Reexportation of Controlled Substances, 72921-72929 [E7-24919]

Agencies

• Drug Enforcement Administration
• Department of Justice

[Federal Register Volume 72, Number 246 (Wednesday, December 26, 2007)]
[Rules and Regulations]
[Pages 72921-72929]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-24919]


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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Part 1312

[Docket No. DEA-276F]
RIN 1117-AB00


Reexportation of Controlled Substances

AGENCY: Drug Enforcement Administration (DEA), Department of Justice.

ACTION: Final rule.

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SUMMARY: The Controlled Substances Export Reform Act of 2005 amended 
the Controlled Substances Import and Export Act to provide authority 
for the Drug Enforcement Administration (DEA) to authorize the export 
of controlled substances from the United States to another country for 
subsequent export from that country to a second country, if certain 
conditions and safeguards are satisfied. DEA is amending its 
regulations to implement the new legislation.

DATES: Effective Date: This rule is effective January 25, 2008.

FOR FURTHER INFORMATION CONTACT: Mark W. Caverly, Chief, Liaison and 
Policy Section, Office of Diversion Control, Drug Enforcement 
Administration, Washington, DC 20537, Telephone (202) 307-7297.

SUPPLEMENTARY INFORMATION:

Background

    The Controlled Substances Export Reform Act of 2005 (Pub. L. 109-
57) was enacted on August 2, 2005. The Act amends the Controlled 
Substances Import and Export Act (CSIEA) to provide authority for the 
Attorney General (and DEA, by delegation) \1\ to authorize the export 
of controlled substances in schedules I and II, and narcotic controlled 
substances in schedules III and IV, from the United States to another 
country for subsequent export from that country to a second country, if 
certain conditions and safeguards are satisfied.
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    \1\ 28 CFR 0.100(b).
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    Previously under the CSIEA (prior to the 2005 legislation), there 
were no circumstances in which it was permissible to export a 
controlled substance in schedules I and II, or a narcotic controlled 
substance in schedules III and IV, for the purpose of reexport to 
another country. Such controlled substances could lawfully be exported 
only to the immediate country where they would be consumed.
    The Controlled Substances Export Reform Act requires the following:

    Notwithstanding [21 U.S.C. 953] subsections (a)(4) and (c)(3), 
the Attorney General may authorize any controlled substance that is 
in schedule I or II, or is a narcotic drug in schedule III or IV, to 
be exported from the United States to a country for subsequent 
export from that country to another country, if each of the 
following conditions is met:
    (1) Both the country to which the controlled substance is 
exported from the United States (referred to in this subsection as 
the `first country') and the country to which the controlled 
substance is exported from the first country (referred to in this 
subsection as the `second country') are parties to the Single 
Convention on Narcotic Drugs, 1961, and the Convention on 
Psychotropic Substances, 1971.
    (2) The first country and the second country have each 
instituted and maintain, in conformity with such Conventions, a 
system of controls of imports of controlled substances which the 
Attorney General deems adequate.
    (3) With respect to the first country, the controlled substance 
is consigned to a holder of such permits or licenses as may be 
required under the laws of such country, and a permit or license to 
import the controlled substance has been issued by the country.
    (4) With respect to the second country, substantial evidence is 
furnished to the Attorney General by the person who will export the 
controlled substance from the United States that--
    (A) The controlled substance is to be consigned to a holder of 
such permits or licenses as may be required under the laws of such 
country, and a permit or license to import the controlled substance 
is to be issued by the country; and
    (B) The controlled substance is to be applied exclusively to 
medical, scientific, or other legitimate uses within the country.
    (5) The controlled substance will not be exported from the 
second country.
    (6) Within 30 days after the controlled substance is exported 
from the first country to the second country, the person who 
exported the controlled substance from the United States delivers to 
the Attorney General documentation certifying that such export from 
the first country has occurred.

[[Page 72922]]

    (7) A permit to export the controlled substance from the United 
States has been issued by the Attorney General.

21 U.S.C. 953(f).

DEA Proposed Implementation of the Controlled Substances Export Reform 
Act of 2005

    To address the provisions of the Controlled Substances Export 
Reform Act of 2005, DEA published a Notice of Proposed Rulemaking 
(NPRM) (71 FR 61436, October 18, 2006). This rulemaking proposed 
amending DEA regulations to implement this new legislation. Most of the 
proposed amendments to the regulations either reiterated the new 
statutory provisions added by the 2005 Act or specified the procedural 
details for complying with the new statutory provisions. In three 
respects, however, the proposed rule contained substantive requirements 
not contained in the statute. The first additional proposed requirement 
was that the exporter notify DEA when the shipment for reexport has 
left the United States. The second additional proposed requirement was 
that the reexport from the first country to the second country take 
place within 90 days after the shipment leaves the United States. The 
third additional proposed requirement was that bulk materials undergo 
further manufacturing in the first country prior to being shipped to 
the second country. This was the same requirement contained in existing 
DEA regulations for reexports of nonnarcotic controlled substances in 
schedules III and IV and schedule V controlled substances (21 CFR 
1312.27(b)(5)).

Comments Received

    DEA received nine comments on the Notice of Proposed Rulemaking. 
Commenters included one pharmaceutical research and manufacturing 
association, seven manufacturers (including one represented by a law 
firm), and one member of the public. Most of the commenters generally 
supported the rulemaking, but had a variety of comments regarding 
certain aspects of the proposed rule. DEA has made certain 
modifications to the proposed rule in view of the comments. The 
comments, and DEA's responses, are discussed below.
    Authority of DEA to issue substantive requirements not contained in 
the statute: One commenter asserted that DEA is without authority under 
the Controlled Substances Export Reform Act of 2005 ``to create new 
criteria'' and thus that this final rule should be limited to those 
substantive requirements mandated by Congress under the 2005 Act. In 
support of this contention, this commenter asserted that ``Congress was 
extraordinary [sic] specific in the Act on the conditions and criteria 
under which schedule I and II controlled substances may be exported for 
reexport.''
    DEA Response: Under the CSIEA, Congress granted the Attorney 
General express authority to ``promulgate and enforce any rules, 
regulations, and procedures which he may deem necessary and appropriate 
for the efficient execution of his functions under [the CSIEA].'' (21 
U.S.C. 871(b) (incorporated into the CSIEA by 21 U.S.C. 965)). This 
authority has been delegated to the DEA Administrator (28 CFR 
0.100(b)). Thus, DEA has such rulemaking authority with respect to all 
provisions of the CSIEA, including amendments thereto, such as those 
made by the Controlled Substances Export Reform Act of 2005. Indeed, if 
DEA were without such general rulemaking authority, the agency would 
have no ability to issue any regulations implementing the Controlled 
Substances Export Reform Act of 2005, as the 2005 legislation itself 
contains no express delegation of regulatory authority. Accordingly, 
this final rule is being issued pursuant to DEA's general authority 
granted by Congress to promulgate regulations necessary and appropriate 
for the efficient enforcement of the CSIEA.
    That Congress included in the 2005 legislation very specific 
criteria under which certain controlled substances may be reexported in 
no way precludes or limits DEA's general rulemaking authority under the 
CSIEA. This is illustrated by, among other things, reviewing the 
longstanding import and export provisions of the CSIEA (21 U.S.C. 952 
and 953), which also contain great specificity. Notwithstanding this 
specificity in the statutes, DEA has promulgated a variety of 
regulations (21 CFR part 1312) that impose restrictions beyond those 
mandated by Congress.
    Time for reexportation: In its NPRM, DEA proposed requiring that 
the reexport from the first country to the second country take place 
within 90 days after the shipment leaves the United States. Eight 
commenters disagreed with this proposed requirement, citing a variety 
of concerns.
    Commenters who disagreed with the 90-day timeframe asserted that, 
in some cases, it can take longer than 90 days to complete the 
additional manufacturing and testing in the first country and to obtain 
the permit from the second country. Further, these commenters asserted 
that other controls required by the Controlled Substances Export Reform 
Act are sufficient to ensure proper reexportation of controlled 
substances.
    One commenter asked that DEA, when evaluating time considerations, 
bear in mind the system of estimates imposed under the treaties and 
implement the reexport allowance in a manner that will ``prevent an 
accumulation of raw materials and distortion of estimates.''
    DEA Response: DEA has considered the commenters' concerns and their 
explanations for those concerns. In addressing these comments, it is 
useful to begin with a reiteration of some important general 
principles. First, it should be noted that the United States has always 
been a world leader in promoting international and domestic control of 
narcotics and other controlled substances. As our nation is the world's 
largest producer of pharmaceutical controlled substances, the controls 
implemented by the United States play a crucial role in preventing 
diversion worldwide. Moreover, taking steps to prevent the United 
States from being a source of worldwide diversion directly benefits our 
country since a portion of the controlled substances diverted into 
illicit channels abroad can end up being sent back to the United States 
through illicit channels.
    Another key principle is that, as one of the commenters suggested, 
reducing the accumulation of stocks of controlled substances tends to 
decrease the opportunity for, and likelihood of, diversion. It has long 
been recognized that the longer large supplies of controlled substances 
remain idly stockpiled, the greater the possibility of diversion. 
Consistent with these considerations, it should be noted that Congress, 
in enacting the 2005 legislation allowing for reexports, contemplated 
that ``[a]ll subsequent transfers of controlled substances would still 
be subject to strict oversight by the DEA and will require a permit 
from the Attorney General to prevent any potential abuse.'' 151 Cong. 
Rec. H6671 (July 27, 2005).
    Given these principles, DEA strongly believes that, from an 
international drug control perspective, it is essential that the export 
from the first country to the second country occur in a finite period 
of time. The reexport allowance was not intended, and should not be 
construed, to allow the United States to become a source of stockpiling 
of controlled substances abroad for indefinite time periods. Moreover, 
without some limitation on the time controlled substances may remain in 
the first

[[Page 72923]]

country, a scenario could arise in which DEA has issued a permit 
authorizing a reexport, yet be without sufficient documentation to 
determine whether the shipment (i) has remained for many months in the 
first country without being reexported, (ii) has been improperly 
reexported to a different second country than that indicated on the 
reexport application, or (iii) was properly reexported to the second 
country but the reexporter failed to notify DEA within 30 days as 
required by the statute. As DEA noted in the NPRM, it can be inferred 
that one purpose of Congress' inclusion of the requirement that the 
United States exporter notify DEA within 30 days of the exportation 
from the first country to the second country is to provide a means for 
DEA to maintain an awareness of the status of shipments leaving the 
United States for reexport and thereby enhance the agency's ability to 
monitor and prevent diversion of such shipments. Requiring that there 
be a finite time within which the exportation from the first country to 
the second country must occur eliminates the possibility that DEA would 
be unable to ascertain the status of an approved reexport for an 
indefinite period of time.
    Nonetheless, based on the comments received, DEA has decided to 
amend the regulation to double the time limit originally proposed. 
Under this Final Rule, the exportation from the first country to the 
second country may take place up to 180 days after the controlled 
substance was exported from the United States.
    Use of National Drug Codes: Proposed Sec.  1312.22(a) would require 
that applicants for export permits include the National Drug Code (NDC) 
number. One commenter suggested that the NDC number should only be 
required if the drug or product exported is listed with the U.S. Food 
and Drug Administration (FDA), because, this commenter asserted, some 
research compounds, reference standards, and samples are not required 
by the FDA to have an NDC number. Another commenter expressed its 
opinion that, based on FDA regulations, NDC numbers are not assigned to 
products for export, and countries outside the United States do not 
require NDC numbers, so the requirement to provide an NDC number on the 
DEA reexport permit application should be removed.
    DEA Response: Requirements relating to NDC numbers are set forth in 
regulations issued by FDA. The NDC number consists of three parts: The 
labeler code, the product code, and the package code. Currently, FDA 
assigns the labeler code, and the product and package codes are 
assigned by the regulated industry within certain FDA parameters. On 
August 29, 2006, FDA published a Notice of Proposed Rulemaking 
[``Requirements for Foreign and Domestic Establishment Registration and 
Listing for Human Drugs, Including Drugs that are Regulated Under a 
Biologics License Application, and Animal Drugs'' (Docket No. 2005N-
0403, RIN 0910-AA49) (71 FR 51276)] proposing, among other things, 
requirements regarding NDC numbers.
    In view of the comments, DEA is modifying the proposed rule to 
indicate that persons applying for a reexport permit must supply to DEA 
the NDC number of a drug in accordance with FDA regulations. DEA 
anticipates that the overwhelming majority of controlled substances 
that will be reexported under this Final Rule will have NDC numbers. 
However, the Final Rule has been modified so that, if no NDC number is 
required under FDA regulations for a drug being exported from the 
United States, the applicant for reexport will not be required to 
supply an NDC number.
    System of controls of imports: Consistent with the 2005 
legislation, proposed Sec.  1312.22(c)(1) and (c)(2) would require the 
countries to which the controlled substance is exported to be parties 
to certain international conventions and to maintain, in conformity 
with such conventions, a system of controls that DEA deems adequate. In 
the text accompanying the proposed rule, DEA stated that DEA must be 
able to make the foregoing determinations based on the information 
contained in the permit application (DEA Form 161R). With respect to 
these aspects of the proposed rule, one commenter stated: ``[I]t will 
be extremely difficult for U.S. exporters to determine in advance of 
applying for an export permit (to reexport) which countries the DEA has 
determined maintain a system of controls that the agency `deems 
adequate.' '' Another commenter requested ``that the permit application 
not require the applicant to certify that the country maintains a 
system of control of imports consistent with the requirements of the 
treaties.'' However, a third commenter stated that ``the export permit 
applicant should be able to state that to the best of their knowledge 
and belief, the country of ultimate consumption maintains a system of 
control of imports consistent with the requirements of the treaties.''
    DEA Response: The requirements to which these comments pertain were 
specifically included in the Controlled Substances Export Reform Act, 
as codified in 21 U.S.C. 953(f)(1) and (2). These statutory 
requirements are repeated essentially verbatim in the text of the 
Proposed and Final rule (Sec.  1312.22(c)(1) and (c)(2)). However, in 
view of the comments, DEA wishes to clarify the following points. 
First, it was not DEA's intent to require the reexport permit applicant 
to certify that the first and second countries maintain systems of 
control which DEA deems adequate. Rather, as the statute indicates, DEA 
must make the determination--as a prerequisite to issuing the permit--
that both the first and second countries are parties to the Single 
Convention and Psychotropic Convention and maintain, in conformity with 
such conventions, a system of controls of imports of controlled 
substances which DEA deems adequate. The applicant will be required to 
certify, on the DEA Form 161R, to the best of his/her belief, that 
``the first and second countries have each instituted and maintain a 
system for the control of these substances.'' This is the same 
certification that traditional exporters have always been required to 
make under the DEA Form 161.
    Responsible official: Proposed Sec.  1312.22(c)(7) would require 
the documentation to DEA to be signed by ``the responsible company 
official.'' One commenter pointed out that large companies might have 
several persons who meet these requirements and recommended that the 
provision be changed to ``a responsible official.''
    DEA Response: DEA agrees that there are circumstances in which 
companies might have more than one official authorized or permitted to 
sign documents providing the required information of DEA. Therefore, 
DEA is amending 21 CFR 1312.22(c)(7) and 1312.22(d)(6) to permit a 
responsible company official to sign the documents in question.
    Further manufacture of bulk materials: Proposed Sec.  1312.22(d)(1) 
would prohibit bulk substances from being reexported in the same form 
as they were exported from the United States, i.e., the material must 
undergo further manufacturing processes. Two commenters requested 
definitions or clarifications of the terms ``further manufacturing'' 
and ``bulk materials.'' One commenter suggested that further 
manufacturing should include processing, packaging, or relabeling and 
that bulk materials should include bulk product, such as tablets, 
capsules, solutions, suspensions, etc. That commenter also requested 
clarification in the Final Rule that bulk dosage forms

[[Page 72924]]

may be reexported for labeling and packaging in the second country.
    DEA Response: The Controlled Substances Act (CSA) defines 
``manufacture'' as: ``the production, preparation, propagation, 
compounding, or processing of a drug or other substance, either 
directly or indirectly or by extraction from substances of natural 
origin, or independently by means of chemical synthesis or by a 
combination of extraction and chemical synthesis, and includes any 
packaging or repackaging of such substance or labeling or relabeling of 
its container'' (21 U.S.C. 802(15)). DEA believes that this definition 
established by Congress is broad enough to encompass all controlled 
substance manufacturing activities. The requirement in the Final Rule 
that further manufacturing of bulk material take place in the first 
country will be satisfied by any bona fide manufacturing activity that 
fits within the broad CSA definition of ``manufacture.'' As mentioned 
in the NPRM, this further manufacturing requirement is the same 
requirement that exists in the current regulations for the 
reexportation of nonnarcotic controlled substances in schedules III and 
IV, and of controlled substances in schedule V. Those regulations have 
been in place for many years, and are well-understood by the regulated 
industry. DEA believes that the intent of this regulation, and the 
definition of remanufacture, is clear; there is nothing in the export 
regulations to supersede or otherwise interpret the definition of 
``manufacture'' and DEA does not believe that further clarification is 
warranted here.
    Similarly, DEA believes that the concept of bulk substances is 
well-understood within the regulated industry and does not require 
further clarification. Congress used the term ``bulk manufacture'' in 
the CSIEA without defining that term, see 21 U.S.C. 958(i), and DEA has 
never attempted to define this term by regulation. DEA does not believe 
that the issuance of this rule necessitates such a definition. One 
example of how the term ``bulk manufacture'' has long been used by 
registrants without difficulty is that all persons who seek to become 
registered to manufacture schedule I and II controlled substances are 
required to specify on their applications for registration (DEA Form 
225) whether they are seeking to engage in ``bulk'' manufacturing or 
some other type of manufacturing, such as dosage form manufacturing.
    Reports of reexport to the second country: Proposed Sec.  
1312.22(d)(4) and (d)(5) would require the United States exporter to 
identify the second countries and quantities at the time of shipment. 
One commenter asserted that shifts in demand may occur after the 
product has been exported to the first country, so a list of second 
countries and potential quantities should be a permissible option. 
Another commenter believed that DEA should recognize that because of 
manufacturing processes in the first country, the amounts of reexports 
to the second country may vary from the original estimates. Thus, this 
commenter asserted that the Final Rule should allow the United States 
exporter to amend the 30-day export reports to keep DEA informed of 
changes.
    DEA Response: While DEA recognizes that international demand for 
controlled substances may shift over time, the statute plainly 
contemplates that both the first and second country must be identified 
to DEA before the shipment leaves the United States in order for the 
agency to make the assessments required by the statute. Among other 
things, for DEA to meet its statutory and international treaty 
obligations, DEA cannot issue a permit for the exportation, or 
reexportation, of any controlled substance to any country when DEA has 
information to show that the estimates or assessments submitted with 
respect to that country for the current period, under the Single 
Convention on Narcotic Drugs, 1961, or the Convention on Psychotropic 
Substances, 1971, have been, or, considering the quantity proposed to 
be imported, will be exceeded. Thus, the permit issued by DEA 
authorizing the reexport must specify both the first and second 
countries and may not be modified to change the second country after 
the shipment leaves the United States.
    Regarding variances in reexports to second countries due to 
manufacturing in the first country, it should be noted that the statute 
requires the applicant for reexport to provide DEA with substantial 
evidence, prior to the shipment leaving the United States, that a 
permit to import the controlled substance is to be issued by the second 
country and that the proposed amount of controlled substance to be 
reexported to the second country is needed for a medical, scientific, 
or other legitimate use in that country. Also, as indicated above and 
in the NPRM, the quantity of controlled substances must be such that 
the importing country will not exceed its estimates or assessments 
provided to the International Narcotics Control Board (INCB) of the 
United Nations. Thus, before any shipment leaves the United States for 
reexport, considerable planning and preparation should go into 
determining the quantity of controlled substances that is ultimately 
destined for the second country. Accordingly, there should be minimal 
variance between the quantity set forth in the export permit and that 
which is actually shipped to the second country. (DEA recognizes that 
there may be some slight wastage of controlled substances in 
manufacturing processes in the first country.)
    Section 1312.22(c)(7) requires the United States exporter, within 
30 days of exportation from the first country to the second country, to 
report to DEA on company letterhead the actual quantity shipped. Those 
who submit such reports will be reporting on quantifiable transactions 
that have already occurred and have a responsibility to provide 
accurate information in doing so. Therefore, amendments to this report 
should not be necessary.
    Time to report reexportation: One commenter requested that DEA 
extend beyond 30 days the time required for the United States exporter 
to provide notification of reexports from the first country to the 
second country, because of the need to obtain information from other 
parties.
    DEA Response: This requirement was set by Congress (21 U.S.C. 
953(f)(6)) and DEA is without authority to modify it by regulation.
    Return of the product to the United States: Proposed Sec.  
1312.22(d)(8) would provide for the reexporter to seek authorization 
from DEA to return a shipment to the United States if such shipment has 
been refused by the second country. One commenter urged DEA to allow 
the reexporter to seek the same return authorization where the shipment 
has been refused by the first country. This same commenter further 
asked that, if the shipment is refused by the second country, the 
reexporter be permitted to return the shipment to the first country. 
Two other commenters requested clarification as to whether the United 
States itself can serve as the second country.
    DEA Response: As DEA discussed in the proposed rule, there are 
circumstances in which a shipment has been exported from the United 
States, but is refused by the consignee in the second country, or is 
otherwise unacceptable or undeliverable. In these circumstances, the 
exporter may seek permission from DEA, in appropriate circumstances, to 
return the shipment to the registered exporter in the United States. 
The language DEA proposed regarding this provision parallels the same 
language as is currently in place for reexportation of nonnarcotic 
controlled substances in schedules III

[[Page 72925]]

and IV, and controlled substances in schedule V. Under this provision, 
DEA will assess each situation on a case-by-case basis in determining 
whether it is appropriate to authorize the return of the shipment to 
the United States. DEA is adopting the first suggestion of the 
commenter to modify the rule to state expressly that if either the 
first or second country refuses the shipment, the reexporter may seek 
authorization from DEA to return the shipment to the United States. It 
should be noted, however, that DEA's experiences with reexportation of 
nonnarcotic controlled substances in schedules III and IV, and 
controlled substances in schedule V, indicate that such returns are 
expected to be very infrequent.
    However, DEA cannot adopt the commenter's second suggestion--that 
DEA allow shipments which have been rejected by the second country to 
be returned to the first country. To do so would be the equivalent of 
allowing an export to the first country without having obtained proper 
approval before the shipment left the United States. Traditional 
exports of narcotic drugs in schedule I, II, III, or IV, and 
nonnarcotic controlled substances in schedule I or II are governed by 
21 U.S.C. 953(a) and (c). Among the requirements of these provisions 
are: That DEA determine, before the shipment leaves the United States, 
that substantial evidence has been furnished that the controlled 
substance is to be applied exclusively to medical, scientific, or other 
legitimate uses within the country of import; that there is an actual 
need for the controlled substance for medical, scientific, or other 
legitimate uses within the country; and that DEA has issued a permit to 
export the controlled substance for consumption in the country of 
import. In order for DEA to make these determinations, the applicant 
for the export permit must supply certain information and make certain 
certifications on DEA Form 161. None of the foregoing requirements 
would be satisfied if DEA allowed a shipment that it authorized for 
reexport to be returned from the second country to the first country. 
In addition, allowing such returns from the second country to the first 
country could potentially disrupt the system of estimates and 
assessments and statistical returns maintained by the INCB, which is 
crucial to international drug control.
    Regarding whether the United States may serve as the second 
country, to allow controlled substances to be re-imported into the 
United States by interpreting the term ``second country'' to include 
the United States would be contrary to the intent of Congress in 
enacting the legislation. As stated in House Report 109-115, part 1, at 
2 (2005): ``The purpose of this legislation is to amend Section 1003 of 
the Controlled Substances Import and Export Act [21 U.S.C. 953] by 
allowing a controlled substance that has been exported from the United 
States to be subsequently exported to a third country under certain 
conditions and pending a permit from the Attorney General.'' (Emphasis 
added.) Similarly, part 2 of the same House Report stated (at 2) that 
the legislation ``will allow pharmaceutical companies to export 
controlled substances to distribution centers for export to one 
additional country.'' (Emphasis added.) Along the same lines, in 
remarks made on the House floor upon moving to pass the Senate version 
of the bill (S. 1395), Congressman Deal stated:

    Under [then current law, as set forth in] the Controlled 
Substances Import and Export Act, a company is not allowed to export 
controlled substances to one country and then send it to a third 
country. Companies that export controlled substances must make a 
large number of long-distance, small shipments to individual 
countries, incurring large shipping costs. Due to this restriction, 
American manufacturers are less competitive than their foreign 
competitors, which results in high-paying U.S. jobs being sent 
overseas.

151 Cong. Rec. H6671 (July 27, 2005) (emphasis added).
    Thus, the scenario that Congress sought to address through the 
legislation entails the exportation of controlled substance drug 
products manufactured (initially) in the United States for ultimate 
consumption abroad (i.e., in a ``third country'').
    In addition, even if Congress had expressed no intent as to whether 
the ``second country'' referred to in 21 U.S.C. 953(f) could be the 
United States (which was not the case), re-importation into the United 
States would be impermissible unless the re-importer were able to 
demonstrate that it met the requirements of 21 U.S.C. 952(a)(2). 
Section 952(a)(2) governs importation of ``any controlled substance in 
schedule I or II or any narcotic drug in schedule III, IV, or V,'' 
which encompasses all the controlled substances subject to 21 U.S.C. 
953(f), the Controlled Substances Export Reform Act. The requirements 
of Sec.  952(a)(2) are highly restrictive and unlikely to be 
demonstrated where the applicant seeks to export a controlled substance 
from the United States for re-importation into the United States.
    Estimated times per response for filing DEA Form 161 and 161R: As 
discussed in the preamble to the NPRM, DEA Form 161 is currently used 
to report the exportation of controlled substances in schedules I and 
II and narcotic controlled substances in schedules III and IV. DEA 
proposed the establishment of new Form 161R for the reporting of 
reexportations. The discussion of the Paperwork Reduction Act in the 
preamble to the proposed rule included a table of the estimated number 
of respondents and the amount of time estimated for an average 
respondent to respond regarding the completion of these forms. One 
commenter believed that the time estimates for completion of the 
required forms were too low because they apparently did not consider 
the time required to obtain the information needed to complete the 
forms. The commenter did not provide its own estimates regarding the 
time needed to complete the forms.
    DEA Response: DEA estimates that it takes 30 minutes for a 
respondent to complete DEA Form 161 for exportation of controlled 
substances. DEA estimates that it takes a respondent 45 minutes to 
complete DEA Form 161R for reexportation of controlled substances. DEA 
recognizes that a variety of factors contribute to the time required to 
complete these forms including, but not limited to, the number and 
variety of controlled substances being exported or reexported, the 
number of countries to which controlled substances are exported or 
reexported, and the respondent's familiarity with the form. DEA notes 
that these estimates are average estimates; it may take some persons 
more time to complete these forms and it may take some less time. 
Therefore, as the time burdens are estimates of the time an average 
respondent takes to respond, and based on the varying factors 
associated with each exportation or reexportation of controlled 
substances, DEA believes that these estimates are accurate, on average, 
and is not adjusting the time burdens associated with this collection.

Other Considerations

Treaty Considerations

    As discussed in the NPRM, the first two subsections of the 
Controlled Substances Export Reform Act of 2005 pertain to the Single 
Convention on Narcotic Drugs, 1961 (Single Convention), and the 
Convention on Psychotropic Substances, 1971 (Psychotropic Convention). 
Under these provisions, a reexport may take place only if both the 
first and second country are parties to both treaties and only if the 
Attorney General (DEA by delegation) determines that both the first 
country and the second country maintain an adequate system of controls 
in conformity with the treaties.

[[Page 72926]]

    Thus, Congress expressly intended that reexports take place in 
accordance with the treaties. The control measures imposed under the 
Controlled Substances Export Reform Act of 2005, along with the 
regulations being finalized here, are intended to work in tandem with 
the international control regimes under the treaties. The ultimate goal 
of the 2005 Act and this Final Rule is to permit exportation of 
controlled substances in schedules I and II and narcotic controlled 
substances in schedules III and IV from the United States to a first 
country for subsequent exportation to one or more second countries 
while preventing international diversion resulting from reexports. 
Whenever considering safeguards against diversion of international 
shipments, one must bear in mind the backdrop of the treaties. Toward 
this end, the following treaty principles are noted.
    Under the Single Convention, each country that is a party to the 
treaty is required to furnish the International Narcotics Control Board 
(INCB) with annual estimates of, among other things, the quantities of 
narcotic drugs on hand, the anticipated amounts that will be consumed 
by the party for legitimate purposes, and the anticipated production 
quantities. The Single Convention also requires parties to furnish the 
INCB with statistical returns for the prior year, indicating the 
amounts of drugs produced, utilized, consumed, imported, exported, 
seized, disposed of, and in stock. The Psychotropic Convention requires 
the parties to provide the INCB with statistical reports and 
assessments containing similar information with respect to psychotropic 
substances. Through the collection of this information, the INCB 
provides exporting countries with information on the legitimate 
requirements of the importing countries and can take steps to reduce 
the likelihood of international diversion. For example, the INCB may 
notify parties if the quantity of drugs exported to a particular 
country exceeded the estimates for that country. Parties that receive 
such notification from the INCB are prohibited from authorizing further 
exports of the drug concerned to that country.

Issuance of Permits

    Under the 2005 Act, before a controlled substance can be exported 
for subsequent reexport, the exporter must obtain from DEA a permit 
that authorizes the export for this purpose. Consistent with the 2005 
Act, DEA may issue such a permit only if each of the conditions 
specified in the Act is met. Each of these conditions is restated in 
this Final Rule. Although most of these conditions are self-
explanatory, some additional explanation is warranted.
    DEA will be issuing a new application form, DEA Form 161R, for a 
permit to export controlled substances for subsequent reexport in 
accordance with the 2005 Act. The statute requires the reexporter (as a 
condition of obtaining an export permit from DEA) to specify both the 
first and the second countries, and to provide substantial evidence 
that, with respect to the second country, the controlled substance is 
to be consigned to a holder of such permits or licenses as may be 
required under the laws of such country, and a permit or license to 
import the controlled substance is to be issued by the country. In its 
NPRM, DEA discussed what would constitute ``substantial evidence'' for 
purposes of subsection (4) of the 2005 Act. Specifically, if on the 
completed DEA Form 161R, the applicant has identified an appropriately 
licensed or permitted consignee in the second country and certified 
that the second country is a party to the Conventions and maintains a 
system of controls of imports consistent with the requirements of the 
treaties, and so affirmed in the affidavit section of the application, 
DEA will consider this substantial evidence that a permit or license to 
import the controlled substance will be issued by the second country.
    Failure to comply with the CSIEA and its implementing regulations, 
including those set forth in this rulemaking, may result in the 
imposition of penalties and/or administrative remedies as provided in 
the CSIEA. As with all statutory and regulatory provisions that DEA 
administers, the agency will evaluate any transgressions involving this 
Final Rule on a case-by-case basis, taking into account the totality of 
the circumstances, in determining the appropriate course of action.

Reexportation to More Than One Second Country

    DEA believes it is consistent with the text, structure, and purpose 
of the 2005 Act to allow a shipment of controlled substances to be 
exported from the United States to a ``first country'' for reexport to 
more than one ``second country'' (but not further export from any 
second country to a third country), provided the exporter notifies DEA 
of this intent in the application for export permit, and provided 
further that the statute is fully complied with in all other respects. 
DEA received one comment discussing this issue. The commenter supported 
DEA's position, agreeing that such an interpretation was contemplated 
in the Controlled Substances Export Reform Act. Therefore, this 
provision is being finalized without change. This Final Rule expressly 
provides for reexport to more than one second country, and the new Form 
161R is structured accordingly.

Refused Shipments

    As discussed previously, there are circumstances in which a 
shipment has been exported from the United States, but is refused by 
the consignee in the second country, or is otherwise unacceptable or 
undeliverable. In these circumstances, the exporter may seek permission 
from DEA, in appropriate circumstances, to return the shipment to the 
registered exporter in the United States. DEA proposed applying the 
same procedures to address this circumstance as already exist for the 
reexportation of nonnarcotic controlled substances in schedule III and 
IV, and controlled substances in schedule V (21 CFR 1312.27(b)(5)(iv)). 
DEA did not receive any comments seeking revision of this proposed 
language. Therefore, it is adopted as proposed.

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. 601-612), 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. 
This rulemaking permits schedule I and II controlled substances, and 
narcotic controlled substances in schedules III and IV, to be exported 
from the United States to the first country for subsequent reexport to 
second countries for consumption. Previously such reexportation was not 
permitted within DEA law and regulations.

Executive Order 12866

    The Deputy Assistant Administrator further certifies that this 
rulemaking has been drafted in accordance with the principles in 
Executive Order 12866 Sec.  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 regulation meets the applicable standards set forth in 
Sec. Sec.  3(a) and 3(b)(2) of Executive Order 12988 Civil Justice 
Reform.

[[Page 72927]]

Executive Order 13132

    This rulemaking 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.

Paperwork Reduction Act of 1995

    The Department of Justice, Drug Enforcement Administration, is 
revising the information collection entitled ``Application for Permit 
to Export Controlled Substances'', by adding a new DEA Form 161R to be 
used by persons applying for a permit to reexport controlled substances 
in schedules I and II, and narcotic controlled substances in schedules 
III and IV. DEA has submitted the new DEA Form 161R and the information 
collection request to the Office of Management and Budget for review 
and clearance in accordance with review procedures of the Paperwork 
Reduction Act of 1995.

Overview of this information collection

    (1) Type of Information Collection: Revision of an existing 
collection.
    (2) Title of the Form/Collection: Application for Permit to Export 
Controlled Substances.
    (3) Agency form number, if any, and the applicable component of the 
Department of Justice sponsoring the collection:
    Form Number: DEA Form 161, Application for Permit to Export 
Controlled Substances; DEA Form 161R, Application for Permit to Export 
Controlled Substances for Subsequent Reexport.
    Office of Diversion Control, Drug Enforcement Administration, U.S. 
Department of Justice.
    (4) Affected public who will be asked or required to respond, as 
well as a brief abstract:
    Primary: Business or other for-profit.
    Other: None.
    Abstract: Title 21 CFR 1312.21 and 1312.22 require persons who 
export controlled substances in schedules I and II and who reexport 
controlled substances in schedules I and II and narcotic controlled 
substances in schedules III and IV to obtain a permit from DEA. 
Information is used to issue export permits, exercise control over 
exportation of controlled substances, and compile data for submission 
to the United Nations to comply with treaty requirements.
    (5) An estimate of the total number of respondents and the amount 
of time estimated for an average respondent to respond: It is estimated 
that 90 respondents will respond, with submissions as follows:

----------------------------------------------------------------------------------------------------------------
                                                   Number of
                                                   responses        Average time per response      Total (hours)
----------------------------------------------------------------------------------------------------------------
DEA Form 161 (exportation only)...............           2,200  30 minutes (0.5 hours)..........           1,100
DEA Form 161R (reexportation).................             400  45 minutes (0.75 hours).........             300
Certification of exportation from United                   400  15 minutes (0.25 hours).........             100
 States to first country.
Certification of reexportation from first                1,200  15 minutes (0.25 hours).........             300
 country to second country*.
    Total.....................................           4,200  ................................           1,800
----------------------------------------------------------------------------------------------------------------
* Assumes three separate reexports to second countries

    (6) An estimate of the total public burden (in hours) associated 
with the collection: The total public burden (in hours) for this 
collection is estimated to be 1,800 hours.

Congressional Review Act

    This rule is not a major rule as defined by Sec.  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--[AMENDED]

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 1312.22 is amended by revising paragraph (a) and adding 
paragraphs (c) through (e) to read as follows:


Sec.  1312.22  Application for export permit.

    (a) An application for a permit to export controlled substances 
shall be made on DEA Form 161, and an application for a permit to 
reexport controlled substances shall be made on DEA Form 161R. Forms 
may be obtained from, and shall be filed with, the Drug Enforcement 
Administration, Import/Export Unit, Washington, DC 20537. Each 
application shall show the exporter's name, address, and registration 
number; a detailed description of each controlled substance desired to 
be exported including the drug name, dosage form, National Drug Code 
(NDC) number (in accordance with Food and Drug Administration 
regulations), the Administration Controlled Substance Code Number as 
set forth in Part 1308 of this chapter, the number and size of packages 
or containers, the name and quantity of the controlled substance 
contained in any finished dosage units, and the quantity of any 
controlled substance (expressed in anhydrous acid, base, or alkaloid) 
given in kilograms or parts thereof. The application shall include the 
name, address, and business of the consignee, foreign port of entry, 
the port of exportation, the approximate date of exportation, the name 
of the exporting carrier or vessel (if known, or if unknown it should 
be stated whether shipment will be made by express,

[[Page 72928]]

freight, or otherwise, exports of controlled substances by mail being 
prohibited), the date and number, if any, of the supporting foreign 
import license or permit accompanying the application, and the 
authority by whom such foreign license or permit was issued. The 
application shall also contain an affidavit that the packages are 
labeled in conformance with obligations of the United States under 
international treaties, conventions, or protocols in effect on May 1, 
1971. The affidavit shall further state that to the best of affiant's 
knowledge and belief, the controlled substances therein are to be 
applied exclusively to medical or scientific uses within the country to 
which exported, will not be reexported therefrom and that there is an 
actual need for the controlled substance for medical or scientific uses 
within such country, unless the application is submitted for reexport 
in accordance with paragraphs (c) and (d) of this section. In the case 
of exportation of crude cocaine, the affidavit may state that to the 
best of affiant's knowledge and belief, the controlled substances will 
be processed within the country to which exported, either for medical 
or scientific use within that country or for reexportation in 
accordance with the laws of that country to another for medical or 
scientific use within that country. The application shall be signed and 
dated by the exporter and shall contain the address from which the 
substances will be shipped for exportation.
* * * * *
    (c) Notwithstanding paragraphs (a) and (b) of this section, the 
Administration may authorize any controlled substance listed in 
Schedule I or II, or any narcotic drug listed in Schedule III or IV, to 
be exported from the United States to a country for subsequent export 
from that country to another country, if each of the following 
conditions is met, in accordance with Sec.  1003(f) of the Act (21 
U.S.C. 953(f)):
    (1) Both the country to which the controlled substance is exported 
from the United States (referred to in this section as the ``first 
country'') and the country to which the controlled substance is 
exported from the first country (referred to in this section as the 
``second country'') are parties to the Single Convention on Narcotic 
Drugs, 1961, and the Convention on Psychotropic Substances, 1971;
    (2) The first country and the second country have each instituted 
and maintain, in conformity with such Conventions, a system of controls 
of imports of controlled substances which the Administration deems 
adequate;
    (3) With respect to the first country, the controlled substance is 
consigned to a holder of such permits or licenses as may be required 
under the laws of such country, and a permit or license to import the 
controlled substance has been issued by the country;
    (4) With respect to the second country, substantial evidence is 
furnished to the Administration by the applicant for the export permit 
that--
    (i) The controlled substance is to be consigned to a holder of such 
permits or licenses as may be required under the laws of such country, 
and a permit or license to import the controlled substance is to be 
issued by the country; and
    (ii) The controlled substance is to be applied exclusively to 
medical, scientific, or other legitimate uses within the country;
    (5) The controlled substance will not be exported from the second 
country;
    (6) The person who exported the controlled substance from the 
United States has complied with paragraph (d) of this section and a 
permit to export the controlled substance from the United States has 
been issued by the Administration; and
    (7) Within 30 days after the controlled substance is exported from 
the first country to the second country, the person who exported the 
controlled substance from the United States must deliver to the 
Administration documentation certifying that such export from the first 
country has occurred. If the permit issued by the Administration 
authorized the reexport of a controlled substance from the first 
country to more than one second country, notification of each 
individual reexport shall be provided. This documentation shall be 
submitted on company letterhead, signed by a responsible company 
official, and shall include all of the following information:
    (i) Name of second country;
    (ii) Actual quantity shipped;
    (iii) Actual date shipped; and
    (iv) DEA export permit number for the original export.
    (d) Where a person is seeking to export a controlled substance for 
reexport in accordance with paragraph (c) of this section, the 
following requirements shall apply in addition to (and not in lieu of) 
the requirements of paragraphs (a) and (b) of this section:
    (1) Bulk substances will not be reexported in the same form as 
exported from the United States, i.e., the material must undergo 
further manufacturing process. This further manufactured material may 
only be reexported to a second country.
    (2) Finished dosage units, if reexported, must be in a commercial 
package, properly sealed and labeled for legitimate medical use in the 
second country.
    (3) Any proposed reexportation must be made known to the 
Administration at the time the initial DEA Form 161R is submitted. In 
addition, the following information must also be provided where 
indicated on the form:
    (i) Whether the drug or preparation will be reexported in bulk or 
finished dosage units;
    (ii) The product name, dosage strength, commercial package size, 
and quantity;
    (iii) The name of consignee, complete address, and expected 
shipment date, as well as the name and address of the ultimate 
consignee in the second country.
    (4) The application (DEA Form 161R) must also contain an affidavit 
that the consignee in the second country is authorized under the laws 
and regulations of the second country to receive the controlled 
substances. The affidavit must also contain the following statement, in 
addition to the statements required under paragraph (a) of this 
section:
    (i) That the packages are labeled in conformance with the 
obligations of the United States under the Single Convention on 
Narcotic Drugs, 1961, the Convention on Psychotropic Substances, 1971, 
and any amendments to such treaties;
    (ii) That the controlled substances are to be applied exclusively 
to medical or scientific uses within the second country;
    (iii) That the controlled substances will not be further reexported 
from the second country, and
    (iv) That there is an actual need for the controlled substances for 
medical or scientific uses within the second country.
    (5) If the applicant proposes that the shipment of controlled 
substances will be separated into parts after it arrives in the first 
country and then reexported to more than one second country, the 
applicant shall so indicate on the DEA Form 161R, providing all the 
information required in this section for each second country.
    (6) Within 30 days after the controlled substance is exported from 
the United States, the person who exported the controlled substance 
shall deliver to the Administration documentation on the DEA Form 161R 
initially completed for the transaction certifying that such export 
occurred. This documentation

[[Page 72929]]

shall be signed by a responsible company official and shall include all 
of the following information:
    (i) Actual quantity shipped;
    (ii) Actual date shipped; and
    (iii) DEA export permit number.
    (7) The controlled substance will be reexported from the first 
country to the second country (or second countries) no later than 180 
days after the controlled substance was exported from the United 
States.
    (8) Shipments that have been exported from the United States and 
are refused by the consignee in either the first or second country, or 
are otherwise unacceptable or undeliverable, may be returned to the 
registered exporter in the United States upon authorization of the 
Administration. In these circumstances, the exporter in the United 
States shall file a written request for the return of the controlled 
substances to the United States with a brief summary of the facts that 
warrant the return, along with a completed DEA Form 357, Application 
for Import Permit, with the Drug Enforcement Administration, Import/
Export Unit, Washington, DC 20537. The Administration will evaluate the 
request after considering all the facts as well as the exporter's 
registration status with the Administration. If the exporter provides 
sufficient documentation, the Administration will issue an import 
permit for the return of these drugs, and the exporter can then obtain 
an export permit from the country of original importation. The 
substance may be returned to the United States only after affirmative 
authorization is issued in writing by the Administration.
    (e) In considering whether to grant an application for a permit 
under paragraphs (c) and (d) of this section, the Administration shall 
consider whether the applicant has previously obtained such a permit 
and, if so, whether the applicant complied fully with the requirements 
of this section with respect to that previous permit.

0
3. Section 1312.23 is amended by revising paragraphs (a) and (f) to 
read as follows:


Sec.  1312.23  Issuance of export permit.

    (a) The Administrator may authorize exportation of any controlled 
substance listed in Schedule I or II or any narcotic controlled 
substance listed in Schedule III or IV if he finds that such 
exportation is permitted by subsections 1003(a), (b), (c), (d), or (f) 
of the Act (21 U.S.C. 953(a), (b), (c), (d), or (f).
* * * * *
    (f) No export permit shall be issued for the exportation, or 
reexportation, of any controlled substance to any country when the 
Administration has information to show that the estimates or 
assessments submitted with respect to that country for the current 
period, under the Single Convention on Narcotic Drugs, 1961, or the 
Convention on Psychotropic Substances, 1971, have been, or, considering 
the quantity proposed to be imported, will be exceeded. If it shall 
appear through subsequent advice received from the International 
Narcotics Control Board of the United Nations that the estimates or 
assessments of the country of destination have been adjusted to permit 
further importation of the controlled substance, an export permit may 
then be issued if otherwise permissible.

    Dated: December 5, 2007.
Joseph T. Rannazzisi,
Deputy Assistant Administrator, Office of Diversion Control.
 [FR Doc. E7-24919 Filed 12-21-07; 8:45 am]
BILLING CODE 4410-09-P