Chemical Registration and Reregistration Fees

[Federal Register Volume 64, Number 230 (Wednesday, December 1, 1999)]
[Proposed Rules]
[Pages 67216-67220]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-30960]

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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Part 1309

[DEA NUMBER 185-P]
RIN 1117-AA50

Chemical Registration and Reregistration Fees

AGENCY: Drug Enforcement Administration (DEA), Justice.

ACTION: Proposed rule.

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SUMMARY: The Drug Enforcement Administration (DEA) proposes to amend
its application fees for registration and reregistration of
manufacturers, distributors, importers, and exporters of List I
chemicals, as authorized by section 3(a) of the Domestic Chemical
Diversion Control Act of 1993 (DCDCA), reducing the fees from $595 to
$326 for initial registration, and the reregistration fees from $477 to
$171. Fees for retail registrants will increase from $255 to $326 for
registration, and from $116 to $171 for reregistration. Office of
Management and Budget (OMB) Circular A-25 requires a periodic review of
user charges for agency programs. This review will bring fees into
alignment with current changes in costs or market values.

DATES: Written comments or objections must be submitted on or before
January 31, 2000.

ADDRESSES: Comments and objections should be submitted in quintuplicate
to the Deputy Assistant Administrator, Office of Diversion Control,
Drug Enforcement Administration, Washington, DC 20537, Attention: DEA
Federal Register Representative/CCR.

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

SUPPLEMENTARY INFORMATION:

Impact of the Proposed Rule

What Is the Effect of This Proposed Rule, and to Whom Does It Apply?

The Drug Enforcement Administration (DEA) proposes to reduce the
registration and

[[Page 67217]]

reregistration fees for persons manufacturing, distributing (non-
retail), importing and exporting List I chemicals. There are currently
3,685 such registrants. Fees are reduced from $595 to $326 for
registration, and from $477 to $171 for reregistration. Registration
and reregistration fees for the 47 current retail registrants increase
slightly, from $255 to $326 for registration, and from $116 to $171 for
reregistration. At this time, DEA is receiving, on average, fewer than
the new retail applications per year.

Legislative History

What is the Legal Basis for Registering Persons Manufacturing,
Distributing, Importing and Exporting List I Chemicals

The Chemical Diversion and Trafficking Act (CDTA) of 1988 was
passed by Congress to control the diversion of certain chemicals that
are necessary for the illicit manufacture of controlled substances. The
CDTA and its regulations, set forth in Title 21 Code of Federal
Regulations (CFR) parts 1310 and 1313, established a system of record
keeping and reporting requirements through which DEA and the chemical
industry could identify persons seeking to divert listed chemicals for
the manufacture of illicit controlled substances.
The Domestic Chemical Diversion Control Act of 1993 (DCDCA), which
became effective on April 16, 1994, established a number of new
requirements intended to close avenues used by illicit controlled
substance manufacturers to circumvent the CDTA. One of the main
provisions of the DCDCA was the requirement that manufacturers,
distributors, importers and exporters of List I chemicals obtain a
registration from DEA.
Concurrent with the establishment of the registration requirement,
DEA established, by regulations, the fees to be charged for
registration and reregistration of List I chemical handlers, as
required under the Independent Offices Appropriations act (IOAA) and
the guidelines set forth in the Office of Management and Budget (OMB)
Circular A-25.
OMB Circular A-25, Section 6 provides that ``[A] user charge * * *
will be assessed against each identifiable recipient for special
benefits derived from Federal activities beyond those received by the
general public.'' The section further requires that the user charge be
sufficient to ``* * * recover the full cost to the Federal Government
for providing the special benefit.'' A special benefit is described as
a Government service which ``Enables the beneficiary to obtain more
immediate or substantial gains or values (which may or may not be
measurable in monetary terms) than those that accrue to the general
public (e.g., receiving a patient, insurance, or guarantee provision,
or a license to carry on a specific activity or business [emphasis
added] or various kinds of public land use).''
Sections 822 and 957 of Title 21, United States Code, as amended by
the DCDCA, require that any person who manufactures, distributes,
imports or exports a List I chemical must obtain annually a
registration in accordance with DEA rules and regulations. A
registration to manufacture, distribute, import or export List I
chemicals is a special benefit under Circular A-25, in that it allows
the registrant to engage in certain activities while a member of the
general public may not. Therefore, the costs associated with DEA's
issuance of a registration to manufacture, distribute, import or export
a List I chemical; certain costs associated with advising registrants
of their responsibilities; and maintenance of the integrity of the
registration system must be recovered through assessment of a user fee.
Section 6(d) of Circular A-25 describes the requirements for
determining the full cost of a service or benefit. ``Full cost'' is
defined as all direct and indirect costs, including, but not limited
to: direct and indirect personnel costs, including salaries, fringe
benefits (such as life and health insurance and retirement) and travel;
physical overhead, including material and supply costs, rent and
utilities; management and supervisory costs; and the costs of
enforcement, collection, research, establishment of standards, and
regulations. Section 6(d)(1)(e) provides that the cost figures shall be
established utilizing ``the best available records of the agency, and
new cost accounting systems need not be established solely for this
purpose.'' The costs of the services provided by DEA were determined by
use of proven and accepted budget estimating techniques as outlined in
the DOJ budget guidelines and OMB Circular A-11.

Initial Fee Implementation

How did DEA Implement the Initial Fees

DEA established two distinct categories of chemical registrants:
retail distributors, such as convenience stores, gas stations, truck
stops, liquor stores, etc., whose regulated activities consist of the
direct sales to walk-in customers of drug products that are regulated
as List I chemicals; and non-retail registrants, such as manufacturers
which distribute, distributors, importers, and exporters of List I
chemicals. Each category of registrant was addressed independently
during the original establishment of the fees.
Establishment of the initial application fee was a simple matter
since the costs associated with the processing of each application for
registration were direct costs applicable to each individual
application; there were minimal general program costs that were
required to be averaged across the applicant population. For renewal
applications the calculation of the fee required identification of
general program maintenance costs which were to be averaged across the
registrant population. However, because List I chemical registration
was a new requirement, there was no existing registrant population and
the fees had to be calculated based on estimates of the potential
population. For purposes of calculating the fee DEA estimated 10,000
retail registrants and 1,500 non-retail registrants.
Full details regarding the calculation of the original fees are
contained in DEA's proposed rule regarding Implementation of the
Domestic Chemical Diversion Control Act of 1993 (Pub. L. 103-200) which
was published in the Federal Register on October 13, 1994 (59 FR
51887).

New Applications

What Factors Were Involved in Establishing New Application Fees

Due to industry comments regarding the financial impact of the
registration fee received at the time the requirements of the MCA were
implemented, DEA reviewed the preregistration process and waived a
significant portion of the initial registration fee for manufacturers,
distributors, importers, and exporters of regulated drug products,
requiring that only $116 of the $595 fee be paid. Notice regarding the
fee waiver was published in the Federal Register on October 17, 1997
(62 FR 53958). Since that time, DEA has continued to assess the
situation and has become aware of a number of incidents involving the
theft of significant quantities of drug products and raw materials from
persons distributing controlled substances and listed chemicals. At
least five million dosage units of drug products and 75 kilograms of
pseudoephedrine powder have been reported stolen. DEA is concerned that
with the emphasis placed on ``knowing the customer'' and ensuring that
all sales are legitimate, there may be

[[Page 67218]]

insufficient emphasis placed on maintaining security of the listed
chemicals that registrants have in their possession. It is clear that a
strong DEA presence at the time of initial registration remains
necessary to ensure that applicants are fully aware of all
requirements, not only in terms of ``knowing the customer'' and
ensuring that sales are legitimate, but also ensuring that appropriate
safeguards are in place to prevent theft or diversion of listed
chemicals from the regulated location. However, while DEA will continue
to conduct on-site activities as part of the preregistration
investigation, at this time, due to the demand on resources for the
pursuit of criminal investigations, DEA will only be able to allocate
six hours of investigative time for each preregistrant investigation.
However, DEA anticipates that, over time, these demands will lessen and
resources currently dedicated to criminal investigations will be
reallocated to other chemical regulatory activities, including
preregistration investigations. DEA will reexamine chemical
registration and reregistration fees when this reallocation of
resources occurs.

Reregistration Applications

What Factors Were Involved in Establishing Reregistration Application
Fees

Two factors have affected the calculation of the reregistration
fees. First, due to the continued demand for resources for the pursuit
of investigations, DEA anticipates dedicating a total of six
investigator work years to regulatory audits of both retail and non-
retail registrants. Second, the actual non-retail registrant population
is greater than the originally estimated population of 1,500
registrants, due in part to the expanded registration requirements of
the MCA. At the time of drafting of this notice, there are 47 retail
registrants and 3,685 non-retail registrants, for a total of 3,732
chemical registrants.

Fees

What Specific Costs Were Included in the Calculation of the Fees?

DEA utilized the standard modular costing method used throughout
the federal government to calculate fees. This methodology relates
costs to the number of personnel within the program and accounts for
inflationary increase. Funding for salaries, benefits, equipment,
training, and other position-related expenses is predicted on the
modular formula which is reviewed and revised each budget year by the
Department of Justice (DOJ) and OMB, the latter having ultimate
authority in finalizing the formula for each fiscal year.
As previously stated, the personnel costs listed below include all
direct and indirect costs, including salaries, fringe benefits (such as
life and health insurance and retirement) and travel; physical
overhead, including material and supply costs such as forms, postage,
equipment, rent and utilities. Direct costs are those costs which are
apportionable to a specific registration or reregistration application,
i.e., direct personnel and materials costs, whereas indirect costs are
costs not directly apportionable to a specific registration or
reregistration application, i.e., managerial, regulatory, and
supervisory costs.
In light of the minimal number of retail registrants (47), the fact
that direct costs are the same for retail and non-retail registrants,
and the indirect costs are averaged across the entire retail/non-retail
registrant population, DEA has determined that the initial fee for
retail and non-retail registrants can be calculated together rather
than separately, and that the renewal fee for retail and non-retail
registrants can be calculated together rather than separately.
Based on the costs as laid out in the following tables, the initial
registration fee will be $326.00, and the reregistration fee will be
$171.00.

Costs for Processing an Application and Issuing an Initial
Registration

Direct Costs:
Clerical Time \1\........................ .5 hour.......................................... $10.34
Material Costs: \2\
Application Form..................... ................................................. .043
Postage.............................. ................................................. .064
Chemical Handlers Manual............. ................................................. 0.30
Registration Certificate............. ................................................. 0.10
Investigator Time \3\.................... 6 hours.......................................... 237.44
---------------
Total Direct Costs................... ................................................. 249.25
===============
Indirect Costs:
Management/Supervisory time \4\.......... ................................................. 23.87
Regulatory/Policy Development \5\........ ................................................. 7.82
Applicant/Registrant Support \6\......... ................................................. 44.26
---------------
Total Indirect Costs................. ................................................. 75.95
===============
Total Direct and Indirect Costs...... ................................................. 325.20

Notes Regarding the Costs Associated With Issuance of an Initial
Registration

1. Clerical time includes the time required for preparing and
mailing application packages, time for processing applications
received, including computer data entry, encoding the application
form, filing, and transmitting a copy of the application to the
appropriate DEA field office for the registration review process.
Following the registration review, time is required to approve the
registration, initiate issuance of the registration certificate, and
file copies of the report and application.
2. The printing cost for application forms for chemical
registration is $4,500 for 20,000 forms or 22.5 cents per form. The
cost for the last printing of the Chemical Handlers Manual was
$2,250 for 7,500 copies, or 30 cents per copy.
3. DEA is including an average of six hours of investigator time
toward the following: travel, on-site visits, telephonic
communications, and paperwork processing.
4. Management/Supervisory time is that time spent by management
and supervisory personnel in the overall development and maintenance
of the registration program, including establishment of program
priorities and policy, resource allocation, and administrative
direction. The following positions are involved:

[[Page 67219]]

Deputy Assistant Administrator and Deputy Director of .05 work year each................... $22,304
the Office of Diversion Control.
Chief, Chemical Control Section...................... .1 work year......................... 13,067
Chief, Data Processing and Analysis Unit............. .25 work year........................ 29,030
Chief, Liaison and Policy Section.................... .1 work year......................... 13,067
Chief, Policy Unit................................... .1 work year......................... 11,612
---------------
Total Costs...................................... ..................................... 89,080

Because the Management/Supervisory costs are related to the general
operation of the registration program, they must be averaged across
the entire applicant population. For 3,732 applicants, the average
cost would be $23.87.
5. Regulatory and policy development time consists of .5 work
year of a program analyst time for drafting new/amended regulations
and Federal Register notices, issuance of policy statements and
directives related to the registration program and responding to
registrant queries regarding registration matters. This time is for
general chemical registration program purposes and must be spread
equally across the applicant population. The cost of that time,
$29,192, divided by 3,732 applicants equals $7.82.
6. Applicant/Registrant Support time will consist of 2 work
years of Diversion Investigator time, which will be dedicated to
providing technical assistance, advice and informational materials
to the industry to assist in complying with the registration, record
keeping and reporting requirements. The total cost for 2 work years
of Diversion Investigator time is $165,178, divided by 3,732
applicants equals $44.26.

Cost for Processing a Reregistration Application

Direct Costs:
Clerical Time ¹.......................... .25 hours........................................ $5.17
Material Costs ² ................................................. .43
Forms................................ ................................................. .64
Postage.............................. ................................................. .64
---------------
Total Direct Costs............... ................................................. 6.24
===============
Indirect Costs:
Management/Supervisory Time ³............ ................................................. 23.87
Regulatory/Policy Development ⁴.......... ................................................. 7.82
Regulatory Audit Time ⁵.................. ................................................. 132.78
---------------
Total Indirect Costs................. ................................................. 164.47
===============
Total Direct and Indirect Costs...... ................................................. 170.71

Notes Regarding the Costs Associated With Reregistration

1. Clerical time includes the time required for preparing and
mailing application packages, time for processing applications
received, including computer data entry, encoding the application
form, filing, and preparing the fee for deposit.
2. The forms cost covers both the reregistration application
form and the registration certificate. Postage is for mailing the
reregistration application and the registration certificate.
3. Management/Supervisory time is that time spent by management
and supervisory personnel in the overall development and maintenance
of the registration program, including establishment of program
priorities and policy, resource allocation, and administrative
direction. The following positions are involved:

Because the Management/Supervisory costs are related to the general
operation of the registration program, they must be averaged across
the entire reregistration applicant population. DEA has received
3,732 retail and non-retail reregistration applications. The average
cost per applicant would be $23.87.
4. Regulatory and policy development time consists of .5 work
year of a program analyst time for drafting new/amended regulations
and Federal Register notices, issuance of policy statements and
directives related to the registration program and responding to
registrant queries regarding registration matters. This time is for
general chemical registration program purposes and must be spread
equally across the reregistration applicant population. The cost of
that time, $29,192, divided by 3,732 reregistration applicants,
equals $7.82.
5. DEA will conduct regulatory audits to ensure that registrants
are complying with the chemical control requirements and that
chemicals are not being distributed to persons seeking to divert
them. The investigations will consist of a comprehensive review of
each registrant's records, reporting systems, and security
provisions. Each investigation will require comprehensive on-site
review of the registrant's records; verification of transactions and
purchasers, including record checks of and visits to purchasers;
travel; and report preparation. DEA anticipates that all such
investigations combined will require 6 work years of Diversion
Investigator time. The total cost for 6 work years of Diversion
Investigator time is $495,534, divided by 3,732 reregistration
applicants equals $132.78.

Refund of Fees for Certain Registrants

Section 8(e) of OMB Circular A-25 requires periodic review of user
fees. DEA's initial review of these fees in 1997 was delayed due to
passage of the Comprehensive Methamphetamine Control Act of 1996 (MCA)
which significantly expanded the scope of the registration requirement.
DEA postponed the review of the fees until all persons affected by the
MCA had submitted their applications. Due to this delay, there are
registrants who have been required to pay the full reregistration fee
of $477.00. DEA will

[[Page 67220]]

be making arrangements to refund the difference between the current and
proposed reregistration fees. Refunds will be provided to those
registrants who have renewed their registration in the year preceding
the effective date of the final rule published in conjunction with this
notice. Refunds will only be provided to those registrants who renewed
their registration on time, not those applicants who, by virtue of
renewing late, fell into this payment period.

Regulatory Certifications

Regulatory Flexibility Act

The Deputy Assistant Administrator hereby certifies that this
proposed rulemaking has been drafted in a manner consistent with the
principles of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). It
will not have a significant economic impact on a substantial number of
small business entities. This notice reduces the registration and
reregistration fee substantially for the larger portion of the
industry, i.e., those persons required to submit applications for
renewal of registration, reducing the registration fee from $595 to
$326, and the reregistration fee from $447 to $171, providing economic
relief to the small businesses affected. With respect to the one
category of fee that increased, for retail distributors, there are
currently less than 50 retail distributor registrants and DEA is
receiving, on average, less than 10 new applications from retail
distributors per year.

Executive Order 12866

The Deputy Assistant Administrator further certifies that this
rulemaking has been drafted in accordance with the principles of
Executive Order 12866 Section 1(b). DEA has determined that this is not
a significant regulatory action. As noted above, this proposed rule
reduces the existing fee structure for most registrants, thus providing
economic relief to the registrant population . DEA has determined that
this rulemaking is not significant. Therefore, it has not been
submitted to the Office of Management and Budget for review.

Executive Order 13132

This action has been analyzed with the principles and criteria in
Executive Order 13132, and it has been determined that this rule does
not have sufficient federalism implications to warrant the preparation
of a Federalism assessment.

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 $100
million or more 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.

Small Business Regulatory Enforcement Fairness Act of 1996

This rule is not a major rule as defined by Section 804 of the
Small Business Regulatory Enforcement Fairness Act of 1996. This rule
will not result in an annual effect on the economy of $100 million 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.

Plain Language Instructions

The Drug Enforcement Administration makes every effort to write
clearly. If you have suggestions as to how to improve the clarity of
these regulations, call or write Patricia Good, Chief, Liaison and
Policy Section, Office of Diversion Control, Drug Enforcement
Administration, Washington, DC 20537. Telephone (202) 307-7297.

List of Subjects in 21 CFR Part 1309

Administrative practice and procedure, Drug traffic control, List I
and List II chemicals, Security measures For the reasons set out above,
21 CFR Part 1309 is proposed to be amended as follows:

PART 1309--[AMENDED]

1. The authority citation for 21 CFR Part 1309 continues to read as
follows:

Authority: 21 U.S.C. 821, 822, 823, 824, 830, 871(b), 875, 877,
958.

2. Section 1309.11 is revised to read as follows:

Sec. 1309.11 Fee amounts.

(a) For each initial registration to manufacture for distribution,
distribute (either retail distribution or non-retail distribution),
import, or export a List I chemical, the applicant shall pay a fee of
$326 for an annual registration.
(b) For each reregistration to manufacture for distribution,
distribute (either retail distribution or non-retail distribution),
import, or export a List I chemical, the registrant shall pay a fee of
$171 for an annual registration.
3. Section 1309.12 is revised to read as follows:

Sec. 1309.12 Time and method of payment; refund.

(a) For each application for registration or reregistration to
manufacture for distribution, distribute (either retail distribution or
non-retail distribution), import, or export a List I chemical, the
applicant shall pay the fee when the application for registration or
reregistration is submitted for filing.
(b) Payment should be made in the form of a personal, certified, or
cashier's check or money order made payable to ``Drug Enforcement
Administration.'' Payments made in the form of stamps, foreign
currency, or third party endorsed checks will not be accepted. These
application fees are not refundable.

Dated: October 1, 1999.
John H. King,
Deputy Assistant Administrator, Office of Diversion Control.
[FR Doc. 99-30960 Filed 11-30-99; 8:45 am]
BILLING CODE 4410-09-M

Chemical Registration and Reregistration Fees

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