retailers that have been following DEA's regulations. Some retail distributors have failed to adequately understand this exemption. They believe that this exemption is absolute--that a retailer may, without regulation, sell as much "safe harbor'' pseudoephedrine and phenylpropanolamine product to any person for any purpose as often as that person wishes to make a purchase. This is not the case. The exemption of sales of "safe harbor'' products by retail distributors from being regulated transactions must be considered in the context of the definition of a retail distributor of pseudoephedrine and phenylpropanolamine products on which it is based. In the definition of a retail distributor (21 U.S.C. 802(46)(A)), all sales of these regulated products--whether the products are defined as "safe harbor'' products or not--are limited almost exclusively to below-threshold amounts to individuals for legitimate personal medical use. The transaction threshold for sales of regulated pseudoephedrine or phenylpropanolamine products by retail distributors is 9 grams (in packages of not more than 3 grams) in a single transaction (21 U.S.C. 802(39)(A)(iv)(II)). Therefore, a person who sells more than an occasional amount of these products at or above the 9 gram threshold does not meet the definition of a retail distributor on which the exemption is based. The seller would need to register with DEA as a distributor of List I chemicals and comply with the recordkeeping and other regulatory requirements that are set forth for all regulated transactions. Background The Comprehensive Methamphetamine Control Act of 1996 (MCA) created the exemption that sales of ordinary over-the-counter pseudoephedrine and phenylpropanolamine products by retail distributors are not regulated transactions (21 U.S.C. 802(39)(A)(iv)(I)(aa), 802(45) and 802(46)). To understand the intent of Congress in creating this exemption, it is necessary to review the legislative history of the MCA. Congress proposed the MCA to curb the fast spreading abuse of methamphetamine and amphetamine across the United States. In the Findings to the MCA, Congress stated that "methamphetamine is a very dangerous and harmful drug'' and that "Illegal methamphetamine manufacture and abuse presents an imminent public health threat * * *'' (Pub. L. 104-237, section 2). To combat the illegal manufacture and the abuse of methamphetamine and amphetamine, Congress chose to restrict access to the chemical precursors of these drugs--ephedrine, pseudoephedrine and phenylpropanolamine. However, many legal over-the-counter allergy and cold products contain these precursor chemicals. Therefore, Congress balanced the need to restrict access to legal over-the-counter drug products containing precursor chemicals with the need of the public to have access to them. Senator Biden clearly stated this in the Congressional Record:
In addition to allowing consumers access to over-the-counter products [[Page 2064]] containing the precursor chemicals, Congress also tried not to overburden retailers with recordkeeping. As Representative Riggs stated:
Clarification The MCA created an exemption or "safe harbor'' for the sale by retail distributors of ordinary over-the-counter pseudoephedrine or phenylpropanolamine products. (Ephedrine and combination ephedrine products were not included in this "safe harbor.'') These pseudoephedrine and phenylpropanolamine products are packaged according to specific criteria, which includes blister packs or unit dose pouches or packets for products in solid form (21 U.S.C. 802(45)). Many retail distributors have the misconception that the exemption is unqualified-- that they may, without regulation, sell as many "safe harbor'' pseudoephedrine or phenylpropanolamine products as they want to anyone for any purpose so long as these products meet the "safe harbor'' definition. A review of the law shows this is not the case, nor was it the intent of Congress. The intent of Congress has been established by the previous statements cited from the legislative history of the MCA. It is further demonstrated by the following statement of Senator Grassley, which clearly indicates that sales of large quantities of these products at retail stores were not to be allowed.
When reference is made to the "safe harbor'' exemption, it is actually referring to ordinary over-the-counter pseudoephedrine and phenylpropanolamine products, which are defined as follows [emphasis added]:
To fully understand the exemption of sales of ordinary over-the- counter pseudoephedrine and phenylpropanolamine products by retail distributors from a regulated transaction, it is necessary to clearly understand the definition of a regulated transaction [emphasis added]:
It is also necessary to understand the definition of a retail distributor as it relates to pseudoephedrine or phenylpropanolamine products. A retail distributor of pseudoephedrine and phenylpropanolamine products is defined as follows [emphasis added]:
This definition of the activities of a retail distributor makes no distinction between "safe harbor'' and other regulated pseudoephedrine or phenylpropanolamine products. All retail sales of these products-- both safe harbor products and other regulated pseudoephedrine or phenylpropanolamine products--are limited almost exclusively to amounts below the retail threshold to an individual for legitimate medical use. When all of the above definitions and conditions are taken as a whole, the exemption of sales of ordinary over-the-counter pseudoephedrine or phenylpropanolamine products ("safe harbor'' products) by a retail distributor from being a regulated transaction must be read as follows:
Since sales of ordinary over-the-counter pseudoephedrine or phenylpropanolamine products by retail distributors are limited almost exclusively to below-threshold amounts to an individual for personal medical use, it is necessary to set forth the general threshold for pseudoephedrine and phenylpropanolamine products for retail distributors:
Thus, sales by retail distributors of all regulated pseudoephedrine and phenylpropanolamine products--both "safe harbor'' products as well as other regulated products--are almost exclusively to be below the 9 gram threshold (in packages of not more than 3 grams) in a single transaction. An occasional sale at or above the 9 gram threshold is permitted for "safe harbor'' products. Such an occasional sale is not a regulated transaction and does not subject the retail distributor to recordkeeping or registration as a distributor. Examples of occasional sales at or above threshold for "safe harbor'' products would include a sale to a family where everyone is sick or suffering from allergies or a sale to a person who comes from a long distance away, such as in a rural area. For other [[Page 2065]] regulated pseudoephedrine and phenylpropanolamine products, a sale at or above threshold, while permitted, is a regulated transaction necessitating recordkeeping and other regulatory requirements (21 U.S.C. 802(39)(A)(iv)(I)(aa)). If sales of either "safe harbor'' or other regulated pseudoephedrine or phenylpropanolamine products exceed "almost exclusively below-threshold'' amounts either in number of sales or volume of sales (i.e., such sales are not just rare events or sales are not in relatively small quantities), the seller does not meet the definition of a retail distributor and must register with DEA as a distributor of List I chemicals and meet all the applicable regulatory requirements (21 CFR 1309). This includes the requirements for customer identification (21 CFR 1310.07), recordkeeping and reporting (21 CFR 1310), and the security of List I chemicals (21 CFR 1309.71). Following is a table showing the qualifications and requirements for the exemption of sales of "ordinary over-the-counter pseudoephedrine or phenylpropanolamine'' regulated products by retail distributors.
Conclusion For sales of ordinary over-the-counter pseudoephedrine or phenylpropanolamine products ("safe harbor'' products) by a retail distributor to qualify for exemption from a regulated transaction, they must fall within the definition of the activities of a retail distributor (21 U.S.C. 802(46)(A)). The activities of a retail distributor relating to regulated drug products containing pseudoephedrine and phenylpropanolamine makes no distinction between "safe harbor'' and other regulated pseudoephedrine and phenylpropanolamine products. All sales by a retail distributor of these products are limited almost exclusively to amounts below the retail threshold for a single transaction to an individual for legitimate personal medical use. Products must be sold to walk-in customers or must be sold in face-to-face transactions. More than occasional sales of these products by a seller at or above-threshold quantities to an individual in a single transaction or a large number of sales of these products to an individual are inconsistent with the activities defined for a retail distributor. An occasional sale of "safe harbor'' pseudoephedrine or phenylpropanolamine products at or above the retail threshold is not a regulated transaction and does not require the retail distributor to keep records. More than an occasional sale that does not fit within these parameters requires the seller to obtain a DEA registration as a distributor and to meet all the requirements for a distributor, including, but not limited to, security requirements for storing List I chemicals and all the requirements for any sales that are regulated transactions. Regulatory Certifications Regulatory Flexibility Act The Deputy Assistant Administrator hereby certifies that this rulemaking has been drafted in accordance with the Regulatory Flexibility Act (5 U.S.C. 605(b)), has reviewed this regulation, and by approving it certifies that this regulation will not have a significant economic impact on a substantial number of small entities. The rule provides DEA's interpretation of its law [[Page 2066]] and regulations regarding the sale by retail distributors of ordinary over-the-counter pseudoephedrine and phenylpropanolamine products ("safe harbor'' products). Compliance with the current law and regulations, as interpreted by this rulemaking, will not result in any change in economic activity for retail distributors of pseudoephedrine and phenylpropanolamine regulated products. Executive Order 12866 The Deputy Assistant Administrator certifies that this rulemaking has been drafted in accordance with the principles of Executive Order 12866, section 1(b). The rule provides DEA's interpretation of its law and regulations regarding the sale by retail distributors of ordinary over-the-counter pseudoephedrine and phenylpropanolamine products ("safe harbor'' products). DEA has determined that this is not a significant regulatory action. Therefore, this action has not 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, Civil Justice Reform. Executive Order 13132 This rulemaking does not preempt or modify any provision of State law; not does it impose enforcement responsibilities on any state; nor does it diminish the power of any State to enforce its own laws. Accordingly, this rule does not have federalism implications warranting the application of Executive Order 13132. Unfunded Mandates Act This rule will not result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more in any one year, and will not significantly or uniquely affect small governments. Therefore, no actions are necessary under the Unfunded Mandates Reform Act of 1995. Small Business Regulatory Enforcement Fairness Act of 1996 This rule is not a major rule as defined by section 804 of the Small Business Regulatory Enforcement Fairness Act of 1996. This rule will not result in an annual effect on the economy of $100,000,000 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. Dated: January 5, 2004. Laura M. Nagel, [FR Doc. 04-722 Filed 1-13-04; 8:45 am] BILLING CODE 4410-09-P
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