Warehouse in Des Moines, Iowa, for storage. Stipulation; Dall
Amexchem then attempted to find a legal use for the
flavomycin 40 shipment. Dall requested Lane to try to secure
FDA approval for blending the flavomycin down to 2.2%. By the
time Dall became fully aware that such approval would not be
forthcoming, it was too late to stop delivery on the second
flavomycin shipment. Dall Hearing Testimony. That flavomycin
200 shipment left Antwerp, Belgium on August 16, 1983, and
arrived in New York on September 2, 1983. Stipulation.
As with the first shipment, the FDA issued a "may proceed"
notice on the flavomycin 200 shipment. Stipulation 2(c). Upon
this shipment's release from Customs, Amexchem sent the
shipment directly to Continental Warehouse, pending
authorization for use or reexportation.*fn15 Stipulation
2(d); Dall Affidavit ¶ 44; Dall Hearing Testimony; Amexchem
Exhibit 48. The shipment arrived at Continental Warehouse on
September 13, 1983.
On June 6, 1984, the State of Iowa issued a stop sale order
on both shipments of flavomycin. The U.S. Marshals in Des
Moines, Iowa seized the shipments of flavomycin on August 3,
All the flavomycin remains unchanged, unused, and in the
original containers. Dall Hearing Testimony. As Hoechst
manufactured the flavomycin, the FDA does not assert that
there is a health or safety problem with the flavomycin.
E. Elancoban 40
On November 24, 1982, Dall wrote a letter to Lane concerning
the importation of elancoban for Lane Agri. Elancoban is Eli
Lilly's tradename for a drug generically known as monensin.
Lane and Dall Hearing Testimony. In the letter, Dall wrote
that Amexchem is "very competitive with monensin 10%." Lane
Exhibit 1. Monensin 10 and 13% are approved concentrations of
monensin in the United States. Lane Hearing Testimony;
Amexchem ordered monensin 10 from Chemtraco on May 14, 1983,
with the intent to resell the monensin to Lane Agri.*fn16
However, the monensin which arrived in New York on June 23,
1983 was monensin 20%, which is not an approved concentration
in the United States. Dall did not know, and had no reason to
know, that the monensin was 20% concentration until the
shipment arrived in Amexchem's New Jersey warehouse. Dall
Affidavit ¶ 45; Dall Hearing Testimony. As soon as Dall
discovered the potency problem, on June 30, 1983, he had the
monensin taken directly to Continental Warehouse. Stipulations
3(d) and (e); Dall Affidavit ¶ 45.
The State of Iowa issued a stop sale order on the monensin
on June 6, 1984, and U.S. Marshals in Des Moines seized the
monensin on August 3, 1984.
As the monensin was manufactured by Eli Lilly, the FDA does
not assert that there is a health or safety problem with the
monensin. The monensin 40 shipment remains unchanged, unused
in its original containers. Dall Hearing Testimony.
III. Procedural History
On July 30, 1984, August 2, 1984 and September 6, 1984, the
United States filed complaints in three districts seeking the
condemnation of the twelve lots of drugs. This court
consolidated all three cases in an order dated February 14,
1985. On February 21, 1985, Amexchem filed an answer admitting
all the allegations of the complaints and requesting
permission to reexport the drugs to its original foreign
The court entered a consent decree of condemnation as to the
twelve lots subject to seizure on March 7, 1985. The decree
condemned all twelve lots as adulterated under section
501(a)(5) of the Food, Drug and Cosmetic Act ("FDCA"),
21 U.S.C. § 351(a)(5), because they are unapproved new animal
drugs. In addition, the decree condemned some of the lots as
being misbranded under 21 U.S.C. § 352(c) for foreign labeling,
and all but two of the lots as being misbranded under
21 U.S.C. § 352(f)(1) for failure to bear adequate directions for use.
The court, in the decree, deferred ruling on the reexportation
On February 22, 1985, Amexchem again moved for reexportation
in lieu of destruction. The Government objected, and, on May
30, 1985, this court issued an order determining several legal
issues the Government had raised with regard to the FDCA's
reexportation provisions. In that order, this court deferred
making a final determination of Amexchem's motion for
reexportation of the seized drugs in lieu of destruction,
pending a factual hearing. As stated above, the court held a
factual hearing on Amexchem's motion for reexportation in June
and July, 1985.
On December 18, 1985, this court, by oral ruling, granted
Amexchem's motion for reexportation in lieu of destruction.
This opinion reiterates, in much greater detail, that oral
IV. Statutory Requirements for Reexportation of
Section 304(d)(1)*fn17 of the FDCA, 21 U.S.C. § 334(d)(1),
and section 801(d)(1)*fn18 of the FDCA, 21 U.S.C. § 381(d)(1),
which is incorporated reference in section 304(d)(1), permit
the reexportation of condemned imported drugs, provided certain
requirements have been met. Importers seeking to reexport drugs
under these provisions have the burden of pleading and proving
satisfaction of the statutory requirements. United States v.
76,552 Pounds of Frog Legs, 423 F. Supp. 329, 337 (S.D.Tex.
Amexchem has stated that it intends to reexport the articles
of drugs to Chemtraco, Amexchem's original foreign supplier.
Under § 304(d)(1), if articles are to be reexported to the
"original foreign supplier," the requirements found in §
801(d)(1)(A) and (B) need not be met. In its May 30, 1985
opinion, this court concluded that the phrase "original foreign
in § 304(d)(1) is not limited to the original manufacturer.
Therefore, Amexchem need only show that it meets the following
four requirements for reexportation: (1) the adulteration or
misbranding of the articles, or any other violation, did not
occur after the articles were imported, § 304(d)(1)(A); (2) the
person or firm seeking to reexport the articles had no cause
for believing the articles were adulterated, misbranded or in
violation before they were released from Customs custody, §
304(d)(1)(B); (3) the articles are labeled on the outside of
the shipping package that they are intended for export, §
801(d)(1)(C); and (4) the articles are not sold or offered for
sale in domestic commerce, § 801(d)(1)(D).
Satisfaction of all four of the requirements does not
mandate an order of reexportation in lieu of destruction; the
court, in its discretion, may order reexportation once all the
requirements have been met. Frog Legs, 423 F. Supp. at 337. As
set out below, the court now finds that Amexchem has satisfied
all four statutory criteria, and, in its discretion, orders
reexportation in lieu of destruction.
A. Section 304(d)(1)(A): No Adulteration,
Misbranding or Violation After Importation
Amexchem has established that the adulteration, misbranding
or violation did not occur after the articles were imported.
The evidence Amexchem presented during the hearing clearly
establishes that all of the drugs in all 12 shipments remain
packaged in their original containers and that Amexchem has
not processed or altered any of the drugs in any way. Indeed,
the FDA does not contend that Amexchem has repackaged or
processed the drugs since Customs released the drugs from
The Government does contend, however, that Amexchem
misbranded the terramycin 167 and the flavomycin 40 and 200
shipments after importation. According to the Government,
Amexchem's shipment of the terramycin to IMS and the
flavomycin to Lane Agri constituted "misbranding" under
section 502 of the FDCA, 21 U.S.C. § 352(f)(1), because neither
firm had authorization from the FDA to use those products.
The Government's argument fails both in its factual account
and its statutory interpretation. First of all, at the time
Amexchem sent the terramycin 167 shipment to IMS, IMS was, in
fact, an authorized blender of Pfizer terramycin. However, as
both IMS and Amexchem understood, IMS was not authorized to
"recondition" the Italian labeled terramycin, absent FDA
approval and supervision. Also, as stated above, Dall's
testimony at the hearing, which was corroborated by highly
credible documentary evidence, established that Amexchem never
sent the flavomycin 200 shipment to Lane Agri. Amexchem sent
that shipment directly to Continental Warehouse.
Second, the Government misinterprets section 502(f)(1). That
section merely provides that a drug is misbranded unless its
labeling bears adequate directions for use. Neither subsection
(f)(1) of section 502, nor any other subsection of section
502, refer to shipment to an unauthorized purchaser as
"misbranding." Given that section 502 specifies numerous
circumstances in which a drug may be considered "misbranded,"
but fails to mention shipment as such a circumstance, the
court now finds that, under the doctrine of expressio unius est
exclusio altetius, a drug is not "misbranded" merely because it
is shipped to an unauthorized purchaser.
Furthermore, in the consent decree of March 7, 1985, the
terramycin and flavomycin shipments were condemned as
"misbranded" under § 352(f)(1) for failing to bear labels with
adequate directions for use, and the terramycin shipments were
also condemned as "misbranded" under § 352(c), for bearing
foreign labels. The reference in section 304(d)(1)(A) to "the"
misbranding refers to the misbranding which led to the seizure
of the drugs, in this case, the misbranding charged in the
consent decree, and not any subsequent
alleged misbranding. The misbranding charged in the consent
decree clearly did not occur after Amexchem imported the
B. Section 304(d)(1)(B): No Cause For Believing The Drugs
Were Adulterated, Misbranded Or In Violation Before
Release From Customs Custody
The Government asserts that Amexchem had actual or
constructive knowledge that several of the shipments were
violative before Customs released the shipments. According to
the Government, Amexchem had actual knowledge that the six
oxytetracycline shipments were "misbranded" before release
from Customs because Dall was aware that the FDA required a
specific customer on all imported OTC shipments, and Amexchem
had no specific orders for the six OTC shipments prior to
importation. The Government also contends that Amexchem had
actual knowledge that the flavomycin 200 shipment was not
approved for sale in the United States prior to release from
Customs, because Lane advised Dall in June and July of 1983
that Lane Agri could not use flavomycin 4%.
The Government, in addition, argues that Amexchem had
constructive knowledge of the violative condition of the
flavomycin 40 and 200 and the elancoban 40 shipments prior to
release from Customs. Flavomycin 4% and Elancoban 20% do not
appear in the lists of approved drugs in the Code of Federal
Regulations, 21 C.F.R. §§ 558.95, 558.355. Therefore, the
Government claims Amexchem had constructive knowledge, through
the Code of Federal Regulations, that these shipments were
violative, and such constructive knowledge is sufficient to
meet the "cause to believe" requirement of § 304(d)(1)(B). The
court now addresses each of these arguments below.
1. Actual Knowledge That The OTC Shipments Were
Misbranded Prior To Customs Release
It is at this juncture that the court first addresses itself
to a problem pervasive in this action, that is, the FDA's
failure to adopt its unwritten, varying, and highly intrusive
"policies" as written, published regulations. Here, the FDA
claims it has a policy of requiring a specific customer prior
to the importation of all OTC shipments.