Authorized Sources of Narcotic Raw Materials, 6843-6851 [E8-2142]

Agencies

• Drug Enforcement Administration
• Department of Justice

[Federal Register Volume 73, Number 25 (Wednesday, February 6, 2008)]
[Rules and Regulations]
[Pages 6843-6851]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-2142]


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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.)
----------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------------

    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