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 Title PDK Lab v. U.S. Drug Enforcement Administration

 Argued November 7, 2003            Decided March 26, 2004

 Subject Judicial Restraint

                                                                                                                                                                                                                

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      United States Court of Appeals

                 FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 7, 2003                      Decided March 26, 2004

                              No. 03-1008

                      PDK LABORATORIES  INC.,

                               PETITIONER

                                      v.

      UNITED  STATES  DRUG  ENFORCEMENT  ADMINISTRATION,

                              RESPONDENT

            On Petition for Review of an Order of the

        United States Drug Enforcement Administration

  Saul Pilchen argued the cause for petitioner.  With him on

the briefs was Joseph L. Barloon.

  Mark T. Quinlivan, Senior Trial Counsel, U.S. Department

of Justice, argued the cause for respondent.  With him on the

brief was Roscoe C. Howard, Jr., U.S. Attorney.

  Before:  RANDOLPH and ROBERTS, Circuit Judges, and

WILLIAMS, Senior Circuit Judge.

  Opinion for the Court filed by Circuit Judge RANDOLPH.

 Bills of costs must be filed within 14 days after entry of judgment.

The court looks with disfavor upon motions to file bills of costs out

of time.

 

                                2

   Opinion concurring in part and concurring in the judgment

filed by Circuit Judge ROBERTS.

   RANDOLPH, Circuit Judge:  Ephedrine is an active ingredi-

ent in over-the-counter medications for the treatment of

asthma and nasal congestion.  Ephedrine is also used in the

illicit production of methamphetamine, a controlled substance.

The government regulates ephedrine pursuant to the Con-

trolled Substances Act, as amended by, inter alia, the Chemi-

cal Diversion and Trafficking Act of 1988, 21 U.S.C. § 801 et

seq.  The Act lists 20 chemicals, including ephedrine, used in

the illicit production of controlled substances.     21 U.S.C.

§ 802(34).  Companies and individuals wishing to import (or

to export, manufacture or distribute) any of these ``List I

chemicals'' must register with the Drug Enforcement Admin-

istration.  21 U.S.C. §§ 957(a), 822(a)(1)-(2).  The ``regulated

person'' must notify DEA no later than 15 days before

bringing a listed chemical into the country.        21 U.S.C.

§  971(a).   DEA has the authority to forbid importation if ``the

chemical may be diverted to the clandestine manufacture of a

controlled substance.''   21 U.S.C. § 971(c)(1).  This petition

for judicial review challenges DEA's interpretation of ``the

chemical may be diverted'' as it relates to the importation of

ephedrine.

                                I.

   PDK Laboratories, at its New York facilities, manufactures

over-the-counter pharmaceuticals and vitamins, including pain

relievers, decongestants, diet aids and nutritional supple-

ments.  Some of its products contain ephedrine in combina-

tion with other active ingredients.  PDK purchases raw, bulk

ephedrine from foreign companies, combines the chemical

with other active agents, and produces a finished product in

tablet form, packaged in bottles or blister packs, all with

DEA's permission.      PDK currently sells only to wholesale

distributors, not to retailers or consumers, although in the

past it had a retail mail order business.

   Producers of illicit methamphetamine prefer using pure

ephedrine.    After the 1988 amendments to the Controlled

 

                                3

Substances Act imposed record keeping and other controls on

transactions involving pure ephedrine, criminals began substi-

tuting ``single entity'' ephedrine tablets ­ that is, tablets

containing ephedrine as the only active medicinal ingredient ­

for pure ephedrine.  When Congress amended the Act again

in 1993 to remove the record keeping exemption for single

entity ephedrine tablets, illicit methamphetamine producers

switched to pseudoephedrine and combination ephedrine

products, such as those PDK and its competitors produce.  In

order to obtain large quantities of this product, criminals

shoplift the tablets from retail stores or, individually and in

groups, make multiple purchases of the tablets from different

stores ­ a process known in the drug trade as ``smurfing.''

   PDK has cooperated with DEA in trying to prevent its

products from winding up in the hands of methamphetamine

producers.  It has cut off sales to distributors suspected of

selling its drug products in bulk;  ended its mail order busi-

ness; stopped shipping its products to California and Mis-

souri in response to the number of methamphetamine labora-

tories found in those states;  monitored sales to determine if a

particular customer has been ordering an extraordinary quan-

tity of its drugs;  imposed monthly quotas on its customers;

retained a former DEA official to review its compliance

program; and altered its packaging to make its over-the-

counter drugs less susceptible to illicit uses.

   Two of PDK's foreign suppliers of bulk ephedrine are

Indace, Inc. and Malladi, Inc., both of which are registered

with DEA as importers of chemicals listed in the Act.  In-

dace, in late 2000, and Malladi, in early 2001, notified DEA

that they were about to ship ephedrine hydrochloride from

India to PDK in New York.  Each shipment was to consist of

3000 kilograms of the chemical in powdered form.  In both

instances DEA issued to the importer an ``Order to Suspend

Shipment,'' stating that it acted pursuant to §  971(c)(1) on the

basis of information indicating that ``the listed chemical may

be diverted.''  By this DEA did not mean that the shipments

would be hijacked or otherwise diverted from their intended

destination.  DEA meant instead that after PDK's finished

products reached the shelves of retail stores, someone might

 

                                 4

buy (or steal) the ephedrine-containing pills and use them to

make methamphetamine.         In support of its judgment that

``the chemical may be diverted,'' DEA described in the sus-

pension orders four instances in 1994 and 1995 when PDK, by

mail order, shipped large quantities of tablets containing

ephedrine to individuals, some of whom were later arrested

for manufacturing methamphetamine.   The suspension orders

also stated that PDK had exported its finished products to

Canada without notifying DEA 15 days in advance, as the

statute and regulations required; and that PDK products

containing ephedrine and pseudoephedrine had been found at

methamphetamine laboratories and ``dumpsites,'' as reported

in ``warning letters'' DEA sent to PDK.       (DEA sometimes

notifies manufacturers when their drug products are found at

methamphetamine laboratories; these ``warning letters'' do

not assign culpability to the manufacturer.)

   PDK litigated the validity of the suspension orders before

an Administrative Law Judge.  After an evidentiary hearing,

the ALJ ruled in PDK's favor, finding that there was no

evidence that the shipments of ephedrine from Indace and

Malladi might have been diverted to illegal uses.           As to

PDK's finished products ­ the pills sold over the counter in

retail stores ­ the ALJ held that these were not ``listed

chemical s '' within § 971's meaning even though they con-

tained ephedrine.  In the alternative, the ALJ held that DEA

had not satisfied the ``may be diverted'' portion of §  971.   The

ALJ's reasoning was as follows.   PDK is the largest manufac-

turer of generic List I chemical products sold in convenience

stores.  In 1998, for instance, PDK distributed approximately

10 million bottles of its combination ephedrine product;  in the

same year DEA warning letters indicated that 1,061 such

bottles ­ about .01 percent of the total PDK distributed ­ had

been seized at illicit sites.  There was no evidence to show

whether other manufacturers of ephedrine products had a

lower or higher percentage.       There was evidence that all

ephedrine-containing medications, from whichever manufac-

turer, ``may be diverted'' in this manner.   Even if retail stores

limited a customer's purchases of these drugs, individuals

 

                               5

could simply buy the drugs from many different stores or

steal them.

   On DEA's exceptions to the ALJ's decision, the DEA

Deputy Administrator sustained the suspension orders, ruling

that § 971(c)(1)'s reference to ``the chemical'' encompassed

not only the chemical to be imported ­ here ephedrine ­ but

also products manufactured from the chemical.  67 Fed. Reg.

77,805, 77,806 (Dec. 19, 2002).  In support of this interpreta-

tion, the Deputy Administrator invoked the definition of

``regulated transaction'' in 21 U.S.C. § 802(39)(A)(iv); the

opinion in United States v. Abdul Daas, 198 F.3d 1167, 1175

(9th Cir. 1999); and a 1993 House Committee Report.         67

Fed. Reg. at 77,806.  In finding that PDK's finished products

``may be diverted,'' the Deputy Administrator recited warning

letters given to PDK involving not only its combination

ephedrine products but also its pseudoephedrine drugs, and

other information contained in the suspension orders, but ­

agreeing with the ALJ ­ decided that PDK had not violated

reporting requirements with respect to its mail order sales.

Id. at 77,808-09.

   The Deputy Administrator also relied on PDK's alleged

export violations.  Id. at 77,809.  In 1994 and 1995 PDK sold

ephedrine tablets to Sun Labs of Canada without notifying

DEA in advance.  The Deputy Administrator concluded that

PDK thereby violated a regulation (21 C.F.R. § 1313.21)

requiring exporters to give DEA notice 15 days in advance of

each transaction in which a listed chemical is exported from

the United States.  Although the ALJ found that PDK had

not exported the tablets, that it had sold the tablets and

transferred ownership to Sun Labs in New York, and that

there was no evidence the tablets were ever delivered to

Canada, the Deputy Director ruled that PDK had failed to

comply with the regulation because its president believed the

tablets would eventually be shipped to Canada.  67 Fed. Reg.

at 77,808.

   The warning letters plus PDK's export violations led the

Deputy Administrator, looking at what he called ``the totality

of the circumstances,'' to conclude that the suspension orders

 

                                  6

should be sustained despite evidence that PDK had made

significant efforts to prevent its finished products from being

used illegally.   Id. at 77,809.

                                 II.

   There is no doubt that PDK suffered an injury when the

shipments of ephedrine did not arrive; and that its injury

could be redressed if we found the DEA orders invalid.

While PDK thus has Article III standing to sue, see Simon v.

Eastern Kentucky Welfare Rights Org., 426 U.S. 26, 38­39

(1976), DEA argues that the company lacks prudential stand-

ing.

   In deciding whether a litigant has prudential standing, the

court must identify what interest the litigant seeks to vindi-

cate and then decide if that interest is ``arguably within the

zone of interests to be protected or regulated by the statute,''

Ass'n of Data Processing Serv. Orgs., Inc. v. Camp, 397 U.S.

150, 153 (1970).     The test, which may be understood as a

gloss on the judicial review provision of the Administrative

Procedure Act (5 U.S.C. § 702), see Clarke v. Sec. Indus.

Ass'n, 479 U.S. 388, 400 n.16 (1987), is not demanding.  See

Animal Legal Defense Fund, Inc. v. Glickman, 154 F.3d 426,

444 (D.C. Cir. 1998) (en banc).        The court ``should not in-

quire'' whether Congress intended to benefit or regulate the

litigant.  Nat'l Credit Union Admin. v. First Nat'l Bank, 522

U.S. 479, 488-89, 492 (1998).  It is enough that the litigant's

interest is ``arguably'' one regulated or protected by ``the

statutory provision at issue,'' id. at 492.

   PDK's interest was in buying ephedrine and using it to

manufacture drugs;  the importers' interest was in selling the

chemical to PDK.  Although suspension orders are directed

to importers, § 971(c)(1) necessarily regulated the interests

not only of importers but also of their domestic customers.

The point is so obviously clear and so clearly obvious that it is

scarcely worth articulating ­ if an importer cannot ship a

listed chemical, the domestic customer cannot receive it.

PDK's interests are thus arguably, indeed more than argu-

ably, within the zone of interests § 971(c)(1) regulates.

 

                                 7

DEA's Deputy Director made the point in a related context:

``the party in interest in this proceeding is the manufacturer-

customer of the importer.       It is the conduct of that party,

PDK, and its customers, and the fact that the product which

it manufactured and distributed ended up in clandestine drug

laboratories, that forms the basis of the Government's conten-

tion that the ephedrine imported `may be diverted.' ''  67 Fed.

Reg. at 77,806­07.

   DEA argues against PDK's prudential standing on the

basis of the following language from § 971(c)(2):  ``a regulated

person to whom an order applies under paragraph (1) is

entitled to an agency hearing on the record in accordance

with'' the Administrative Procedure Act.  According to DEA,

§  971(c)(2) entitles only the importer ­ as ``a regulated person

to whom a suspension  order applies'' ­ to an agency hearing

on the validity of the order.  There is no formal DEA ruling

or regulation to this effect and the only judicial precedent on

point is Judge Kennedy's decision, in an earlier phase of this

case, ordering DEA to provide PDK with a hearing.  PDK

Labs Inc. v. Reno, 134 F. Supp. 2d 24, 31 (D.D.C. 2001).  A

``regulated person'' is a ``person who manufactures, distrib-

utes, imports, or exports a listed chemical, a tableting ma-

chine,   or    an  encapsulating    machineTTTT''     21   U.S.C.

§ 802(38).    PDK is therefore ``a regulated person.''     Judge

Kennedy held that because the orders blocked shipments to

PDK, the company is also someone ``to whom an order

applies,'' a result he thought consistent with Yi Heng Enter-

prises Dev. Co., 64 Fed. Reg. 2234, 2235 (DEA Jan. 13, 1999)

(``the statute provides the opportunity for a hearing to `a

regulated person to whom an order (suspending shipment)

applies,' not necessarily the person to whom the order was

issued.'').   PDK Labs v. Reno, 134 F. Supp. 2d at 30.

   DEA's contrary argument ­ that under § 971(c)(2) only `` `a

regulated person to whom an order applies under paragraph

1' is entitled to judicial review,'' and that only importers fit

that description, Respondent's Br. at 20 ­ is wrong for several

reasons. Very rarely has Congress withheld judicial review

from those who have suffered an Article III injury at the

hands of an administrative agency.  See Bowen v. Michigan

 

                                  8

Acad. of Family Physicians, 476 U.S. 667, 670-71 (1986).

Time and again the Supreme Court has emphasized that

there is a ``strong presumption'' in favor of judicial review, id.

at 670, 672 n.3, and that ``only upon a showing of `clear and

convincing evidence' of a contrary legislative intent should the

courts restrict access to judicial review.''     Abbott Labs. v.

Gardner, 387 U.S. 136, 141 (1967); see, e.g., Gutierrez de

Martinez v. Lamagno, 515 U.S. 417, 424-25 (1995);  Block v.

Community Nutrition Inst., 467 U.S. 340, 349 (1984).  We do

not believe there is any such legislative intent here.  Section

971(c)(2) is not itself a judicial review provision.  It is instead

a provision dealing with hearings before the agency.            See

Envirocare of Utah, Inc. v. Nuclear Regulatory Comm'n, 194

F.3d 72, 75-76 (D.C. Cir. 1999).  One can envision a statutory

system in which only those who may participate in agency

proceedings are entitled to review in court.        Id.   The Su-

preme Court in Block so interpreted the Agricultural Market-

ing Agreement Act of 1937, 7 U.S.C. § 601 et seq., in holding

that consumers could not bring actions for judicial review of

the Agriculture Secretary's milk marketing orders.  467 U.S.

at 347.    But DEA concedes that even on its reading of

§ 971(c)(2), PDK could participate in an agency hearing

challenging a suspension order, so long as the importer

initiated the challenge (which neither Indace nor Malladi did).

Respondent's Br. at 21.       Furthermore, in Block the Court

discerned several reasons why Congress would not have

wanted consumers to bring judicial challenges to the market-

ing orders.  467 U.S. at 347-52.  Here, it is hard to see any

cogent reason why Congress would give importers a right to

judicial review, but deny that right to their domestic custom-

ers who have as much to lose.

  DEA tries to come up with such a reason:  to avoid wasteful

proceedings as when a customer succeeds in getting a suspen-

sion order vacated but the importer then decides not to go

through with the deal.  Respondent's Br. at 21.  DEA appar-

ently believes that the contractual arrangements between the

parties would permit the importer to back out.  We have no

way of knowing if that is a customary way of doing this

business; and DEA has provided nothing to indicate that

 

                                9

Congress thought it was.      There is another problem with

DEA's rationale.     Everyone agrees that importers have a

right to judicial review.  Yet if the parties are free to cancel a

deal, as DEA assumes, there is a risk that the customer will

call it off after the importer wins in court and has the

suspension order set aside.  In other words, DEA's argument

offers no rational distinction between importers, who may

seek judicial review, and domestic customers, who DEA says

cannot.  In addition, the Deputy Director's ruling in PDK's

case would preclude it from buying ephedrine from any

importer.  On his view, the suspension order rests on what

may happen to the finished products after they leave PDK's

facilities.  No matter which importer sought to supply PDK,

a suspension order presumably would issue.  A ruling against

the validity of the orders in this case, far from being an

academic exercise, therefore has practical future conse-

quences for PDK even if Indace or Malladi cancel their deals.

  As to the judicial review provision of the Controlled Sub-

stances Act, 21 U.S.C. § 877, this gives no indication that

Congress meant to grant judicial review to importers but to

withhold it from their domestic customers.   Section 877 mere-

ly provides, in familiar language, that ``any person aggrieved''

by a final DEA decision is entitled to judicial review in the

court of appeals.    While statutory language and legislative

history may overcome the presumption in favor of judicial

review,  see Block, 467 U.S. at 349, there is no language in

§ 877 and no legislative history DEA has cited that accom-

plishes that here.  In view of the interpretation of statutes

applicable to other agencies containing language identical to

§ 877, we hold that if PDK has Article III standing, which no

one doubts, and if its interests are ``arguably within the zone

of interests'' § 971(c)(1) regulates, which we believe they are,

PDK is a ``person aggrieved'' within § 877's meaning and is

entitled to prosecute its case in court.      See, e.g., Director,

Office of Workers' Comp. Programs v. Newport News Ship-

building & Dry Dock Co., 514 U.S. 122, 126-27 (1995);  New

World Radio, Inc. v. FCC, 294 F.3d 164, 169 (D.C. Cir. 2002);

Louisiana Energy & Power Auth. v. FERC, 141 F.3d 364,

366 (D.C. Cir. 1998).

 

                                 10

  In holding that PDK has prudential standing, we have

avoided placing a judicial interpretation on § 971(c)(2), the

hearing provision.  As we have said, DEA has not yet ren-

dered any formal interpretation of this provision.  Compare

Vermont Yankee Nuclear Power Corp. v. NRDC, 435 U.S.

519 (1977), with Envirocare of Utah, Inc. v. Nuclear Regula-

tory Comm'n, 194 F.3d at 75-76.  There will be time enough

to consider whatever construction DEA ultimately places on

the provision.  In the meantime, companies in PDK's position

have prudential and Article III standing to challenge suspen-

sion orders, which themselves must contain ``a statement of

the legal and factual basis'' for the order, 21 U.S.C.

§ 971(c)(1). See Citizens to Preserve Overton Park v. Volpe,

401 U.S. 402 (1971).

                                 III.

  To repeat, § 971(c)(1) authorizes DEA to ``order the sus-

pension of any importation TTT of a listed chemical TTT on the

ground that the chemical may be diverted to the clandestine

manufacture of a controlled substance.''  The main interpre-

tive question in the case is whether, as the suspension orders

assume, ``the chemical may be diverted'' includes the prospect

that PDK's ephedrine-containing pills in retail stores will be

sold to, or shoplifted by, people who will then use the pills to

produce methamphetamine.1  The Deputy Administrator con-

cluded that the statute plainly meant what the suspension

orders assumed.      He reached this conclusion without men-

tioning any policy considerations or other matters within the

  1 The concurring opinion severs ``chemical'' from ``diverted,'' and

then treats each word as if it should be construed in isolation.  But

the correct approach is to take the language of § 971(c)(1) in its

entirety, rather than trying to construe each word separately.  See,

e.g., Davis v. Michigan Dep't of Treasury, 489 U.S. 803, 809-10

(1989); United States v. Morton, 467 U.S. 822, 828 (1984).       It is

true that one must comprehend the words in a statute in order to

comprehend the statute, just as one must comprehend the letters in

a word in order to comprehend the word.  But it is equally true

that one cannot understand a statute merely by understanding the

words in it.

 

                                  11

agency's expertise. Apparently for this reason, DEA neither

invokes  Chevron v. NRDC, 467 U.S. 837, 843-45 (1984), nor

asks us to give any special deference to the Deputy Adminis-

trator's judgment about the meaning of the provision.  See,

e.g., Prill v. NLRB, 755 F.2d 941, 956-57 (D.C. Cir. 1985);

Alarm Indus. Communications Comm. v. FCC, 131 F.3d

1066, 1072 (D.C. Cir. 1997); Transitional Hosps. Corp. v.

Shalala, 222 F.3d 1019, 1028-29 (D.C. Cir. 2000);  ITT Indus.,

Inc. v. NLRB, 251 F.3d 995, 1004 (D.C. Cir. 2001);  Arizona v.

Thompson, 281 F.3d 248, 254 (D.C. Cir. 2002).

   As one of his reasons for thinking the statute clear, the

Deputy Administrator cited ``the legislative history of the

Chemical Diversion Control Act of 1993, Public Law 103-200,

§ 9, 107 Stat. 2333 (1993),'' and stated that this legislation

was meant ``to close the `loophole' for those who divert

ephedrine drug products.''  67 Fed. Reg. at 77,806.  Congress

enacted § 971(c)(1) in 1988, but the House Report the Deputy

Administrator cited came out five years later, in 1993.  In all

cases, ``the views of a subsequent Congress form a hazardous

basis for inferring the intent of an earlier one,'' United States

v. Price, 361 U.S. 304, 313 (1960), and have ``very little, if any,

significance.''  Rainwater v. United States, 356 U.S. 590, 593

(1958).  In this case, the ``basis'' is ``hazardous'' indeed.2  The

   2 The concurring opinion, like the Deputy Administrator, relies

heavily on this legislation and its history, treating it as ``significant''

because it altered the definition in § 802(39) of ``regulated transac-

tions.''  Concurring op. at 7 & 10.  But the 1993 amendments did

not amend the language at issue here.  How the 1993 amendments

``changed the reach'' of § 971(1)(c), as the concurrence supposes (at

12 n.6), thus remains a mystery.       Section 971(c)(1) did not give

DEA authority to suspend ``regulated transactions.''  The authority

Congress conferred in 1988 was and is limited to suspending

importations or exportations of listed chemicals. Such importations

and exportations are a subset of ``regulated transactions'' as

§  802(39)(A) defines the term.   To say that other regulated transac-

tions are included in § 971(c)(1) is simply to restate the question in

the case.

  As to the 1996 legislation, which the concurrence also invokes, it

too did not alter § 971(c)(1) and neither the DEA Deputy Adminis-

 

                                  12

``loophole'' mentioned in the House Report did not deal with

the importation of listed chemicals; it dealt instead with

domestic reporting and record keeping relating to finished

products.  The Report explained the purpose of the legisla-

tion:  ``to provide authority to DEA  to require that manufac-

turers of ephedrine products sold over-the-counter maintain

transaction records.''   H.R. REP. NO. 103-379, pt. 1, at 5 (1993).

If this later statute and its history had any bearing on the

meaning of § 971(c)(1), it would tend to support PDK, not

DEA.  The Chemical Diversion Control Act of 1993 drew a

distinction between, on the one hand, the finished product

and, on the other hand, the listed chemical.  Thus, § 814(a)

provides that DEA may remove a``drug or a group of drugs''

containing ``a listed chemical'' from the exemption for report-

ing.   21 U.S.C. § 814(a).       And § 814(e), which specifically

relates to ephedrine, gave DEA authority to reinstate the

exemption if it found that ``the drug product'' was ``manufac-

tured and distributed in a manner that prevents diversion.''

Id. § 814(e).  One might say, therefore, that in the view of a

later Congress it is PDK's ``drug'' or ``drug product,'' not the

``listed chemical'' mentioned in § 971(c)(1), that is being di-

verted.  The same may be said of § 802(39)(A)(iv)(I)(aa), on

which the Deputy Administrator also relied.  67 Fed. Reg. at

77,806.  This provision also resulted from the 1993 legislation

and it too speaks in terms of ``the drug'' containing ephedrine

rather than, as in § 971(c)(1), simply ``a listed chemical'' or

``the chemical.''

    Current DEA regulations are to the same effect.               The

regulations, in defining a ``regulated transaction,'' distinguish

between a ``drug contain ing  ephedrine'' and ``a listed chemi-

cal.''  21 C.F.R. § 1300.02(b)(28)(i)(D)(1).  ``The term combi-

nation ephedrine product means a drug product containing

ephedrineTTTT''     21 C.F.R. § 1300.02(b)(32).        And when re-

ferring to the type of diversion the Deputy Administrator had

in mind in this case, the regulations speak not of the diversion

of the listed chemical, but of the diversion of ``the drug or

trator, in his reasons for interpreting § 971(c)(1) to cover shipments

of bulk ephedrine, nor the government in its brief, relied on it.

 

                                 13

group of drugs TTT to obtain the listed chemical for use in the

illicit production of a controlled substance,'' 21 C.F.R.

§ 1300.02(b)(28)(i)(D)(1)(ii).  The 1993 amendment uses the

identical language.   21 U.S.C. §  802(39)(A)(iv)(I)(bb).

   The Deputy Administrator also thought that § 971(c)(1)'s

meaning was plain in light of the decision of the Ninth Circuit

in United States v. Daas, 198 F.3d 1167, 1175 (1999), which he

described as holding that the ``plain meaning'' of ``listed

chemical'' encompasses ephedrine contained in finished prod-

ucts.   67 Fed. Reg. at 77,806.      Daas was a criminal case.

The defendant sold decongestants containing ephedrine to

convenience stores knowing the drugs would be used to

manufacture methamphetamine.           The court sustained his

conviction for violating what is now 21 U.S.C. § 841(c)(2).

Section 841(c)(2) states that anyone who ``possesses or distrib-

utes a listed chemical knowing, or having reasonable cause to

believe, that the listed chemical will be used to manufacture a

controlled substance'' is guilty of an offense.  In an analysis

the Deputy Administrator adopted, 67 Fed. Reg. at 77,806,

the court held that because ephedrine did not change its

chemical composition when mixed with other ingredients to

form decongestants, it was plain that the defendant was

distributing ``a listed chemical'' when he sold decongestants to

retail stores.   198 F.3d at 1174-75.

   There is logic in the Ninth Circuit's reasoning, and in the

Deputy Administrator's reliance on the decision. When Con-

gress uses the same word in different parts of a statute, it

usually means the same thing.  See Sullivan v. Stroop, 496

U.S. 478, 484 (1990); Energy Research Found. v. Defense

Nuclear Safety Bd., 917 F.2d 581, 583 (D.C. Cir. 1990).  But

statutory interpretation is not just about logic.  See Henry J.

Friendly, Mr. Justice Frankfurter and the Reading of Stat-

utes, in BENCHMARKS 213 (1967).       The words of the statute

should be read in context, the statute's place in ``the overall

statutory scheme'' should be considered, and the problem

Congress sought to solve should be taken into account.

Davis v. Michigan Dep't of Treasury, 489 U.S. 803, 809

(1989).  As to the last, we know that when § 971(c)(1) was

enacted in 1988, the problem Congress addressed ­ at least

 

                                14

with respect to ephedrine ­ was not the misuse of finished

products at the retail level.  (Section 841(d)(2), the statute at

issue in Daas, was also part of the 1988 amendments.)  The

problem instead was, as the Deputy Administrator stated in

his opinion here, the diversion of imported bulk ephedrine to

illegal uses.  67 Fed. Reg. at 77,807.  It was only years later,

after amendments to provisions other than § 971(c)(1), that

the use of ephedrine-containing pills to make methamphet-

amine became widespread.  This is at least some indication

that Congress, in § 971(c)(1), did ``not directly address    the

precise question at issue'' in this case.  Chevron, 467 U.S. at

843.

   In saying this we recognize that the ``fact that Congress

may not have foreseen all of the consequences of a statutory

enactment is not a sufficient reason for refusing to give effect

to its plain meaning.''  Union Bank v. Wolas, 502 U.S. 151,

158 (1991).    But we do not agree that the language of

§ 971(c)(1) plainly covers the diversion of finished products,

or drug products.       That a statute is susceptible of one

construction does not render its meaning plain if it is also

susceptible of another, plausible construction, as we believe

this statute is.  Section 971(c)(1) deals with importation (and

exportation) of listed chemicals.  It does not regulate what a

drug manufacturer does with the chemical after receiving it;

other sections of the Act control that subject.            When

§ 971(c)(1) states that DEA may stop the importation if ``the

chemical may be diverted to the clandestine manufacture of a

controlled substance,'' one might ask:  ``Diverted from what?''

In context, a reading as plausible as the Deputy Administra-

tor's is that Congress meant only to cover diversions during

importation.  On this view, § 971(c)(1) would authorize sus-

pension orders only if the imported chemical might not reach

its intended destination ­ the legitimate, domestic manufac-

turer.3

   3 The concurring opinion states that § 971(c)(1) ``contains no

words of limitation.''  Concurring op. at 3, 8.   That of course

assumes the issue.  If ``the chemical may be diverted'' means only

diversion of ephedrine away from the manufacturer during importa-

 

                                 15

  One other consideration deserves mention.            The evidence

in this case showed that all ephedrine-containing pills, no

matter who manufactures them, may be used to make meth-

amphetamine, and that every company producing drugs con-

taining List I chemicals has had its products diverted from

the legitimate treatment of illnesses to illegal uses.  It follows

that under the Deputy Administrator's reading of § 971(c)(1),

DEA would have blanket authority to prevent the importation

of ephedrine to any domestic manufacturer.  Indications are

that PDK could obtain bulk ephedrine only from overseas

suppliers.  Yet no one doubts that Congress did not intend to

ban, or to give DEA the authority to ban, all sales of

ephedrine-containing drugs in retail stores.  DEA itself has

acknowledged ``Congress' intent that public access to the

ephedrine-containing  products at the retail level be protect-

edTTTT''    62 Fed. Reg. 52,253, 52,254 (DEA Oct. 7, 1997).

  The Deputy Administrator attempted to avoid this problem

by relying on Mediplas Innovations, 67 Fed. Reg. 41,256

(DEA June 17, 2002), and its ``totality of circumstances''

analysis to define ``may be diverted.''  67 Fed. Reg. at 77,807.

This kitchen-sink approach allows ``consideration of the wid-

est possible range of relevant evidence,'' without quantifying

the relative weight to be given to any particular consider-

ation.  Mediplas Innovations, 67 Fed. Reg. at 41,261.  DEA

may thus consider the quantity of a manufacturer's drugs

identified in DEA warning letters without determining wheth-

er competing manufacturers, whose importations were not

suspended, had a comparable percentage of their products

diverted.    DEA may also take into account the extent to

which the manufacturer has complied with DEA regulations

requiring timely filing of certain forms, id. at 41,262, its

efforts to cooperate with DEA, id. at 41,264, and other

tion, the statute does indeed contain words of limitation.        The

dictionary definition of ``divert'' cited in the concurrence lends

further support to the plausibility of this interpretation.  Concur-

ring op. at 4.    We do not say that this is the only possible

interpretation of § 971(c)(1).  Our point instead is that the statute's

meaning is not as clear as the DEA Deputy Administrator made it

out to be.

 

                                  16

matters.  The wide range of factors DEA used in Mediplas,

and in this case, to give meaning to ``the chemical may be

diverted'' language of § 971(c)(1) seems hardly the stuff of

plain meaning.

   In short, we do not agree that the meaning of § 971(c)(1) is

as plain as DEA says it is.  It may be that here, as in other

cases, the strict dichotomy between clarity and ambiguity is

artificial, that what we have is a continuum, a probability of

meaning.  In precisely those kinds of cases, it is incumbent

upon the agency not to rest simply on its parsing of the

statutory language.4  It must bring its experience and exper-

tise to bear in light of competing interests at stake.          See

Chevron v. NRDC, 467 U.S. at 865-66. When it does so it is

entitled to deference, so long as its reading of the statute is

reasonable.  But it has not done so here and at this stage it is

not for the court ``to choose between competing meanings.''

Alarm Indus. Communications Comm. v. FCC, 131 F.3d at

1072;  see, e.g., Prill v. NLRB, 755 F.2d at 956-57;  Transi-

tional Hosps. Corp. v. Shalala, 222 F.3d at 1028-29; ITT

Indus., Inc. v. NLRB, 251 F.3d at 1004;  Arizona v. Thomp-

son, 281 F.3d at 254.

   In trying to distinguish the Prill line of decisions, the

concurring opinion states that unlike those cases, here `` w e

know how the agency would choose to interpret the statute''

on remand.  Concurring op. at 16.  We know no such thing.

Yes, DEA did exercise discretion when it issued the order

here, but before doing so it necessarily had to decide what

§ 971(c)(1) meant.  That is the issue the agency must recon-

sider on remand.  In addition, it is important to remember

   4 The concurring opinion assumes that the so-called Chevron

``step 1'' is limited to determining whether the statute has a plain

meaning.  Concurring op. at 13.  But in deciding whether Congress

directly addressed a particular issue (step 1), one may use ``the

traditional tools of statutory construction.''  467 U.S. at 843 n.9;

see, e.g., Am. Bankers Ass'n v. Nat'l Credit Union, 271 F.3d 262,

271 (D.C. Cir. 2001).  This is all the DEA Deputy Administrator

did, and it is all that we have done in examining the language and

context of §  971(c)(1).

 

                                  17

that if we find that an agency's stated rationale for its

decision is erroneous, we cannot sustain its action on some

other basis the agency did not mention.  See SEC v. Chenery

Corp., 332 U.S. 194, 200 (1947).          The law of this circuit

requires in those circumstances that we withhold Chevron

deference and remand to the agency so that it can fill in the

gap.  As we held in Arizona v. Thompson, 281 F.3d at 254,

deference to an agency's interpretation of a statute is not

appropriate when the agency wrongly ``believes that interpre-

tation is compelled by Congress.''  See, e.g., ITT Indus., Inc.

v. NLRB, 251 F.3d at 1004; Transitional Hosps. Corp. v.

Shalala, 222 F.3d at 1028-29;  Alarm Indus. Communications

Comm. v. FCC, 131 F.3d at 1072.

  Even if § 971(c)(1) plainly meant what DEA thought, we

would still have to vacate the Deputy Administrator's decision

and remand the case.5        In applying his ``totality of circum-

stances'' approach to determining whether the listed chemical

may be diverted, the Deputy Administrator ruled that PDK

had violated an export notification regulation when it made

four deliveries of tablets containing ephedrine between 1994

and 1995 to Sun Labs of Canada in New York.  67 Fed. Reg.

at 77,807-08.  The Deputy Administrator did not explain how

alleged export violations were relevant to determining wheth-

er PDK's finished products might be used in methamphet-

amine laboratories.  In any event, the Deputy Administrator

failed to distinguish, indeed did not mention, Alfred Khalily,

Inc., 64 Fed. Reg. 31,289 (DEA June 10, 1999), which held

that a company selling List I chemicals to a foreign buyer but

delivering the chemicals to the buyer in the United States

  5 We do not understand the complaint in the concurring opinion

that we should have disposed of this case solely on this basis,

without saying anything about the Deputy Administrator's interpre-

tation of § 971(c)(1).  Giving several, separate reasons for reversing

and remanding is a time-honored, prudent mode of appellate juris-

prudence, see, e.g., Erie R.R. v. Tompkins, 304 U.S. 64, 72-73, 77-79

(1938);  Kleppe v. Sierra Club, 427 U.S. 390, 403-06 (1976).  So here.

DEA should have our opinion on the statutory construction issue so

that it may deal with that issue now, rather than later if PDK seeks

judicial review of DEA's decision on remand.

 

                               18

``was not responsible for filing any export documentation.''

Id. at 31,293 n.2.  Khalily could not have escaped the Deputy

Administrator's attention;  the ALJ had cited it in her opin-

ion.  An agency may of course alter its positions over time,

but the ``agency acts arbitrarily when it departs from its

precedent without giving any good reason.''  Northern Cali-

fornia Power Agency v. FERC, 37 F.3d 1517, 1522 (D.C. Cir.

1994).   DEA recognizes as much and confesses that the

Deputy Administrator erred in failing to reconcile his ruling

with  Khalily.   But, DEA continues, this is of no moment

because the result of the agency proceedings would not have

changed.

  In administrative law, as in federal civil and criminal litiga-

tion, there is a harmless error rule:  § 706 of the Administra-

tive Procedure Act, 5 U.S.C. § 706, instructs reviewing courts

to take ``due account TTT of the rule of prejudicial error.''  If

the agency's mistake did not affect the outcome, if it did not

prejudice the petitioner, it would be senseless to vacate and

remand for reconsideration.  But in this case we cannot say

that the Deputy Administrator's error was of that sort.  It is

entirely possible that, on remand, he will decide to adhere to

Khalily, in which event PDK will be exonerated from any

export violations.   The Deputy Administrator stated that it

was ``the totality of circumstances'' that led him to sustain the

suspension orders, and four of the ``circumstances'' promi-

nently mentioned were PDK's export violations.          67 Fed.

Reg. at 77,807.  What weight he gave to those circumstances

(or any others) is impossible to discern.  The decision uphold-

ing the suspension orders must therefore be set aside and the

case remanded.

                                                     So ordered.

 

                                1

  ROBERTS, Circuit Judge, concurring in part and concurring

in the judgment:

  I agree with the majority that PDK has standing to seek

review of DEA's suspension order, and that the order must

be vacated because it relies, in significant part, upon a

conclusion that PDK violated certain export notification regu-

lations -- a conclusion that contradicted relevant agency

precedent without explanation.      This much is not terribly

controversial;  DEA conceded its error and all but conceded

that this court should remand the decision on that basis.  See

DEA Br. 59 (``we acknowledge that, in such circumstances,

the ordinary practice would be a remand to the agency'').

This is a sufficient ground for deciding this case, and the

cardinal principle of judicial restraint -- if it is not necessary

to decide more, it is necessary not to decide more -- counsels

us to go no further.

  My brethren, however, are not content with this narrow

and effectively conceded basis for disposition, and instead

adopt an alternative ground of far broader significance, one

that precipitates disagreement among us but at the end of the

day leads to the same result -- vacatur and remand to the

agency.   I cannot go along for that gratuitous ride.

                            *  *  *

  The majority's alternative basis for remand sidesteps the

familiar Chevron analysis, see Chevron U.S.A. Inc. v. Natural

Resources Defense Council, 467 U.S. 837, 843­45 (1984),

substituting in its stead an argument in three parts:  (1) the

Deputy Administrator thought the plain meaning of Section

971 gave him discretion to suspend importation in this case,

(2) Section 971 has no plain meaning but is in fact susceptible

of different interpretations on the question presented, and (3)

the case must therefore be sent back so that the Deputy

Administrator can decide which construction he thinks is

right (as opposed to compelled) and explain why.

  This reasoning fails at each step, and each defect is fatal to

the majority's analysis.  First, Section 971(c)(1) is not ambig-

uous, and the Deputy Administrator's interpretation in this

case is entirely consistent with the clearly expressed intent of

 

                                2

Congress.  Second, the Deputy Administrator's decision can-

not fairly be read as reflecting the view that he felt compelled

to read the statute as he did, as opposed to simply adopting

the construction that seemed most reasonable to him, and

explaining his reasons for that.  Finally, even if Section 971

were ambiguous, and even if the Deputy Administrator erro-

neously rested his decision only on a plain reading of the

statute, a remand still would not be necessary.   We know how

the agency would construe the statute, because its interpreta-

tion in this case was reached in the course of a purely

discretionary act.  If the agency did not want to block this

importation, nothing in Section 971(c) required it to do so.

This is hardly a case -- like those cited by the majority -- in

which the agency felt it was forced to take the action it did,

based on an erroneous reading of the law.

  1.  I would uphold the agency's interpretation of Section

971 under step one of Chevron.         Congress has ``directly

addressed the precise question at issue,'' and the Deputy

Administrator's position is entirely consistent with the ``unam-

biguously expressed intent of Congress'' on this subject.

Chevron, 467 U.S. at 843.

  ``We turn first, as we must, to the language of the statute,

the most important manifestation of Congressional intent.''

Public Citizen, Inc. v. U.S. Dep't of Health & Human Servs.,

332 F.3d 654, 662 (D.C. Cir. 2003) (quotation omitted).  The

language in question:  ``The Attorney General may order the

suspension of any importation or exportation of a listed

chemical TTT on the ground that the chemical may be diverted

to the clandestine manufacture of a controlled substance.''  21

U.S.C. § 971(c)(1).   Ephedrine is a ``listed chemical'' under

the statute.  See 21 U.S.C. § 802(34)(C);  id. § 951(b) (apply-

ing definitions from Section 802 to Controlled Substances

Import and Export Act, 21 U.S.C. §§ 951­971).  Thus, under

Section 971(c)(1), the Attorney General may order the sus-

pension of any importation of ephedrine on the ground that

the ephedrine, if imported, may be diverted to the clandestine

manufacture of a controlled substance.          See 21 C.F.R.

§ 1313.41 (providing that DEA may suspend a shipment of a

 

                                  3

listed chemical ``based on evidence'' that the chemical may be

diverted).

    The statute contains no words of limitation.  Any probabili-

ty of diversion of any amount of ephedrine is a sufficient

statutory basis for the invocation of the Attorney General's

authority.    This is, to be sure, an expansive delegation of

power.  When faced with similarly broad grants of authority

to the Executive, we have noted that ``the Supreme Court has

consistently instructed that statutes written in broad, sweep-

ing language should be given broad, sweeping application.''

Consumer Elecs. Ass'n v. FCC, 347 F.3d 291, 298 (D.C. Cir.

2003).   So here.

    a.  ``Listed chemical.''  The majority primarily takes issue

with the Deputy Administrator's conclusion that the term

``listed chemical'' can include PDK's over-the-counter drug

products containing ephedrine.        See Maj. Op. at 10­14; 67

Fed. Reg. at 77,806.        The majority explains that a drug

containing a listed chemical is not the same as a listed

chemical, and that the statute recognizes this distinction.

Fair enough.  What the majority fails to acknowledge, howev-

er, is that it is not PDK's ``MaxBrand Mini Two­Way Action''

product (obviously itself not a ``listed chemical,'' but a ``chemi-

cal mixture,'' see 21 U.S.C. § 802(40)) that is regularly divert-

ed to the manufacture of methamphetamine, but rather the 25

mg of ephedrine that each Mini Two­Way Action pill con-

tains.

    Once it receives its bulk ephedrine, PDK combines the

ephedrine with the decongestant guaifenesin and binders to

form its Mini Two­Way Action pills.           See PDK Br. 4.

Throughout this process, the chemical composition of the

ephedrine is unaltered.  Illicit methamphetamine manufactur-

ers then purchase or steal Mini Two­Way Action, and break

the finished product back down into its component parts,

yielding exactly the same pure ephedrine that was imported

by PDK.  See ALJ Op. ¶¶ 90­91.  It is that imported ephed-

rine that is ``diverted'' -- i.e., turned away from its intended

destination or use, see infra at 4­5 -- to the manufacture of

methamphetamine.  In this manner, it is the listed chemical

itself -- ephedrine -- that is diverted to methamphetamine

 

                                  4

manufacturing.  At the time of its ``diversion,'' the ephedrine

extracted from PDK Mini Two­Way Action is just as much a

listed chemical as when it was transported across the high

seas in bulk form.  Thus, at least insofar as a listed chemical

is readily extractable from its finished drug product, the text

of Section 971(c) treats transactions (including a ``diversion'')

in that drug as transactions in the listed chemical it contains.

   This interpretation comports with common sense.             If a

methamphetamine manufacturer steals, for the purpose of

making methamphetamine, a bottle containing pure ephed-

rine, or pure ephedrine dissolved in water, or a bottle contain-

ing 50 ephedrine pills and 50 guaifenesin pills, we would not

hear an argument that he did not divert a listed chemical

because he also diverted a bottle, some water, or some

guaifenesin.   The presence of packaging materials or other

extraneous items does not vitiate the existence of the listed

chemical.   Here, a bottle of PDK Mini Two­Way Action

contains pills each consisting of 25 mg of ephedrine and 200

mg of guaifenesin and binders.         For purposes of Section

971(c), the decongestant and the binders are extraneous

materials, no more relevant to the analysis than the bottles

and boxes in which the pills are packaged.

   b.  ``May be diverted.''  The majority also finds ambiguity

in the term ``may be diverted.''   I do not.

   Although PDK did not object here or below to DEA's

construction of the term ``diverted,'' the majority suggests

that, given the focus of Section 971 on imports and exports,

the term may only cover hijackings during the import or

export.  See Maj. Op. at 14.  Such a crabbed construction is

untenable.   First, it conflicts with the plain meaning and

common usage of the verb.  The Oxford English Dictionary

defines ``divert'' to mean `` t o turn aside (a thing, as a stream,

etc.) from its (proper) direction or course;  TTT to turn from

one destination or object to another.''       IV OXFORD  ENGLISH

DICTIONARY 888 (2d ed. 1989);  see also BLACK'S LAW DICTIONARY

491 (7th ed. 1999) (defining ``diversion'' as `` a  deviation or

alteration from the natural course of things'').  That the term

 

                                   5

is broad does not make it ambiguous.               See Diamond v.

Chakrabarty, 447 U.S. 303, 315 (1980) (``Broad general lan-

guage is not necessarily ambiguous when congressional objec-

tives require broad terms.'').  The majority asks `` d iverted

from what?,'' Maj. Op. at 14, but Congress did not choose to

limit the statute along any such lines.1

   Moreover, the word ``diversion'' appears throughout both

the statute that initially enacted Section 971, the Chemical

Diversion and Trafficking Act of 1988 (CDTA), Pub. L. No.

100­690, §§ 6051 et seq., 102 Stat. 4181, 4312, and the statute

that expanded the CDTA's reach to cover many finished drug

products containing ephedrine, the Domestic Chemical Diver-

sion Control Act of 1993 (DCDCA), Pub. L. No. 103­200, 107

Stat. 2333.    There is, of course, a strong presumption that

``identical words used in different parts of the same act are

intended to have the same meaning.''  Sullivan v. Stroop, 496

U.S. 478, 484 (1990) (quotation omitted), and in no section of

either the CDTA or the DCDCA is the term ``diversion'' used

in the limited sense the majority speculates it might have

been used in Section 971.2

   The majority also contends that the ``totality of the circum-

stances'' standard applied by DEA in explaining its decision

to suspend importation in this case, see 67 Fed. Reg. at

77,807; In re Mediplas Innovations, 67 Fed. Reg. 41,256,

   1 The majority asserts that `` i f `the chemical may be diverted'

means only diversion of ephedrine away from the manufacturer

during importation, the statute does indeed contain words of limita-

tion.''  Maj. Op. at 14­15 n.3 (emphasis in original).       No.   The

majority can choose to read the words ``away from the manufactur-

er during importation'' into the statute, but it cannot claim that the

statute contains those words of limitation.

   2 The majority says I err by considering ``listed chemical'' apart

from ``may be diverted.''  See Maj. Op. at 10 n.1.  I took my cue, of

course, from Congress, which treated ``listed chemical'' as a sepa-

rately defined term in the statute.  See 21 U.S.C. § 802(33)­(35).

And I do not see any significant difference between asking whether

a ``listed chemical'' ``may be diverted'' and whether a ``listed chemi-

cal may be diverted.''

 

                                6

41,262 (2002), ``seems hardly the stuff of plain meaning.''

Maj. Op. at 16.  Noting that all ephedrine-containing drugs

are diverted to some extent, the majority complains that

DEA's ``kitchen-sink approach'' could potentially permit DEA

to ban ephedrine-containing drugs altogether.  Id. at 15­16.

This criticism confuses the grant of discretion with review for

abuse.  There is nothing unusual about a statute granting an

agency broad discretion -- plainly or otherwise -- and the

agency developing standards that govern the exercise of that

discretion on a case-by-case basis, through adjudication rath-

er than rulemaking.  See, e.g., INS v. Aguirre­Aguirre, 526

U.S. 415, 429 (1999); Chippewa & Flambeau Improvement

Co. v. FERC, 325 F.3d 353, 359 (D.C. Cir. 2003).  Over time,

that will result in an effective and salutary narrowing of the

discretion enjoyed by the agency.      See  HENRY  J. FRIENDLY,

More Definite Standards of Administrative Action: The

Need, in BENCHMARKS       86, 97 (1967) (`` W here the initial

standard is thus general, it is imperative that steps be taken

over the years to define and clarify it -- to canalize the broad

stream into a number of narrower ones.'').         That process

hardly belies the original broad grant of discretion.

  c.  Legislative history.  Although we have been instructed

not to ``resort to legislative history to cloud a statutory text

that is clear,'' Ratzlaf v. United States, 510 U.S. 135, 147­48

(1994);  accord Air Transport Ass'n of Canada v. FAA, 323

F.3d 1093, 1096 (D.C. Cir. 2003) (``ordinarily, we do not read

legislative history to create otherwise non-existent ambigui-

ties''), the majority relies upon legislative history to such an

extent that a response seems in order.  The majority's main

point is that Congress was not concerned about diversion of

finished ephedrine-containing products in 1988, when Section

971 was enacted.  See Maj. Op. at 11­12.  Even if true, the

Supreme Court has held often enough that ``the fact that a

statute can be applied in situations not expressly anticipated

by Congress does not demonstrate ambiguity.           It demon-

strates breadth.''  PGA Tour, Inc. v. Martin, 532 U.S. 661,

689 (2001) (internal quotation marks and citation omitted);

accord Consumer Elecs. Ass'n, 347 F.3d at 298.

 

                                7

  Moreover, as the Deputy Administrator recognized -- and

as will be demonstrated below -- the history that is signifi-

cant is the history of the DCDCA and its sibling Comprehen-

sive Methamphetamine Control Act of 1996 (CMCA), Pub. L.

No. 104­237, 110 Stat. 3099, for those are the statutes that

broadened the ambit of the regulation of listed chemicals --

including under Section 971 -- to cover drugs containing

ephedrine.    As noted by the Deputy Administrator, that

legislative history clearly demonstrates that Congress was

very much concerned about the diversion of finished drug

products containing ephedrine.   See H.R. REP.  NO.  103­379, at

6 (1993) (``This provision removes the exemption TTT for

drugs containing ephedrine TTT because these products are

being diverted in significant quantities for the illicit manufac-

ture of methamphetamine'').

  The majority also complains that the ``loophole'' cited by

the Deputy Administrator in his decision bears no relation-

ship to Section 971, because it dealt only with ``reporting and

record keeping relating to finished products.''   Maj. Op. at 12.

The majority is half right; the ``loophole'' in question did

concern reporting and record keeping requirements.            Of

course, Section 971 is, first and foremost, a reporting require-

ment, and it is primarily the reporting that alerts the Attor-

ney General to an importation that might be suspended.  See

21 U.S.C. § 971(a).  More importantly, the Deputy Adminis-

trator cited two references in the committee report in discuss-

ing the ``loophole,'' see 67 Fed. Reg. at 77,806, and the

second -- the one ignored by the majority -- offered a more

detailed description of the problem in question.  The second

reference was to the DEA Acting Administrator's explanation

that ``the so-called `legal drug exemption' which currently

exempts drug products approved for marketing under the

Food, Drug and Cosmetic Act from the regulatory provisions

of our chemical control law'' had become a ``loophole,'' ``ex-

ploited by clandestine laboratory operators.''  H.R. REP.  NO.

103­379, at 8.    It is that loophole that the DCDCA and

CMCA revoked for drugs containing ephedrine, see 21 U.S.C.

§ 802(39)(A)(iv)(I)(aa), but which the majority's proffered

reading would restore for purposes of Section 971.

 

                                  8

                               *  *  *

   For all these reasons I would uphold the agency's interpre-

tation of Section 971 under step one of Chevron.  The broad

language unambiguously confers discretion to suspend the

importation at issue because the ephedrine in PDK's products

may be diverted to methamphetamine production, and noth-

ing in the legislative history remotely suggests -- let alone

compels -- a narrower reading.

   2.  The majority, however, concludes that the statute is

ambiguous.  But my colleagues refuse to proceed -- as we

ordinarily would in such circumstances -- to Chevron's sec-

ond step, and ask whether the agency's interpretation ``is

based on a permissible construction of the statute.''  Chevron,

467 U.S. at 843.3       Rather, they contend that a remand is

   3 Not to chase down every rabbit spooked by the majority's

alternative holding, but the fact that DEA did not, as the majority

notes, request ``any special deference to the Deputy Administrator's

judgment about the meaning of the provision,'' Maj. Op. at 11,

would seem to be without consequence.  DEA is clearly entitled to

Chevron deference -- it has been delegated the authority both to

issue legislative rules and to engage in binding adjudications under

the statute, either of which triggers the applicability of Chevron.

See Thomas W. Merrill & Kristin E. Hickman, Chevron's Domain,

89 GEO.  L. J. 833, 900­01 (2001).    We have never held that an

agency must mouth magic words before we will apply the deference

required by a congressional delegation of authority to the agency.

See Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 99 (1991)

(``When an issue or claim is properly before the court, the court is

not limited to the particular legal theories advanced by the parties,

but rather retains the independent power to identify and apply the

proper construction of governing law.'');  ISI Int'l, Inc. v. Borden

Ladner Gervais LLP, 256 F.3d 548, 551 (7th Cir. 2001) (Easter-

brook, J.) (``Federal courts are entitled to apply the right body of

law, whether the parties name it or not.'').       Moreover, DEA's

reticence on this score is understandable.  The terms at issue here

are more typically implicated in criminal prosecutions to which

Chevron does not apply.  It is not difficult to see why DEA would

prefer not to invite a holding from this court that is predicated on a

conclusion that those terms are ambiguous.

 

                                9

required, citing Prill v. NLRB, 755 F.2d 941 (D.C. Cir. 1985),

and its progeny.

   The Prill line of cases stands for the proposition that when

an agency reads a statute in a particular way based on the

erroneous belief that the reading was mandated by the stat-

ute (and thus the agency had no latitude to adopt a different

interpretation), the case will be remanded so that the agen-

cy -- now freed from its confined view of its own discre-

tion -- can reconsider its interpretation of the statute.  See

Prill, 755 F.2d at 947­48, 950­53.  Here, the majority claims

that `` t he Deputy Administrator . . . thought that

§ 971(c)(1)'s meaning was plain,'' Maj. Op. at 13;  see also id.

at 10 (``The Deputy Administrator concluded that the statute

plainly meant what the suspension orders assumed.'');  id. at

16 (``we do not agree that the meaning of § 971(c)(1) is as

plain as DEA says it is''); and that `` h e reached this

conclusion without mentioning any policy considerations or

other matters within the agency's expertise,'' id. at 10­11;  see

also id. at 16 (`` I t is incumbent upon the agency not to rest

simply on its parsing of the statutory language.        It must

bring its experience and expertise to bear in light of compet-

ing interests at stake. TTT I t has not done so here.'').

   That is not how I read the Deputy Administrator's decision.

There is nothing here to suggest that the Deputy Administra-

tor thought he was under Chevron step one as opposed to

step two, or that he thought of Chevron at all.  Compare, e.g.,

Arizona v. Thompson, 281 F.3d 248, 254 (D.C. Cir. 2002) (``In

Chevron terms, then, the agency has stopped at step one:

HHS believes that the statute clearly bars primary program

allocation, and that it is without discretion to reach another

result.'').   Contrary to the majority's opinion, the Deputy

Administrator did not state that the meaning of the statute is

``plain.''  He also never used words like ``unambiguous'' or

other phrases evocative of Chevron step one, such as ``directly

spoken to the precise question at issue.''  Instead, he said the

critical language ``must be construed'' in light of other statu-

tory language he considered relevant, distinguished three

cases relied on by the ALJ, found ``additional support'' in a

court of appeals case interpreting a related criminal statute,

 

                               10

discussed a House Report, and rejected the ALJ's policy

concern that the government's view would create ``strict

liability.''  67 Fed. Reg. at 77,806­07.  Hardly the stuff of a

plain language reading.

   The Deputy Administrator's interpretation of Section 971

rested primarily on the theory that the scope of Section 971

must be understood in light of the term ``regulated transac-

tion,'' as defined in Section 802(39).   See id. at 77,806; see

also 21 U.S.C. § 951(b).  This was the lead-off argument he

made in defending his statutory reading.

   It is a structural argument that leans heavily on the history

of the listed chemical statutes.  The CDTA, of which Section

971 was a part, see CDTA § 6053, 102 Stat. at 4314, generally

widened the reach of the Nation's drug laws to include

precursor chemicals -- i.e., chemicals used to manufacture

controlled substances.  In the section immediately following

that which enacted Section 971, the CDTA also amended

Section 802 of the Controlled Substances Act to provide

definitions for the terms ``listed chemical,'' ``regulated per-

son,'' and ``regulated transaction.''  See CDTA § 6054(3), 102

Stat. at 4316 (codified at 21 U.S.C. § 802(34), (38), (39)).

These terms have application not only in Section 971, but

throughout the CDTA and its amendments -- that is, in all

the laws concerning the regulation of listed precursor chemi-

cals.

   At the time of the enactment of Section 971 in 1988,

``regulated transaction'' included imports and exports of listed

chemicals -- including ephedrine -- but exempted ``any trans-

action in a listed chemical that is contained in a drug that

may be marketed or distributed lawfully in the United States

under the Federal Food, Drug, and Cosmetic Act.''   21 U.S.C.

§ 802(39)(A)(iv) (1989).   Similarly, Section 802(39)(A)(v) ex-

empted transactions ``in a chemical mixture,'' defined as ``a

combination of two or more chemical substances, at least one

of which is not a listed chemical .''  Id. § 802(39)(A)(v), (40).

Thus, Section 802 specifically excluded all FDA-approved

drug products and all chemical mixtures from the definition of

``regulated transaction,'' and, concomitantly, from coverage

under the CDTA, including Section 971.

 

                                  11

   Illegal methamphetamine manufacturers soon exploited

this loophole.     In 1993 and 1996, Congress responded by

adding exceptions to its exception for FDA-approved drugs,

effectively eliminating the exception for transactions in any

``drug that  contains ephedrine.''  See DCDCA § 2(a)(6)(C),

107 Stat. at 2333­34 (removing exception for a drug contain-

ing ephedrine and ``therapeutically insignificant quantities of

another active medicinal ingredient'');  CMCA § 401(a)(1), 110

Stat. at 3106­07 (codified as amended at 21 U.S.C.

§ 802(39)(A)(iv)(I)(aa)) (removing exception for any drug con-

taining ephedrine, regardless of whether it contained other

therapeutic ingredients).4  The DCDCA and the CMCA thus

eliminated any exception for ephedrine-containing drugs from

the definition of ``regulated transaction.''  Because only listed

chemical transactions qualify as ``regulated transactions,'' see

21 U.S.C. § 802(39)(A), the re-inclusion of transactions in

ephedrine-containing drugs reflects congressional intent that

transactions in those drugs be treated as transactions in

listed chemicals.5  As the Deputy Administrator explained in

expressly adopting the government's reasoning along these

   4 The DCDCA also limited the exception for chemical mixtures to

those found by the Attorney General to be ``formulated in such a

way that it cannot be easily used in the illicit production of a

controlled substance and that the listed chemical or chemicals

contained in the mixture cannot be readily recovered.''              See

DCDCA § 2(a)(6)(D), 107 Stat. at 2334 (codified at 21 U.S.C.

§ 802(39)(A)(v)).

   5 This structural argument also answers the majority's contention

(Maj. Op. at 12) that Section 814(a)'s separate use of the terms

``drug'' and ``listed chemical'' demonstrates that drugs cannot be

treated as listed chemicals.  Section 814(a) requires the Attorney

General to ``remove from exemption under section 802(39)(A)(iv) TTT

a drug or group of drugs that the Attorney General finds is being

diverted to obtain a listed chemical.''  21 U.S.C. § 814(a);  see also

id. § 802(39)(A)(iv)(I)(bb).  The exemption referenced is the exemp-

tion from ``regulated transaction'' status for transactions ``in a listed

chemical that is contained in a FDA-approved  drug.''                Id.

§ 802(39)(A)(iv).  The fact that Congress, in Section 814(a), told the

Attorney General to revoke this exemption in certain circumstances

 

                                   12

lines, `` t hus a `regulated transaction' includes any ephedrine

drug product as a `listed chemical.' ''  67 Fed. Reg. at 77,806.6

means that, in the absence of such an exemption, transactions in

FDA-approved drugs containing listed chemicals can be treated as

regulated transactions -- that is, transactions in listed chemicals.

See id. § 802(39)(A).  The majority's invocation of Section 814(e),

concerning the road to reinstatement of that exemption for ephed-

rine-containing drugs, only reinforces this point in a particularly

germane way.

   6 The majority protests that the DCDCA is irrelevant because it

did not alter the language of Section 971(c)(1).  See Maj. Op. at 11­

12 n.2.  The language of Section 971(c)(1) was not changed, but the

meaning of that language was.       The DCDCA -- and the CMCA

after it -- broadened the scope of the defined term ``regulated

transaction'' in Section 802 -- a term that appears in the text of

Section 971(c)(1) -- to include transactions in drugs containing

ephedrine.  Section 971 applies to that class of ``regulated transac-

tions'' that are imports and exports, i.e., imports and exports of

listed chemicals;  by specifying that ``regulated transactions'' include

transactions in drug products containing ephedrine, the DCDCA

and CMCA changed the reach of Section 971.

   In faulting the Deputy Administrator's reasoning along these

lines, the majority gives insufficient weight to the agency's views on

how the statutes Congress entrusted to the agency to administer

should be read together.      See,  e.g.,  Natural Resources Defense

Council, Inc. v. EPA, 859 F.2d 156, 202 (D.C. Cir. 1988) (``As the

agency charged with interpreting the complicated statutory provi-

sions that comprise the Clean Water Act , EPA is entitled to

considerable deference in the interpretive process of making the

regulatory machinery work.'').     The majority's suggested reading

would also lead to the incongruous result that DEA could reach

transactions involving drugs containing ephedrine as ``regulated

transactions'' under other provisions, but could not address those

same transactions through its Section 971 power, despite the lack of

any evidence that Congress wanted DEA to address such transac-

tions armed with only part of its usual arsenal.  More fundamental-

ly, the majority's objections to the Deputy Administrator's analysis

sound in Chevron step one, when the whole point is that he was not

 

                                  13

  This is not a ``plain language'' argument, and the Deputy

Administrator did not say that it was.7  The agency here did

not just parse language;  it applied its experience and exper-

tise administering the statutes entrusted to it by Congress to

resolve any question about the scope of Section 971 in light of

the evolving reach of the definitional provisions in Section

802 -- which apply throughout the drug control laws --

concluding that this would most faithfully carry out the will of

Congress.  See Chevron, 467 U.S. at 844 (deference appropri-

ate ``whenever decision as to the meaning or reach of a

statute has involved reconciling conflicting policies, and a full

understanding of the force of the statutory policy in the given

situation has depended upon more than ordinary knowledge

respecting the matters subjected to agency regulations'' (quo-

tation omitted)).  DEA's interpretation is a vivid example of

bringing agency ``experience and expertise'' to bear on statu-

tory construction of the sort that the majority describes as

wholly absent.   See Maj. Op. at 10, 16.

  The majority relies almost exclusively for its contrary view

on the paragraph in the Deputy Administrator's ruling dis-

cussing the Ninth Circuit's decision in United States v. Daas,

198 F.3d 1167, 1175 (1999).  The Deputy Administrator began

the paragraph -- which appears after his discussion of the

foregoing structural argument -- by stating that Daas pro-

vided ``additional support'' for the government's position.  67

Fed. Reg. at 77,806.   He then noted:

undertaking to show that his reading of the statute was unambigu-

ously compelled.   See infra at 13­16.

  7  In the Proposed Final Order submitted with its exceptions to

the ALJ decision, the government sought to have the Deputy

Administrator rely on `` t he plain language of this statutory provi-

sion'' and conclude that ``the statute's plain meaning is clear.''

Government's Exceptions to Recommended Rulings, Findings of

Fact, Conclusions of Law, and Decision of the ALJ (Apr. 25, 2002),

App. A, at 5, 6.  Although he adopted much of the government's

Proposed Final Order, the Deputy Administrator did not accept

that language.

 

                                14

      The Daas court stated:  ``The chemical matrix in which

      ephedrine and pseudoephedrine are contained is irrele-

      vant because they do not disappear, become different

      chemicals, or become useless when combined with other

      substances to make finished products .       For the pur-

      poses of § 841(d)(2), the other ingredients * * * function

      solely as a carrier medium or packaging material facili-

      tating the distribution of the listed chemical.''  The court

      concluded that ``the plain meaning of `listed chemical'

      encompasses the ephedrine and pseudoephedrine con-

      tained in finished products .''  The Deputy Administra-

      tor finds this analysis equally applicable to the instant

      case.

Id. (citation omitted and alteration in original).

  Two points about this paragraph:  First, Daas was a crimi-

nal case; the Ninth Circuit was not there reviewing an

agency's interpretation of ``listed chemical.''    Its use of the

phrase ``plain meaning'' obviously was not shorthand for a

Chevron determination that ``Congress has directly spoken to

the precise question at issue.''     Chevron, 467 U.S. at 842.

  Second, the ``analysis'' that the Deputy Administrator found

applicable was the discussion of how the listed chemicals do

not change composition when combined with other ingredi-

ents.    This is clear from the immediately preceding para-

graph of the Deputy Administrator's decision, which distin-

guishes three cases relied on by the ALJ because they --

unlike Daas -- did not analyze the ``issue of chemical identi-

ty.''   67 Fed. Reg. at 77,806.      The Ninth Circuit's ``plain

meaning'' conclusion was just that -- a conclusion, not ``analy-

sis.''  The Deputy Administrator's partial reliance on Daas

for part of the interpretive question at issue here thus affords

no justification for the majority's failure to follow normal

Chevron analysis.

 

                                   15

   In short, I am at a loss to understand how the majority can

fairly describe the Deputy Administrator's decision as

``rest ing  simply on his  parsing of the statutory language.''

Maj. Op. at 16.8      In discussing his interpretation of the

statute, the Deputy Administrator examined the interplay

between Section 971 and the definition of ``regulated transac-

tion'' set out in Section 802, and the legislative history of the

statutes that amended that definition to include drugs con-

taining ephedrine.      See 67 Fed. Reg. at 77,806.         He dis-

cussed, in addition to the Ninth Circuit decision in Daas, four

other DEA decisions concerning suspensions of importations

under Section 971.  See id.  He considered legislative history

and weighed policy concerns about closing loopholes, on the

one hand, and about imposing ``strict liability,'' on the other.

See id.  In sum, the Deputy Administrator's decision looks to

be a quite ordinary construction of a statute over which the

agency has been given interpretive authority.

   It emphatically is not like Alarm Industry Communica-

tions Committee v. FCC, 131 F.3d 1066 (D.C. Cir. 1997),

where, in interpreting a statutory term, the agency relied

only on Black's Law Dictionary, and expressly concluded

that ``the statutory language TTT is unambiguous and TTT the

plain meaning of the term requires that an `entity' have an

independent legal existence.''  131 F.3d at 1068 (quoting In re

Ameritech, 12 F.C.C.R. 3855, 3859, ¶ 9 (1997)) (internal quota-

tion marks omitted).  Nor is this case like Prill, where we

found `` t he Board's opinion clearly reveals that it considered

its adoption of a narrow test for `concerted activities' TTT to

be mandated by the NLRA itself'' and that the agency was

otherwise ``without discretion to construe `concerted activi-

ties.' ''   755 F.2d at 948.       Transitional Hospitals Corpo-

   8  In a footnote to the just-quoted passage, the majority states

that the Deputy Administrator ``use d  `the traditional tools of

statutory construction.' ''  Id. at 16 n.4 (quoting Chevron, 467 U.S.

at 843 n.9).

 

                                 16

ration v. Shalala, 222 F.3d 1019 (D.C. Cir. 2000), and Arizona

v. Thompson are similarly inapposite.            See Transitional

Hosps., 222 F.3d at 1029 (``the notice TTT makes it quite clear

the Secretary did not believe she had the discretion to do

what the plaintiffs request'');  id. (`` `We do not believe that the

statute permits us to extendTTTT' '' (quoting Final Rule, 57

Fed. Reg. 39,800­01)); Arizona, 281 F.3d at 253 (`` T he

Action Transmittal declares that `the TANF legislation TTT

does not permit it being designated as the primary TTT

program.' '' (quoting HHS Action Transmittal 98­2)).  There

is nothing in the Deputy Administrator's decision here that

even faintly approximates a confession of powerlessness simi-

lar to the ones in these cases.

  3.   Even if the statutory language were ambiguous, and

even if the Deputy Administrator did read it as plain, a Prill

remand would still not be required.  I have no quarrel with

the basic proposition -- expressed in Prill and the other

cases cited by the majority -- that when an agency errone-

ously concludes that a statutory interpretation is required by

Congress, we should remand to give the agency an opportuni-

ty to interpret the statute in the first instance.  That course

is consistent with principles of Chevron deference, and with

the respect due Congress's delegation of interpretive authori-

ty to the agency.      But this rule should not be extended

beyond its rationale.

  The rationale that animates all Prill remands is real and

genuine doubt concerning what interpretation the agency

would choose if given the opportunity to apply ``any permissi-

ble construction.''   See, e.g., Prill, 755 F.2d at 956­67 (``This is

not a case in which the `mistake of the administrative body is

one that clearly had no bearing on the procedure used or the

substance of decision reached.' TTT W e cannot say that the

Board's error in this case clearly had no bearing on the result

reached.'') (quoting Massachusetts Trustees v. United States,

377 U.S. 235, 248 (1964)).       Here, though, there is no such

open question.    We know how the agency would choose to

interpret the statute because, unlike the situations in the

 

                               17

cases on which the majority relies, the agency reached its

interpretation in the course of a purely discretionary act, and

the substance of its preferred interpretation is implicit in the

decision to exercise that discretion.

  In the cases cited by the majority, we were reviewing

proceedings initiated by members of the regulated community

demanding that the agency take corrective action required by

the invoked statute.   Prill brought an unfair labor practice

complaint alleging that his termination was based on actions

protected as ``concerted activity'' under the National Labor

Relations Act.  See Prill, 755 F.2d at 942.  Alarm Industry

was initiated when an alarm monitoring trade association

moved the FCC for an order to show cause why Ameritech's

acquisition of a corporation's alarm monitoring assets did not

violate the Telecommunications Act.      See 131 F.3d at 1068.

In Transitional Hospitals, a pair of long-term care hospitals

contended that certain Medicare reimbursement regulations

violated the governing statute.     See 222 F.3d at 1022­23.

And in Arizona v. Thompson, six states challenged regula-

tions restricting the use of grants from the Department of

Health and Human Services.  See 281 F.3d at 250.  In each

case, the agency determined that the statute at issue unam-

biguously rendered it powerless to grant relief.

  Not so here.    The majority's premise is only that DEA

believed that Congress compelled an interpretation of Section

971 that permits the agency to reach the diversion of ephed-

rine in finished drug products.  Section 971(c)(1) is a permis-

sive grant of authority.  The majority does not suggest that

DEA believed that Congress compelled an interpretation that

required it to suspend PDK's imports.       Here, DEA could

have -- in an exercise of prosecutorial discretion -- granted

PDK relief and vacated the orders to suspend shipment.  But

DEA -- in an exercise of that same prosecutorial discre-

tion -- chose not to grant relief to PDK.  That makes this

case very different from Prill and its progeny.

 

                                 18

  DEA wanted to suspend PDK's imports.            We know this

because it did suspend the imports.  If it did not want to, the

agency had discretion to choose otherwise.  Given its mani-

fest desire to suspend PDK's imports, it is fanciful to suggest

that the agency -- when presented on remand with an

opportunity to choose ``any permissible construction'' of Sec-

tion 971 -- will choose an interpretation that diminishes its

discretion to an extent that places PDK's imports beyond its

reach.  Under these circumstances, I can find no reasonable

and genuine doubt that the agency -- if, as the majority says,

it is truly free to choose among ``any permissible construc-

tion,''  i.e., any construction ``not in conflict with the plain

language of the statute,'' K Mart Corp. v. Cartier Inc., 486

U.S. 281, 292 (1988) -- will elect a narrower, self-abnegating

interpretation.

  In the absence of such doubt, a Prill remand outstrips its

rationale.  `` Chenery does not require that we convert judi-

                `

cial review of agency action into a ping-pong game.' ''  Time,

Inc. v. U.S. Postal Serv., 667 F.2d 329, 335 (2d Cir. 1981)

(Friendly, J.) (quoting NLRB v. Wyman­Gordon Co., 394

U.S. 759, 766­67 n.6 (1969) (plurality opinion));  see Fisher v.

Bowen, 869 F.2d 1055, 1057 (7th Cir. 1989) (Posner, J.) (``No

principle of administrative law or common sense requires us

to remand a case in quest of a perfect opinion unless there is

reason to believe that the remand might lead to a different

result.'');  Illinois v. ICC, 722 F.2d 1341, 1348 (7th Cir. 1983)

(Posner, J.) (``Chenery does not require futile gestures.'').

This is especially the case where, as here, we have the

Deputy Administrator's informed explanation of the reason-

able grounds for his interpretation.

                              *  *  *

  I end where I began -- with regret that the majority feels

compelled to address far-reaching questions on which we

disagree, when they are wholly unnecessary to the disposition

of the case.  As Justice Frankfurter once put it:  ``These are

perplexing questions.  Their difficulty admonishes us to ob-

serve the wise limitations on our function and to confine

 

                              19

ourselves to deciding only what is necessary to the disposition

of the immediate case.''   Whitehouse v. Illinois Central R.

Co., 349 U.S. 366, 372­73 (1955).

 

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