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UNITED STATES v. ARTICLES OF DRUG

May 30, 1985

UNITED STATES OF AMERICA, PLAINTIFF,
v.
ARTICLES OF DRUG, CONSISTING OF: 203 PAPER BAGS, MORE OR LESS, ET AL., DEFENDANT.



The opinion of the court was delivered by: Nordberg, District Judge.

      MEMORANDUM OPINION AND ORDER

This action is before the court on motion of Amexchem International, Inc. ("Amexchem"), the claimant of the articles seized in this case, for exportation in lieu of destruction. For the reasons set forth below, this court must defer ruling pending further hearings.

Twelve shipments of animal drugs imported by Amexchem were seized by the Food and Drug Administration ("FDA"). The drugs have been condemned by consent decree as being 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. Most of the lots have also been condemned as misbranded under either section 502(c) or 502(f)(1) of the FDCA, 21 U.S.C. § 352(c) or 352(f)(1), or both. The sole issue before the court is whether Amexchem may reexport these condemned drugs under § 304(d)(1), 21 U.S.C. § 334(d)(1), or whether they may be destroyed by the FDA.

Section 304(d)(1) provides for the disposition of any "food, drug, device or cosmetic" condemned under the section. It specifically provides for the reexportation of imported articles as follows:

  If the article was imported into the United
  States and the person seeking its release
  establishes (A) that the adulteration,
  misbranding, or violation did not occur after the
  article was imported, and (B) that he had no
  cause for believing that it was adulterated,
  misbranded, or in violation before it was
  released from customs custody, the court may
  permit the article to be delivered to the owner
  for exportation in lieu of destruction upon a
  showing by the owner that all of the conditions
  of section 381(d) of this title can and will be
  met: Provided, however, That the provisions of this
  sentence shall

  not apply where condemnation is based upon
  violation of section 342(a)(1), (2), or (6),
  section 351(a)(3), section 352(j), or section
  361(a) or (d) of this title: And provided further,
  That where such exportation is made to the original
  foreign supplier, then clauses (1) and (2) of
  section 381(3) of this title and the foregoing
  proviso shall not be applicable; and in all cases
  of exportation the bond shall be conditioned that
  the article shall not be sold or disposed of until
  the applicable conditions of section 381(d) of this
  title have been met. Any article condemned by
  reason of its being an article which may not, under
  section 344 or 355 of this title, be introduced
  into interstate commerce, shall be disposed of by
  destruction.

Thus, Amexchem must establish that (1) the adulteration, misbranding or violation occurred before the article was imported; (2) that Amexchem had no cause to believe the article was adulterated, misbranded or in violation before it was released from customs, and (3) that it can comply with the conditions section 801(d)(1) of the Act, 21 U.S.C. § 381(d)(1), unless the articles will be returned to the original suppliers, in which case it need not comply with section 801(d)(1) and (2), 21 U.S.C. § 381(d)(1)(A) and (B).*fn1

Amexchem asserts that it can establish all three of these requirements, and requests the court to exercise its discretion under section 304(d) to permit reexportation. The FDA raises a number of arguments against reexportation, and instead requests the court to authorize destruction of the seized drugs. First, the FDA argues that unapproved new animal drugs that have been imported, seized and condemned cannot be reexported under section 304(d) as a matter of law. FDA relies on the sentence in section 801(d)(1), which states, "This paragraph does not authorize the exportation of any new animal drug, or an animal feed bearing or containing a new animal drug, which is unsafe within the meaning of section 360b of this title."*fn2 The FDA asserts that, since section 304(d)(1) requires compliance with section 801(d)(1), this sentence in section 801(d)(1) prohibits reexportation of the seized new animal drugs of Amexchem under section 304(d)(1).

However, the FDA's interpretation ignores the specific language of these provisions and the legislative intent of Congress. The last sentence of section 801(d) states that "this paragraph" (emphasis added) does not authorize the export of new animal drugs. It does not prohibit export authorized by other paragraphs, such as section 304(d)(1). In addition, section 304(d)(1) permits export of articles that are "adulterated, misbranded, or in violation" (emphasis added). If a drug is not adulterated or misbranded, the only way it can violate the FDCA is by being new and unapproved. Thus, by including "violative" drugs, Congress seems to have contemplated the export of new unapproved drugs.

Moreover, if Congress intended to impose any additional requirements on export or bar the export of any particular products, it could have done so expressly when amending section 304(d)(1). Congress did in fact specify in the amendment to section 304(d)(1) products which it would not permit to be exported under section 304(d)(1). A proviso to the export provision of section 304(d)(1) expressly states that, if goods are condemned under any of the sections of the Act specifically listed, they cannot be exported under section 304(d)(1). Each of the sections listed concerns substances dangerous to health. Congress therefore expressly specified the types of goods which could not be exported because of their dangerous nature. If Congress intended to prohibit the export of new animal drugs under section 304(d)(1), it could have included section 501(a)(5), 21 U.S.C. § 351(a)(5), the section governing new drugs, in that proviso. By not including section 501(a)(5), under the well-established principle of expressio unius est exclusio alterius, Congress evidenced an intent that new drugs not be subject to any special prohibition from the export privilege created by the amendment to section 304(d)(1).

This interpretation is consistent with the legislative history of section 304(d)(1) and reflects Congress' intent in amending this provision. Since the original enactment of the FDCA in 1938, section 801(a) has given importers the unqualified right to reexport imported drugs if a failure to comply with U.S. requirements is discovered at the point of entry before the drugs are released by customs. 21 U.S.C. § 381(a). However, the 1938 Act had no equivalent provision permitting reexport of violative drugs which were for some reason released into commerce before the violation was discovered. If the articles were seized after they were released, section 304 required their destruction unless the drugs could be brought into compliance with the Act. This resulted in unequal treatment of importers, with the right to reexport dependent upon whether the violation of U.S. drug law was discovered before or after the drugs were released from customs. The ability to reexport therefore often depended upon the imperfect and highly variable screening process at the point of entry.

In apparent response to this perceived inequity, Congress amended the FDCA in 1957 to permit the reexport of imported drugs which violate the FDCA if the conditions specified above could be met. Testimony at legislative hearings in the amendment indicates that the purpose of the bill was to apply the same reexport procedure whether the merchandise is seized at the point of entry or at some later time. Amendments to Federal Food, Drug, and Cosmetic Act. Hearings on H.R. 10519 Before the Subcommittee on Health and Science of the House Committee on Interstate and Foreign Commerce ("Hearings"), 84th Cong., 2d Sess. 27-33, 39-43 (1956) (statement of Harry S. Radcliffe). The Deputy Commissioner of the Food and Drug Administration interpreted the amendment to section 304 as follows:

  This bill seeks to amend section 304(d) of the
  Federal Food, Drug, and Cosmetic Act in a manner
  to allow a United States judge to authorize
  exportation of seized drugs or cosmetics, where
  those goods had originally been imported and their
  faulty condition was not detected at the port of
  entry, and they subsequently entered the channels
  of domestic commerce and later were discovered to
  have been in violation of the act, and they are
  seized under domestic sections of the law. It is
  the settled judicial interpretation now that where
  such seizures are made, the provision to simply
  reexport them will not lie.
  This bill seeks to authorize the exportation of
  such seized goods (1) if the importer or owner
  proposes simply to send them back to the person
  he got them from by a simple court order
  authorizing him to do so under appropriate bond
  which is exonerated when it is found he has done
  so.

Id. at 39.

From these hearings, it seems that Congress intended the amendments to section 304 to allow the export of goods seized after admission to same extent as section 801(a) allowed the export of goods rejected before admission, except for the additional requirements Congress chose to specifically impose. Thus, Congress presumably chose to permit the virtually unrestricted export allowed under section 801(a), except to the extent it specifically limited that export in section 304(d). The only products not exportable under section 304(d) are those condemned under the provisions specifically listed. There is no basis in the statute itself or the legislative history for concluding that Congress intended the one sentence in section 801(d) relied on by the FDA, which by its own terms does not purport to preclude export of new animal drugs under any other provisions of the Act, to place an additional restriction on exports under section 304, which is complete in itself. The court therefore finds that the sentence in section 801(d) prohibiting export under that section of domestically produced new animal drugs does not, preclude export of imported new animal drugs, as a matter of law, under section 304.

The FDA next argues that, even if new animal drugs may be reexported as a matter of law, Amexchem cannot meet the requirements of section 304(d)(1). First, the FDA describes the factual circumstances of each of the twelve lots of drugs. It argues that Amexchem cannot meet the requirements of section 304 for each of these lots. However, Amexchem has not responded to this aspect of FDA's memorandum, apparently taking the position that only legal issues should be addressed now, and that these factual matters should be resolved at a later time. The court therefore will not now analyze each lot to determine if the requirements of section 304 can be met.

FDA also makes a second legal argument regarding Amexchem's ability to comply with section 304. It asserts that Amexchem cannot reexport under section 304, because it will not be sending the drugs back to the original foreign manufacturer. As discussed above, for a claimant to reexport under section 304, it must show that it "can and will" meet the requirements of section 801(d)(1), unless it exports to the original foreign supplier. In that case, the claimant need only comply with subsections (C) and (D) of section 801(d)(1), not with subsections (A) and (B).

The government argues that "original foreign supplier" means the original manufacturer of the drugs. Amexchem intends to reexport to Chemtraco B.V., in the Netherlands, the broker from which it purchased the drugs. Since these drugs were not manufactured by Chemtraco, the FDA asserts that it is not the original supplier. It therefore contends that Amexchem must comply with section 801(d)(1)(B), which allows export only if the drug is not in conflict with the laws of the country to which it is intended for export.

The FDA offers no support for its argument that "original foreign supplier" means "original foreign manufacturer." It asserts only that to allow reexport to a broker would defeat this country's policy against "dumping" dangerous or adulterated drugs abroad. However, if Congress had intended to permit reexport only to the original manufacturer, it would have so stated. Instead, it chose the word "supplier," which does not connote that the goods may be sent only to the original creator of the product.

The legislative history of section 304(d)(1) supports this interpretation. As quoted above, the Deputy Commissioner of the FDA stated that the bill sought to authorize the exportation of goods "if the importer or owner proposes only to send them back to the person he got them from . . ." Hearings, supra, at 39. In addition, Congressman Dies, in commenting on the bill, also recognized that it was intended to permit the importer to "send it back to the man who sold it." Id. at 30-31. Congress therefore intended to permit reexport to the person who sold goods to the importer. No evidence of a Congressional intent to limit export under section 304(d) only to the original manufacturer has been presented. Therefore, under the plain language of the statute, and in the absence of any contrary authority, the court concludes that export is permitted under section 304 to a foreign supplier, such as Chemtraco. Amexchem could therefore export the drugs in question to Chemtraco as the original foreign supplier without complying with section 801(d)(1)(A) and (B).

Since the factual circumstances of each shipment have not been fully presented to the court, it is impossible at this time to apply the facts to the standards set forth in section 304(d) as interpreted above. The court therefore defers making a final determination on whether to permit export of the drugs seized in this case pending further hearing on the matter.

ON MOTION FOR RE-EXPORTATION

I. Introduction

These consolidated cases concern twelve lots of drugs intended for use in the manufacture of medicated animal feed, which the United States Government ("Government") seized at the request of the Food and Drug Administration ("FDA"). The motion of claimant, Amexchem, International, Inc. ("Amexchem"), for re-exportation of the drugs in lieu of destruction is presently before the court. The court notes the extreme urgency of this motion, given that the Government seized the drugs in August and September of 1984, and the drugs are rapidly losing their effectiveness.

The court held a hearing on this motion on June 24-26, July 2-3 and July 12, 1985. The court has reviewed the pleadings and the statutory provisions related to the motion for re-exportation in lieu of destruction, and has heard the opening statements and closing arguments of counsel and the testimony of witnesses. The court has considered all the evidence presented and has drawn what it concludes to be the correct reasonable inferences from this evidence. The court has also evaluated the legal arguments presented by the parties. In judging the credibility of each witness and the weight to be given the testimony of each, the court has taken into account for each witness the intelligence, the ability and opportunity to observe, the age, the memory, the manner while testifying, any interest, bias, or prejudice the witness may have, and the reasonableness of the testimony considered in the light of all the evidence in the case. The court has reviewed its extensive hearing notes, including its references concerning the credibility of witnesses and the conclusions drawn from the evidence. Based on all the evidence and legal arguments presented, and for the reasons set forth below, the court grants Amexchem's motion for exportation in lieu of destruction, making the following findings of fact and conclusions of law.

II. Facts

Amexchem is the importer and claimant of the twelve seized shipments which are the subject of this proceeding. Heinz Dall is the President of Amexchem.

In 1982, Amexchem began importing trace minerals and vitamins for resale to animal feed manufacturers. Several of Amexchem's customers requested Amexchem to also import certain drugs used in animal feed. Dall Aff. ¶ 4. These animal feed manufacturers wanted to purchase imported drugs of the same type as sold domestically at lower prices than were available in the United States. Dall Aff. ¶ 4, Dall, Hospodka, Hasiak, Adkins, and Lane Hearing Testimony. In answer to this request, Amexchem began importing certain drugs used in animal feed from Chemtraco B.V., a brokerage house in the Netherlands.

The twelve shipments of drugs involved in this action are as follows: (1) Oxytetracyline 262, 67, 53, 120, 779 and 80; (2) Terramycin 167 and 154; (3) Tylosin 203; (4) Flavomycin 40 and 200; and (5) Elancoban 40.*fn1 The court will now examine the particular facts and circumstances surrounding each imported and seized animal drug.

A. Oxytetracyline 262, 67, 53, 120, 779 and 80

V.P.O., Inc. ("V.P.O."), of Omaha, Nebraska, is a manufacturer of animal feed and one of Amexchem's customers. In late 1982, William Winstrom, the President of V.P.O., and Dall discussed the possibility of Amexchem supplying V.P.O. with oxytetracycline ("OTC") manufactured in China and Hungary. Dall Aff. ¶ 5. V.P.O. was, and is, authorized to use OTC from those sources. Stipulation at Hearing.

Between December, 1982 and the Spring of 1983, V.P.O. gave Amexchem several oral orders for OTC, which were followed by written purchase orders. Altogether, V.P.O. ordered a total of 30,000 kilograms of OTC from Amexchem during this period. Dall Aff. ¶¶ 6, 7.

Each of V.P.O.'s Purchase Orders specified a delivery date. From December, 1982 through July, 1983, thirteen shipments of the ordered OTC arrived and were transferred to V.P.O. Sigler Group Exhibit. Some of these shipments arrived in time to meet the purchase order delivery date. However, a large percent of the shipments arrived after the delivery date. Dall Aff. ¶ 8.

In the Spring of 1983, Dall and Winstrom met to discuss the delivery problems encountered during the 1982-1983 season.*fn2 Winstrom stated that V.P.O. would like to continue to order OTC from Amexchem, because of the comparatively low price and the high quality of the OTC Amexchem imported. However, Winstrom indicated that he was not sure V.P.O. would be able to continue ordering OTC from Amexchem because of Amexchem's chronic failure to meet delivery deadlines. Dall Aff. ¶ 9.

In response to Winstrom's reservations, Dall proposed that Amexchem purchase and import OTC which it could then hold for V.P.O.'s use as needed. Winstrom stated that he would be pleased with such an arrangement. He also stated that, although he could not commit V.P.O. to any specific orders for the 1983-1984 season right then, V.P.O.'s business had increased over the years and he expected V.P.O. to produce at least as much in the 1983-1984 season as it had in the 1982-1983 season. Thus, Amexchem and V.P.O., through Dall and Winstrom, reached an informal understanding that Amexchem would have OTC available for V.P.O. which could be delivered expeditiously, and V.P.O. would place specific orders for OTC as needed. Dall Aff. ¶ 10. Of course, V.P.O.'s prospective purchases of OTC would be contingent on the competitiveness of Amexchem's price, but Amexchem was willing to meet any competitive price. Dall Aff. ¶ 10.

Based on this informal understanding, Amexchem ordered OTC from its supplier, Chemtraco, for V.P.O. On July 21, 1983, Amexchem ordered 60 tons of OTC 10%. Stipulation 8(a). Later that summer, Amexchem ordered 6,325 kilograms of pure (base) OTC. Stipulations 7(a), 10(a), 11(a) and 12(a). According to Dall, this was a conservative quantity when compared to the 30,000 kilograms of OTC V.P.O. ordered in the 1982-1983 season. Dall Aff. ¶ 11.

During the Summer of 1983, Dall spoke with Winstrom frequently concerning V.P.O.'s need for OTC. On each occasion, Winstrom informed Dall that V.P.O. was not yet ready to place a specific order, but asked Dall to keep in touch. Dall Aff. ¶ 12. In October, 1983, Smithkline acquired V.P.O. Winstrom stayed on as a consultant with SmithKline. After the acquisition, Winstrom assured Dall that there was no reason why SmithKline would not continue to do business with Amexchem.*fn3 Again, Winstrom expressed that V.P.O. did not at that time need OTC, but V.P.O. would need OTC further into the 1983-1984 season. Dall Aff. ¶ 14.

Beginning in December, 1983 through February, 1984, the OTC Amexchem ordered pursuant to its informal understanding with V.P.O./SmithKline arrived in the United States.*fn4 Amexchem transferred the OTC shipments to storage warehouses in Iowa in order to avoid the much higher New York warehousing fees and to keep the OTC at a location from which Amexchem would readily deliver the OTC to V.P.O.*fn5 Once in storage, the six OTC shipments remained in storage until the Government seized the shipments.*fn6

In February, 1984, Dall met with James Meier and Richard Smythe of SmithKline. Smythe, a purchasing agent for SmithKline, repeated what Winstrom had told Dall in October, 1983: that there was no reason why SmithKline and Amexchem could not continue the relationship which V.P.O. and Amexchem had established, but that SmithKline currently had a sufficient supply of OTC. Smythe told Dall that SmithKline would purchase OTC from Amexchem when the need arose, if Amexchem's price was competitive. Dall Aff. ¶ 16. As further evidence of SmithKline's willingness to continue business with Amexchem, in early March, 1984, SmithKline solicited a quote from Amexchem for OTC. Again, SmithKline postponed making a purchase because it had an adequate supply of OTC at the time. Dall Hearing Testimony.

Meanwhile, with the approach of the end of the 1983-1984 season, Dall became doubtful that V.P.O. would purchase an amount of OTC equivalent to the amount V.P.O. had purchased in the 1982-1983 season. Therefore, Dall requested Chemtraco to sell in Europe the balance of the OTC yet to be delivered. Dall Aff. ¶ 17; Amexchem Exhibit 2.

The OTC which had been delivered remained, unaltered and unopened, in warehouses. Dall Aff. ¶ 21; Stipulations 7(f)-(i), 8(d)-(f), 10(d)-(h), 11(f)-(h), 12(d)-(h). Amexchem did not attempt to sell the delivered OTC to any manufacturer in the United States except V.P.O./SmithKline and, on one occasion, Pfizer.*fn7 Dall Aff. ¶ 18. Pfizer, a manufacturer of OTC itself, was not interested in purchasing the OTC from Amexchem. As outlined earlier, V.P.O./SmithKline continued to express interest in purchasing the OTC from Amexchem through the Spring of 1984. It was not until November, 1984, long after U.S. Marshals had seized the six shipments, that SmithKline, for the first time, informed Amexchem that it would not purchase the OTC under any circumstances. Dall Aff. ¶ 19

B. Terramycin 167 and 154

In December, 1983, Amexchem ordered Pfizer terramycin from Oberdale, Ltd., an affiliate of Chemtraco also located in the Netherlands. Amexchem intended to sell the terramycin to Custom Feed Blenders in Iowa.

Amexchem received a telex from Oberdale on December 19, 1983, in which Oberdale stated that it would ship Pfizer terramycin with Italian labels. Dall Aff. ¶ 24; Amexchem Exhibit 6; Stipulation 5(a). Amexchem immediately responded, notifying Oberdale that Italian labels would not be acceptable and that Amexchem required terramycin manufactured in the United States with English labels.*fn8 On December 27, 1983, Oberdale sent another telex to Amexchem apologizing for the error and confirming that the terramycin would be "U.S." Dall Aff. ¶ 25; Amexchem Exhibit 7; Stipulation 5(a).

The terramycin 167 shipment arrived at Custom Feed Blenders on March 12, 1984. Stipulation 5(c) and (d). On that date, Custom Feed Blenders called to inform Amexchem that the terramycin had Italian labels. Stipulation 5(a). Prior to this call, Amexchem was completely unaware of any labeling problem with the terramycin. Dall Aff. ¶ 28. Amexchem had expected Oberdale to ship terramycin with English labels, given the exchange of telexes in December, 1983 and previous assurances from, and reliable performance by, Chemtraco, Oberdale's affiliate. Dall Aff. ¶ 29. Upon hearing of the Italian labels, Amexchem directed Custom Feed Blenders to send the terramycin 167 shipment on to White Transfer and Storage.

Amexchem then began to make efforts to find a lawful use for the terramycin. A foreign division of Pfizer, a highly reputable firm, had manufactured the terramycin; the FDA, therefore, did not and could not assert that the terramycin was dangerous or contaminated. Dall Aff. ¶ 47; Hospodka Testimony. Amexchem, in order to cure the labeling defect, attempted to find a manufacturer with the FDA authority to verify the composition of the terramycin and rebag it with proper labels. Dall, Hasiak, Adkins and Hospodka Hearing Testimony. Amexchem tried to find a company holding an FDA "356" authorization to blend certain drugs from high "base" concentrations to lower concentrations.

Dall then made many attempts to secure FDA approval of his plan to "recondition" the terramycin through chemical verification and repackaging. Dall spoke informally with FDA officers in the Brooklyn, New York office about his "reconditioning" plan in the Spring of 1984. On June 12, 1984, Dall formally proposed his plan to James McDonald, a compliance officer in the FDA's Kansas City office. Dall followed his oral proposal with one in writing, per McDonald's request. Dall Testimony; McDonald Deposition Attachments 1 and 2. On July 16, 1984, Dall met with FDA officers in Rockville, Maryland. At this time, the FDA rejected Dall's "reconditioning" plan and informed Dall that it was planning to seize the terramycin. Dall Testimony.

Upon learning of the FDA's decision, Dall immediately removed the terramycin from IMS to a storage warehouse in Chicago. Dall Testimony. Dall then explored the possibility of exporting the terramycin to Canada. Government Exhibits 1034, 1149 and 1150. However, the State of Illinois issued a stop sale order for the terramycin 167 shipment on August 17, 1984, and, on September 27, 1984, the U.S. Marshals in Chicago seized the terramycin 167 shipment. Stipulation.

The terramycin 154 shipment was part of the December, 1983 order along with the terramycin 167 shipment. However, the terramycin 154 shipment did not arrive in New York until March 27, 1984. Stipulation. As set out above, Amexchem did not know of the foreign labeling on the terramycin 167 shipment until March 12, 1984, when Custom Feed Blenders notified Amexchem of the problem. By that time, Chemtraco had already sent the terramycin 154 shipment and Amexchem could no longer verify the labeling on the terramycin 154 shipment. Dall affidavit ¶ 30. On April 5, 1984, Amexchem inspected the shipment at its office, found Italian labels, and immediately changed the shipping instructions to direct the shipment to White Transfer and Storage. Dall Affidavit ¶ 31; Amexchem Exhibit 9; Stipulation 6(d).

At the time Amexchem sent the terramycin 154 shipment to Iowa for storage, Dall was attempting to secure FDA approval of his "reconditioning" plan. Dall hoped to include the terramycin 154 shipment in any approved reconditioning. In a letter dated April 16, 1984, Dall formally notified the FDA of his plan to find an animal feed manufacturer with 356 authorization to blend terramycin, who could chemically verify and repackage the terramycin. Government Exhibit 999. In a July 9, 1984 letter, Dall identified the 356 holder as International Nutrition. Government Exhibit 951. As stated above, the FDA rejected Dall's "reconditioning" plan at the July 16, 1984 meeting.

The terramycin 154 shipment, like the 167 shipment, involved Pfizer terramycin. The FDA does not assert that the terramycin in the 154 or 167 shipment is dangerous or contaminated. The terramycin from both shipments remains unchanged in its original containers. Dall Testimony.

On June 7, 1984, the State of Iowa issued a stop sale order against the terramycin 154 shipment. U.S. Marshals in Cedar Rapids, Iowa, seized this shipment on August 15, 1984.

C. Tylosin 203

Between June and December of 1983, Amexchem received four shipments of Tylosin from Chemtraco, all of which were manufactured by Eli Lilly in the United States and labeled in English. Dall Affidavit ¶ 36. In October, 1983, Amexchem ordered more tylosin, specifying, as always, that the tylosin was to be manufactured in the United States and labeled in English. Amexchem intended to sell the tylosin to V.P.O. Dall Affidavit ¶ 33.

The shipment arrived in New York on December 15, 1983. That same day, the FDA issued a "may proceed" notice on the shipment. Stipulations 4(b) and (c). The foreman of the trucking company hired by Amexchem to pick up the tylosin called Amexchem, after the pickup, to inform Amexchem that the labeling was not in English. As it turned out, Eli Lilly's Belgium division had manufactured the tylosin in the 203 shipment, and the labels were in French and Dutch. Dall Affidavit ¶ 34. The shipment was to go directly to V.P.O. During the telephone call, Dall directed the trucking company to divert the tylosin to Continental Warehouse in Des Moines, Iowa. Stipulation 4(a), Amexchem Exhibit 10; Dall Affidavit ¶ 35.

Amexchem was not expecting, and had no reason to expect, foreign made and labeled tylosin, in light of the four previous tylosin shipments and prior conversations with Chemtraco. Dall Affidavit ¶ 36. However, knowing that the FDA did not, and could not, assert that there were any health or safety problems with the tylosin 203 shipment, given that a division of Eli Lilly, a well-respected drug manufacturer, had manufactured the tylosin, Amexchem decided to try to secure FDA approval for "reconditioning" of the tylosin.

International Nutrition had 356 authorization to blend tylosin. In May, 1984, Amexchem contacted International Nutrition, proposing a sale of the foreign labeled tylosin, subject to FDA approval.*fn11 International Nutrition agreed to purchase the tylosin, but all parties understood that International Nutrition would not pay Amexchem or use the tylosin absent FDA approval. The tylosin 203 shipment arrived at International Nutrition on June 4, 1984.

Meanwhile, Dall attempted to secure FDA approval of his "reconditioning" plan for the tylosin 203 shipment and, as previously mentioned, the terramycin 167 and 154 shipments. In early June, 1984, Dall met with Joseph McCallion of the FDA's Brooklyn, New York office, and informally discussed the "reconditioning" plan. A formal proposal to FDA officer McDonald followed in mid-June. Dall Testimony; Government Exhibit McDonald Attachment 1 and 2. On July 9, 1984, McCallion informed Dall and Reid Adkins of International Nutrition that the Kansas City FDA office would decide whether to approve of the "reconditioning" plan, and, until approval, neither Amexchem nor International Nutrition were to use the tylosin. Government Exhibit McCallion 1. At the July 16, 1984 meeting with the FDA in Rockville, Maryland, the FDA disapproved Amexchem's "reconditioning" plan as to both the tylosin and the terramycin, and indicated that it planned to seize these shipments. Dall Testimony. Amexchem then moved the tylosin from International Nutrition to a storage warehouse in Chicago. Government Exhibit Hasiak Attachment.

Once the tylosin arrived in Chicago, Amexchem looked into the possibility of exporting it to Canada. Government Exhibits 1149, 1150, 1199C.*fn12 However, on August 17, 1984, the State of Illinois issued a stop sale order on the tylosin, and on September 27, 1984 United States Marshals in Chicago seized the tylosin 203 shipment. Stipulation.

D. Flavomycin 40 and 200

In early 1983, Dall discussed importing flavomycin with Albert Lane of Lane Agri. Lane Agri, until that time, had purchased only minerals from Amexchem and had apparently purchased flavomycin from another importer. Stipulation 1(d).

All flavomycin is manufactured outside of the United States, and flavomycin manufactured by Hoechst, a West German company, is approved for use in the United States. Dall Affidavit ¶ 37. American Hoechst, a subsidiary of Hoechst in West Germany, imports 4% flavomycin, which it then blends to a 2.2% concentration level for resale in the United States. Lane Hearing Testimony.

In their discussions regarding the importation of flavomycin, Dall and Lane discussed the requirement of English labeling, but not concentration levels.*fn13 Dall assumed that all Hoechst flavomycin came in one concentration level, 4%, and that the flavomycin Lane Agri had previously purchased had been at that level. Dall Affidavit ¶ 38; Dall Hearing Testimony. In fact, Lane Agri had only purchased and used 2.2% flavomycin, but Dall was unaware of this fact. Lane and Dall Hearing Testimony.

Based on his discussions with Lane, Dall ordered flavomycin from Chemtraco for resale to Lane Agri in early 1983. On February 21, 1983, Chemtraco confirmed the Amexchem order for flavomycin, noting the 4% concentration level. Dall knew, then, that Amexchem was importing for resale flavomycin 4%. Stipulation.

The flavomycin 40 shipment arrived in the United States on March 19, 1983. The FDA issued a "may proceed" notice for the shipment on March 24, 1983, although the documents which Amexchem rendered to Customs and the FDA stated that the flavomycin was 4%. Stipulations 1(b), 1(c), Dall Affidavit ¶ 40; Amexchem Exhibits 11, 32.

The flavomycin 40 shipment arrived later than expected, and, in the meantime, Lane Agri had purchased needed flavomycin from American Hoechst. Lane Hearing Testimony. Therefore, Amexchem did not immediately deliver the flavomycin to Lane Agri. Instead, Amexchem stored the shipment, reminding Lane Agri in an April, 1983 letter that the flavomycin 4% was on hand. Amexchem Exhibit 47.

On June 22, 1983, Amexchem shipped the flavomycin and mailed the invoice, which specified the 4% concentration, to Lane Agri. In late July, 1983, Lane informed Dall that Lane Agri was not authorized to use flavomycin 4%.*fn14 Amexchem immediately removed the flavomycin to Continental Warehouse in Des Moines, Iowa, for storage. Stipulation; Dall Hearing Testimony.

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, 1984.

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 ...


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