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DEA Warns International Brokers of List 1 & 2 Chemicals
Feb 17 2004
From The Code of Federal Regulations Vol 69, no 31, Feb 17, 2004

This is an official notice in the Federal Register indicating the DEA is likely going to increase enforcement of regulation over brokering or advertising for pay the sale of listed chemicals by vendors inside the US.

(for more info about listed chemicals, see List of Listed Chemicals in 2000)

[Federal Register: February 17, 2004 (Volume 69, Number 31)]
[Rules and Regulations]               
[Page 7348-7349]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17fe04-2]                         


[[Page 7348]]

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DEPARTMENT OF JUSTICE

Drug Enforcement Administration

21 CFR Parts 1300 and 1313

[Docket No. DEA-194N]

 
Use of the Internet To Arrange International Sales of Listed 
Chemicals

AGENCY: Drug Enforcement Administration (DEA), Justice.

ACTION: Guidance; request for comments.

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SUMMARY: DEA is issuing this notice to clarify the applicability of 
current DEA regulations to Internet Web site providers located in the 
United States who serve as brokers or traders for arranging 
international transactions of listed chemicals. The growth in the 
number of Internet Web sites that provide information and services for 
buyers and sellers of listed chemicals has increased the possibility 
that there may be confusion over the applicability of DEA regulations 
to Web site providers serving as brokers or traders. This guidance 
provides information about the regulations with which Internet Web site 
providers located in the U.S. who serve as brokers or traders for 
arranging international transactions of listed chemicals must comply.

DATES: Written comments must be postmarked on or before April 19, 2004.

ADDRESSES: Comments should be submitted 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 M. Good, Chief, Liaison and 
Policy Section, Office of Diversion Control, Drug Enforcement 
Administration, Washington, DC 20537. Telephone (202) 307-7297.

SUPPLEMENTARY INFORMATION:

Why Is This Clarification Needed?

    DEA has been studying the increased use of the Internet to provide 
information and services to persons interested in buying or selling 
listed chemicals. Operators of some Web sites mistakenly believe that 
they, as merely brokers of transactions, are not required to comply 
with DEA regulations. However, U.S. brokers of international 
transactions are regulated by DEA.
    There also appears to be confusion over what types of Internet 
services fall under the regulatory scope of DEA. There are at least two 
reasons for this confusion. First, some Web sites provide a wide range 
of services, such as providing information and resources on chemicals, 
providing bulletin board services for buyers and sellers, and serving 
as an agent, sometimes for a fee, for arranging sales. Second, the 
chemicals are legal commercial products and, in many cases, only a 
small proportion of the chemicals included in the Web site information 
are listed chemicals regulated by DEA. For these reasons, Web site 
providers may be unaware that they are subject to DEA regulations.
    This guidance explains when U.S. brokers of international 
transactions of listed chemicals are subject to DEA regulations, with 
what regulations they must comply, and the types of activities 
performed by Internet Web site providers that fall within the broker 
category and are subject to DEA regulations.

What Are Listed Chemicals?

    Listed chemicals are chemicals specifically designated by the 
Administrator of DEA and identified in 21 CFR 1310.02 that, in addition 
to legitimate uses, are used in illegally manufacturing controlled 
substances. There are two types of listed chemicals: List I and List 
II. List I chemicals are important in illegally manufacturing a 
controlled substance; List II chemicals are chemicals other than List I 
chemicals used in illegally manufacturing a controlled substance. 
Examples of List I chemicals include ephedrine, gamma-Butyrolactone, 
hydriodic acid, phenylpropanolamine, red phosphorus, and 
pseudoephedrine. Examples of List II chemicals include acetic 
anhydride, acetone, hydrochloric acid, iodine, methyl ethyl ketone, 
potassium permanganate, and toluene.

What Is a Broker or Trader?

    The terms "broker'' and "trader'' are defined in 21 CFR 
1300.02(b)(4) to mean--

    Any individual, corporation, corporate division, partnership, 
association, or other legal entity which assists in arranging an 
international transaction in a listed chemical by--
    (i) Negotiating contracts;
    (ii) Serving as an agent or intermediary; or
    (i) Fulfilling a formal obligation to complete the transaction 
by bringing together a buyer and seller, a buyer and transporter, or 
a seller and transporter, or by receiving any form of compensation 
for so doing.

What Is an International Transaction?

    The term "international transaction'' is defined in 21 CFR 
1300.02(b)(15) to mean--

    A transaction involving the shipment of a listed chemical across 
an international border (other than a United States border) in which 
a broker or trader located in the United States participates.

When Are U.S. Brokers of International Transactions of List I and List 
II Chemicals Subject to DEA Regulations?

    If brokers or traders located in the United States participate or 
assist in transactions involving shipments of List I or List II 
chemicals between two foreign countries, the brokers or traders are 
subject to DEA regulations relating to international transactions.

What Regulations Apply to U.S. Brokers of International Transactions of 
List I and List II Chemicals?

    U.S. brokers of international transactions of listed chemicals are 
regulated by DEA under 21 CFR part 1313, Importation and Exportation of 
Precursors and Essential Chemicals. The following regulations apply:

Advance Notification of International Transactions

    A broker or trader is required by 21 CFR 1313.32 to notify DEA no 
later than 15 days before an international transaction is to take place 
involving above-threshold amounts of a listed chemical in which the 
broker or trader participates. Threshold amounts for listed chemicals 
are provided in 21 CFR 1310.04. This notification must be made on DEA 
Form 486, must include the identification information listed in 21 CFR 
1313.33(c), and must be mailed or faxed to DEA.

No Transactions in Violation of the Laws of the Country to Which 
Chemicals Are Exported

    It is a violation of 21 U.S.C. 960(d)(2) (21 CFR 1313.32(c)) for a 
broker or trader to participate in an international transaction that he 
or she knows, or has reason to believe, is in violation of the laws of 
the country to which the chemical is exported, or knows, or has reason 
to believe, that the chemical will be used to manufacture a controlled 
substance in violation of the laws of the country to which it is 
exported. Finally, under 21 CFR 1313.25 any person or company that 
exports any listed chemical from the United States in violation of the 
laws of the country to which the chemical is exported is subject to 
penalties.

Recordkeeping, Reporting, and Identification Requirements

    In addition to the requirements specifically applicable to brokers 
of international transactions under 21 CFR 1313, brokers are also 
subject to DEA requirements that apply to regulated

[[Page 7349]]

persons. A broker is a "regulated person'' under 21 CFR 1300.02(b)(27) 
and an international transaction involving the shipment of a listed 
chemical is considered a regulated transaction under 21 CFR 
1300.02(b)(28). Therefore, brokers of international transactions 
involving the shipment of listed chemicals are subject to the reporting 
and recordkeeping requirements of 21 CFR 1310.03-1310.06 and the 
identification requirements of 21 CFR 1310.07.

What Is the Purpose of the 15-Day Advance Notification Requirement in 
21 CFR 1313.32?

    The 15-day advance notification requirement provides a critical 
window of opportunity for DEA to carry out its mandate of preventing 
the diversion of listed chemicals for illegal manufacture of controlled 
substances. DEA may have knowledge or information unknown to the broker 
indicating that the chemical may be diverted for the illegal 
manufacture of controlled substances.
    When copies of DEA Form 486 are received, DEA immediately reviews 
them. If DEA has reason to believe that the chemical proposed for 
shipment may be diverted to the illegal manufacture of a controlled 
substance, the Administrator may contact the broker or trader. The 
information in DEA Form 486 provides the Administrator with the means 
to identify the diversion and the opportunity to take appropriate steps 
to attempt to prevent diversion.

Which Internet Web Site Providers Are Subject to DEA Requirements?

    Internet Web site providers located in the U.S. who assist in 
arranging transactions of listed chemicals among buyers, sellers, or 
transporters from foreign countries are brokers or traders as defined 
in 21 CFR 1300.02(b)(4). Such brokers or traders must comply with 21 
CFR part 1313. Assistance in arranging international transactions by a 
Web site provider includes the following types of activity:
     Requiring the buyer, seller, or transporter to 
notify the Web site provider when an agreement for a transaction has 
been made;
     Utilizing user profiles of Web site visitors' 
interests to notify the visitors of the availability of listed 
chemicals they want to buy, the availability of customers for listed 
chemicals they want to sell, or the availability of transporters to 
ship the chemicals; and
     Imposing a fee or commission for the Web site 
service.
    Merely advertising foreign companies on the Web site would not be 
considered "assisting in arranging international transactions.'' 
Furthermore, if the Web site provides only a bulletin board and does 
not monitor, facilitate, charge a fee for, or otherwise participate in 
any subsequent transactions, the provider would not be considered a 
broker or trader.
    If either party to a transaction or both are located in the U.S., 
those companies have the responsibility to comply with the applicable 
requirements of 21 CFR parts 1309, 1310, and 1313, and the broker is 
not subject to the 15-day advance notification requirement.
    DEA recommends that Internet Web site providers post a notice to 
their Web site users about the advance notification requirement for 
international transactions of listed chemicals so that buyers and 
sellers can plan their transactions accordingly. Web site providers 
acting as brokers of international transactions are subject to the 
civil and criminal penalties under the Comprehensive Drug Abuse 
Prevention and Control Act of 1970 (21 U.S.C. 801 et seq.), including 
21 U.S.C. 842, 843, and 960 for any failure to comply with DEA 
regulations.
    While the advance notification and the recordkeeping requirements 
impose a modest burden on brokers and traders, it is a necessary burden 
that provides DEA with important information that could prevent the 
diversion of listed chemicals.

What Additional Information Is DEA Requesting?

    DEA requests comments on the following topics to better understand 
brokering/trading of listed chemicals on the Internet and to make it as 
easy as possible for Internet providers who serve as brokers or traders 
of international transactions of listed chemicals to comply with the 
regulations.
    1. How do you provide assistance to chemical buyers and sellers 
through your Internet Web site?
    2. At what point do you as a broker become involved in the 
transaction?
    3. How will complying with the advance notification requirements 
affect the services you provide to buyers and sellers?
    4. What is the size and scope of this emerging segment of the 
chemical industry?
    5. What changes in the nature and methods of buying and selling 
listed chemicals have been brought about by the use of the Internet?
    6. What does the future hold for the use of the Internet in this 
business?
    DEA welcomes answers to these questions and any additional relevant 
information that you can provide. Please send comments to the address 
listed above under ADDRESSES.

    Dated: February 4, 2004.
Laura M. Nagel,
Deputy Assistant Administrator, Office of Diversion Control.
[FR Doc. 04-3355 Filed 2-13-04; 8:45 am]

BILLING CODE 4410-09-P