Federal Register IFR with Request for Comments

58522

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations
hours or can be viewed at:
www.regulations.gov. All comments
submitted in response to this rule will
be included in the record and will be
made available to the public.

DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 990
[Doc. No. AMS–SC–19–0042; SC19–990–2
IR]

Establishment of a Domestic Hemp
Production Program
Agricultural Marketing Service,
USDA.
ACTION: Interim final rule with request
for comments.
AGENCY:

This rule establishes a new
part specifying the rules and regulations
to produce hemp. This action is
mandated by the Agriculture
Improvement Act of 2018, which
amended the Agricultural Marketing Act
of 1946. This rule outlines provisions
for the Department of Agriculture
(USDA) to approve plans submitted by
States and Indian Tribes for the
domestic production of hemp. It also
establishes a Federal plan for producers
in States or territories of Indian Tribes
that do not have their own USDAapproved plan. The program includes
provisions for maintaining information
on the land where hemp is produced,
testing the levels of delta-9
tetrahydrocannabinol, disposing of
plants not meeting necessary
requirements, licensing requirements,
and ensuring compliance with the
requirements of the new part.
DATES:
Effective date: This rule is effective
October 31, 2019 through November 1,
2021.
Comment due dates: Comments
received by December 30, 2019 will be
considered prior to issuance of a final
rule. Pursuant to the Paperwork
Reduction Act (PRA), comments on the
information collection burden must be
received by December 30, 2019.
ADDRESSES: Interested persons are
invited to submit written comments
concerning this rule and the proposed
information collection. Comments
should be submitted via the Federal
eRulemaking portal at
www.regulations.gov. Comments may
also be filed with Docket Clerk,
Marketing Order and Agreement
Division, Specialty Crops Program,
AMS, USDA, 1400 Independence
Avenue SW, STOP 0237, Washington,
DC 20250–0237; or Fax: (202) 720–8938.
All comments should reference the
document number and the date and
page number of this issue of the Federal
Register and will be made available for
public inspection in the Office of the
Docket Clerk during regular business

khammond on DSKJM1Z7X2PROD with RULES3

SUMMARY:

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

Bill
Richmond, Chief, U.S. Domestic Hemp
Production Program, Specialty Crops
Program, AMS, USDA; 1400
Independence Avenue SW, Stop 0237,
Washington, DC 20250–0237;
Telephone: (202) 720–2491, Fax: (202)
720–8938, or Email:
[email protected] or Patty
Bennett, Director, Marketing Order and
Agreement Division, Specialty Crops
Program, AMS, USDA at the same
address and phone number above or
Email: [email protected].
Small businesses may request
information on complying with this
regulation by contacting Richard Lower,
Marketing Order and Agreement
Division, Specialty Crops Program,
AMS, USDA, 1400 Independence
Avenue SW, STOP 0237, Washington,
DC 20250–0237; Telephone: (202) 720–
2491, Fax: (202) 720–8938, or Email:
[email protected].

FOR FURTHER INFORMATION CONTACT:

This rule
is issued under Section 10113 of Public
Law 115–334, the Agriculture
Improvement Act of 2018 (2018 Farm
Bill). Section 10113 amended the
Agricultural Marketing Act of 1946
(AMA) by adding Subtitle G (sections
297A through 297D of the AMA).
Section 297B of the AMA requires the
Secretary of Agriculture (Secretary) to
evaluate and approve or disapprove
State or Tribal plans regulating the
production of hemp. Section 297C of the
AMA requires the Secretary to establish
a Federal plan for producers in States
and territories of Indian Tribes not
covered by plans approved under
section 297B. Lastly, section 297D of the
AMA requires the Secretary to
promulgate regulations and guidelines
relating to the production of hemp,
including sections 297B and 297C, in
consultation with the U.S. Attorney
General. USDA is committed to issuing
the final rule expeditiously after
reviewing public comments and
obtaining additional information during
the initial implementation. This interim
final rule will be effective for two years
and then be replaced with a final rule.

SUPPLEMENTARY INFORMATION:

I. Introduction
Hemp is a commodity that can be
used for numerous industrial and
horticultural purposes including fabric,
paper, construction materials, food
products, cosmetics, production of
cannabinoids (such as cannabidiol or

PO 00000

Frm 00002

Fmt 4701

Sfmt 4700

CBD), and other products.1 While hemp
was produced previously in the U.S. for
hundreds of years, its usage diminished
in favor of alternatives. Hemp fiber, for
instance, which had been used to make
rope and clothing, was replaced by less
expensive jute and abaca imported from
Asia. Ropes made from these materials
were lighter and more buoyant, and
more resistant to salt water than hemp
rope, which required tarring.
Improvements in technology further
contributed to the decline in hemp
usage. The cotton gin, for example,
eased the harvesting of cotton, which
replaced hemp in the manufacture of
textiles.
Hemp production in the U.S. has seen
a resurgence in the last five years;
however, it remains unclear whether
consumer demand will meet the supply.
High prices for hemp, driven primarily
by demand for use in producing CBD,
relative to other crops, have driven
increases in planting. Producer interest
in hemp production is largely driven by
the potential for high returns from sales
of hemp flowers to be processed into
CBD oil.
USDA regulates the importation of all
seeds for planting to ensure safe
agricultural trade. Hemp seeds can be
imported into the United States from
Canada if accompanied by either: (1) A
phytosanitary certification from
Canada’s national plant protection
organization to verify the origin of the
seed and confirm that no plant pests are
detected; or (2) a Federal Seed Analysis
Certificate (SAC, PPQ Form 925) for
hemp seeds grown in Canada. Hemp
seeds imported into the United States
from countries other than Canada may
be accompanied by a phytosanitary
certificate from the exporting country’s
national plant protection organization to
verify the origin of the seed and confirm
that no plant pests are detected.
Accordingly, since importation of seed
is covered under USDA Animal and
Plant Health Inspection Service (APHIS)
regulations, this rule does not further
address hemp seed imports or exports.
For imports of hemp plant material,
1 The 2018 Farm Bill explicitly preserved the
authority of the U.S. Food and Drug Administration
(FDA) to regulate hemp products under the Federal
Food, Drug, and Cosmetic Act (FD&C Act) and
section 351 of the Public Health Service Act (PHS
Act). See section 297D(c)(1) (‘‘Nothing in this
subchapter shall affect or modify . . . the Federal
Food, Drug, and Cosmetic Act (21 U.S.C. 301 et
seq.); section 351 of the Public Health Service Act
(42 U.S.C. 262); or the authority of the
Commissioner of Food and Drugs and the Secretary
of Health and Human Services . . .’’ under those
Acts). Accordingly, products containing cannabis
and cannabis-derived compounds are subject to the
same authorities and requirements as FDAregulated products containing any other substance.

E:\FR\FM\31OCR3.SGM

31OCR3

khammond on DSKJM1Z7X2PROD with RULES3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations
APHIS will have jurisdiction for any
pest related issues if they arise.
The 2018 Farm Bill allows for the
interstate transportation and shipment
of hemp in the United States. This rule
does not affect the exportation of hemp.
Should there be sufficient interest in
exporting hemp in the future, USDA
will work with industry and other
Federal agencies to help facilitate this
process.
Prior to the 2018 Farm Bill, Cannabis
sativa L. with delta-9
tetrahydrocannabinol (THC) levels
greater than 0.3% fell within the
definition of ‘‘marihuana’’ under the
Controlled Substances Act (CSA), 21
U.S.C. 801 et seq., and was therefore a
Schedule I controlled substance unless
it fell under a narrow range of
exceptions (e.g., the ‘‘mature stalks’’ of
the plant).2 As a result, many aspects of
domestic production of what is now
defined as hemp was limited to persons
registered under the CSA to do so.
Under the Agricultural Act of 2014
(2014 Farm Bill), Public Law 113–79,
State departments of agriculture and
institutions of higher education were
permitted to produce hemp as part of a
pilot program for research purposes.
The authority for hemp production
provided in the 2014 Farm Bill was
extended by the 2018 Farm Bill, which
was signed into law on December 20,
2018.
The 2018 Farm Bill requires USDA to
promulgate regulations and guidelines
to establish and administer a program
for the production of hemp in the
United States. Under this new authority,
a State or Indian Tribe that wants to
have primary regulatory authority over
the production of hemp in that State or
territory of that Indian Tribe may
submit, for the approval of the
Secretary, a plan concerning the
monitoring and regulation of such hemp
production. For States or Indian Tribes
that do not have approved plans, the
Secretary is directed to establish a
Departmental plan to monitor and
regulate hemp production in those
areas.
There are similar requirements that all
hemp producers must meet. These
include: Licensing requirements;
maintaining information on the land on
which hemp is produced; procedures
for testing the THC concentration levels
for hemp; procedures for disposing of
non-compliant plants; compliance
provisions; and procedures for handling
violations.
the statutory spelling is ‘‘marihuana’’
in the Controlled Substances Act, this rule uses the
more commonly used spelling of marijuana.

After extensive consultation with the
Attorney General, USDA is issuing this
interim final rule to establish the
domestic hemp production program and
to facilitate the production of hemp, as
set forth in the 2018 Farm Bill. This
interim rule will help expand
production and sales of domestic hemp,
benefiting both U.S. producers and
consumers. With the publication of the
interim rule, USDA will begin to
implement the hemp program including
reviewing State and Tribal plans and
issuing licenses under the USDA hemp
plan. There is also a 60-day comment
period during which interested persons
may submit comments on this interim
rule. The comment period will close on
December 30, 2019. After reviewing and
evaluating the comments, USDA will
draft and publish a final rule within two
years of the date of publication. USDA
will evaluate all information collected
during this period to adjust, if
necessary, this rule before finalizing.
For the purposes of this new part, and
as defined in the 2018 Farm Bill, the
term ‘‘hemp’’ means the plant species
Cannabis sativa L. and any part of that
plant, including the seeds thereof and
all derivatives, extracts, cannabinoids,
isomers, acids, salts, and salts of
isomers, whether growing or not, with a
delta-9 tetrahydrocannabinol
concentration of not more than 0.3
percent on a dry weight basis. Delta-9
tetrahydrocannabinol, or THC, is the
primary intoxicating component of
cannabis. Cannabis with a THC level
exceeding 0.3 percent is considered
marijuana, which remains classified as
a schedule I controlled substance
regulated by the Drug Enforcement
Administration (DEA) under the CSA.
The term ‘‘State’’ means any of one of
the fifty States of the United States of
America, the District of Columbia, the
Commonwealth of Puerto Rico, and any
other territory or possession of the
United States. The term ‘‘Indian Tribe’’
or ‘‘Tribe’’ is the same definition as in
section 4 of the Indian SelfDetermination and Education
Assistance Act (25 U.S.C. 5304). The
interim rule also includes the definition
of ‘‘territory of an Indian Tribe’’ to
provide clarity to the term because the
Act does not define it. The definition
adopts the definition ‘‘Indian Country’’
in 18 U.S.C. 1151 because it is a
commonly acceptable approach to
determine a tribal government’s
jurisdiction. Under an approved Tribal
plan, the Indian Tribe will have
regulatory authority over Indian
Country under its jurisdiction.3 A full

2 Although

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

3 We note that if an Alaskan Native Corporation
wants to produce hemp on land it owns in fee

PO 00000

Frm 00003

Fmt 4701

Sfmt 4700

58523

list of terms and definitions relating to
this part can be found under
‘‘Definitions’’ in section IV.
II. State and Tribal Plans
If a State or Indian Tribes wants to
have primary regulatory authority over
the production of hemp in that State or
territory of that Indian Tribe they may
submit, for the approval of the
Secretary, a plan concerning the
monitoring and regulation of such hemp
production. State or Tribal plans must
be submitted to USDA and approved
prior to their implementation. Nothing
preempts or limits any law of a State or
Tribe that regulates the production of
hemp and is more stringent than the
provisions in the 2018 Farm Bill. State
and Tribal plans developed to regulate
the production of hemp must include
certain requirements when submitted
for USDA approval. These requirements
are outlined in the following sections.
A. Land Used for Production
Plans will need to contain a process
by which relevant information regarding
the land used for hemp production in
their jurisdiction is collected and
maintained. All information on hemp
production sites must be collected for
each producer covered by the State or
Tribal plan. The information required to
be collected includes a legal description
of the land and geospatial location,
which the USDA Farm Service Agency
(FSA) can help provide, for each field,
greenhouse, or other site where hemp is
produced. Geospatial location is
required because many rural locations
do not have specific addresses and these
coordinates will assist with the proper
identification of hemp production
locations. Per statute, States and Tribes
will need to retain these records for
three years.
In addition to the land information
required to be submitted to the
appropriate State or Tribe, licensed
producers must also report their hemp
crop acreage to the FSA. When reporting
to FSA, producers must provide their
State or Tribe-issued license or
authorization number. The requirement
that producers report hemp crop acreage
to FSA establishes an identification
system for hemp production nationwide
and complies with the information
sharing requirements of the 2018 Farm
Bill. A link to FSA information on how
to report hemp crop acreage to FSA is
available at https://www.fsa.usda.gov/
Assets/USDA-FSA-Public/usdafiles/
FactSheets/2019/crop-acreagesimple, it would need to have a State or USDA
license, whichever is applicable, because that land
does not qualify as Indian Country and it does not
have jurisdiction over that land.

E:\FR\FM\31OCR3.SGM

31OCR3

58524

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

khammond on DSKJM1Z7X2PROD with RULES3

reporting-19.pdf and will be provided
on the USDA hemp production program
web site. USDA believes that most
producers who will plant hemp already
report land use data to FSA for other
crops and to apply for various FSA
programs, including those for hemp.
FSA offices are located in various
counties within each State and are
designed to be a single location where
customers can access services from
USDA agencies including FSA, AMS,
Natural Resources Conservation Service
(NRCS) and Rural Development (RD).
These offices currently serve the
agricultural industry within their
communities and provide producers
access to an office for establishing farm
and producer records, a place for
producers to record their licensing
information, and a place to report crop
acreage. The producer may, with
supporting documentation, also update
its FSA farm records for leases, subleases, or ownership of land.
Under the hemp pilot program
authorized under the terms of the 2014
Farm Bill, various States developed seed
certification programs to help producers
identify hemp seed that would work
well in their specific geographical areas.
USDA will not include a seed
certification program in this rule
because the same seeds grown in
different geographical locations and
growing conditions can react differently.
For example, the same seed used in one
State to produce hemp plants with THC
concentrations less than 0.3%, can
produce hemp plants with THC
concentrations of more than 0.3% when
planted in a different State. We have
also found that the technology necessary
to determine seed planting results in
different locations is not advanced
enough at this time to make a seedcertification scheme feasible.
Additionally, we do not have accurate
data at this time on the origin of most
hemp seed planted in the U.S.
B. Sampling and Testing for Delta-9
Tetrahydrocannabinol
State and Tribal plans must
incorporate procedures for sampling
and testing hemp to ensure the cannabis
grown and harvested does not exceed
the acceptable hemp THC level.
Sampling procedures, among other
requirements, must ensure that a
representative sample of the hemp
production is physically collected and
delivered to a DEA-registered laboratory
for testing. Within 15 days prior to the
anticipated harvest of cannabis plants, a
Federal, State, local, or Tribal law
enforcement agency or other Federal,
State or Tribal designated person shall
collect samples from the flower material

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

from such cannabis plants for delta-9
tetrahydrocannabinol concentration
level testing. If producers delay harvest
beyond 15 days, the plant will likely
have a higher THC level at harvest than
the sample that is being tested. This
requirement will yield the truest
measurement of the THC level at the
point of harvest. Accepting that a preharvest inspection is best to identify
suspicious plants and activities, and
that the sample should be taken as close
to harvest as possible, the time was
selected based on what would be a
reasonable time for a farmer to harvest
an entire field. This 15-day post-sample
harvest window was also designed to
allow for variables such as rain and
equipment delays. We are requesting
comments and information regarding
the 15-day sampling and harvest
timeline.
Testing procedures must ensure the
testing is completed by a DEA-registered
laboratory using a reliable methodology
for testing the THC level. The THC
concentration of all hemp must meet the
acceptable hemp THC level. Samples
must be tested using postdecarboxylation or other similarly
reliable analytical methods where the
total THC concentration level reported
accounts for the conversion of delta-9tetrahydrocannabinolic acid (THCA)
into THC. Testing methodologies
currently meeting these requirements
include those using gas or liquid
chromatography with detection. The
total THC, derived from the sum of the
THC and THCA content, shall be
determined and reported on a dry
weight basis. In order to provide
flexibility to States and Tribes in
administering their own hemp
production programs, alternative
sampling and testing protocols will be
considered if they are comparable and
similarly reliable to the baseline
mandated by section 297B(a)(2)(ii) of
the AMA and established under the
USDA plan and procedures. USDA
procedures for sampling and testing will
be issued concurrently with this rule
and will be provided on the USDA
website.
Sections 297B(a)(2)(A)(iii) and
297C(a)(2)(C) require that cannabis
plants that have a THC concentration
level of greater than 0.3% on a dry
weight basis be disposed of in
accordance with the applicable State,
Tribal, or USDA plan. Because of this
requirement, producers whose cannabis
crop is not hemp will likely lose most
of the economic value of their
investment. Thus, USDA believes that
there must be a high degree of certainty
that the THC concentration level is
accurately measured and is in fact above

PO 00000

Frm 00004

Fmt 4701

Sfmt 4700

0.3% on a dry weight basis before
requiring disposal of the crop.
The National Institute of Standards
and Technology (NIST) Reference on
Constants, Units, and Uncertainty states
that ‘‘measurement result is complete
only when accompanied by a
quantitative statement of its uncertainty.
The uncertainty is required in order to
decide if the result is adequate for its
intended purpose and to ascertain if it
is consistent with other similar
results.’’ 4 Simply stated, knowing the
measurement of uncertainty is necessary
to evaluate the accuracy of test results.
This interim rule requires that
laboratories calculate and include the
measurement of uncertainty (MU) when
they report THC test results. Hemp
producers must utilize laboratories that
use appropriate, validated methods and
procedures for all testing activities and
who also evaluate measurement of
uncertainty. Laboratories should meet
the AOAC International 5 standard
method performance requirements for
selecting an appropriate method.
This interim rule defines
‘‘measurement of uncertainty’’ as ‘‘the
parameter, associated with the result of
a measurement, that characterizes the
dispersion of the values that could
reasonably be attributed to the
particular quantity subject to
measurement.’’ This definition is based
on the definition of ‘‘uncertainty (of
measurement)’’ in section 2.2.3 of the
Joint Committee for Guides in
Metrology 6 100:800, Evaluation of
measurement data—Guide to the
expression of uncertainty in
measurement (JCGM Guide). NIST
Technical Note 1297, Guidelines for
Evaluating and Expressing the
Uncertainty of NIST Measurement
Results (TN 1297), is based on the JCGM
Guide. USDA also relied on the
Eurachem/Co-Operation on
International Traceability in Analytical
Chemistry’s ‘‘Guide on Use of
Uncertainty Information in Compliance
4 https://physics.nist.gov/cuu/Uncertainty/
international1.html.
5 USDA established the Association of Official
Agricultural Chemists in 1884. In 1965, it changed
its name to the Association of Official Analytical
Chemists and became an independent organization
in 1979. In 1991, it adopted its current, legal name
as AOAC International.
6 The Joint Committee for Guides in Metrology is
composed of international organizations working in
the field of metrology. Its membership includes the
Bureau International des Poids et Mesures, the
Organisation Internationale de Me´trologie Le´gale,
the International Organization for Standardization,
the International Electrotechnical Commission, the
International Union of Pure and Applied Chemistry,
the International Union of Pure and Applied
Physics, the International Federation of Clinical
Chemistry and Laboratory Medicine, and the
International Laboratory Accreditation Cooperation.

E:\FR\FM\31OCR3.SGM

31OCR3

khammond on DSKJM1Z7X2PROD with RULES3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations
Assessment, First Edition 2007’’.
Colloquially, the measurement of
uncertainty is similar to a margin of
error. When the measurement of
uncertainty, normally expressed as a
+/¥ with a number, (e.g., +/¥ 0.05) is
combined with the reported
measurement, it produces a range and
the actual measurement has a known
probability of falling within that range
(typically 95%).
This interim rule requires that
laboratories report the measurement of
uncertainty as part of any hemp test
results. The rule also includes a
definition of ‘‘acceptable hemp THC
level’’ to account for the uncertainty in
the test results. The reported THC
concentration level of a sample may not
be the actual concentration level in the
sample. The actual THC concentration
level is within the distribution or range
when the reported THC concentration
level is combined with the measurement
of uncertainty.
It bears emphasis that this rule does
not alter Federal law with regard to the
definition of hemp or marihuana. As
stated above, the 2018 Farm Bill defines
hemp as the plant species Cannabis
sativa L. and any part of that plant,
including the seeds thereof and all
derivatives, extracts, cannabinoids,
isomers, acids, salts, and salts of
isomers, whether growing or not, with a
delta-9 THC of not more than 0.3
percent on a dry weight basis. Likewise,
the Federal (CSA) definition of
marihuana continues to include those
parts of the cannabis plant as specified
in 21 U.S.C. 802(16) (and derivatives
thereof) that contain more than 0.3
percent delta-9 THC on a dry weight
basis. The foregoing provisions of
Federal law remain in effect for
purposes of Federal criminal
prosecutions as well as Federal civil and
administrative proceedings arising
under the CSA. However, for purposes
of this rule (i.e., for purposes of
determining the obligations of licensed
hemp growers under the applicable
provisions of the 2018 Farm Bill), the
term ‘‘acceptable hemp THC level’’ is
used to account for the uncertainty in
the test results.
The definition of ‘‘acceptable hemp
THC level’’ explains how to interpret
test results with the measurement of
uncertainty with an example. The
application of the measurement of
uncertainty to the reported delta-9
tetrahydrocannabinol content
concentration level on a dry weight
basis produces a distribution, or range.
If 0.3% or less is within the distribution
or range, then the sample will be
considered to be hemp for the purpose
of compliance with the requirements of

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

State, Tribal, or USDA hemp plans. For
example, if a laboratory reports a result
as 0.35% with a measurement of
uncertainty of +/¥0.06, the distribution
or range is 0.29% to 0.41%. Because
0.3% is within that distribution or
range, the sample, and the lot it
represents, is considered hemp for the
purpose of compliance with the
requirements of State, Tribal, or USDA
hemp plans. However, if the
measurement of uncertainty for that
sample was 0.02%, the distribution or
range is 0.33% to 0.37%. Because 0.3%
or less is not within that distribution or
range, the sample is not considered
hemp for the purpose of plan
compliance, and the lot it represents
will be subject to disposal. Thus the
‘‘acceptable hemp THC level’’ is the
application of the measurement of
uncertainty to the reported delta-9
tetrahydrocannabinol content
concentration level on a dry weight
basis producing a distribution or range
that includes 0.3% or less. As such, the
regulatory definition of ‘‘acceptable
hemp THC level’’ describes how State,
Tribal, and USDA plans must account
for uncertainty in test results in their
treatment of cannabis. Again, this
definition affects neither the statutory
definition of hemp, 7 U.S.C. 1639o(1), in
the 2018 Farm Bill nor the definition of
‘‘marihuana,’’ 21 U.S.C. 802(16), in the
CSA.
The laboratories conducting hemp
testing must be registered by the DEA to
conduct chemical analysis of controlled
substances (in accordance with 21 CFR
1301.13). Registration is necessary
because laboratories could potentially
handle cannabis that tests above the
0.3% concentration of THC on a dry
weight basis, which is, by definition,
marijuana and a Schedule 1 controlled
substance. Instructions for laboratories
to obtain DEA registration, along with a
list of approved laboratories, will be
posted on the USDA Domestic Hemp
Production Program website.
USDA is considering establishing a
fee-for-service hemp laboratory approval
process for labs that wish to offer THC
testing services. USDA approved
laboratories would be approved by the
USDA, AMS, Laboratory Approval
Service, which administers the
Laboratory Approval Program (LAP).
USDA-approved laboratories would
need to comply with the LAP
requirements, as established under
‘‘Laboratory Approval Program—
General Policies & Procedures’’
(www.ams.usda.gov/services/labtesting/lab-approval), which describes
the general policies and procedures for
a laboratory to apply for and maintain
status in a LAP. Under the LAP, an

PO 00000

Frm 00005

Fmt 4701

Sfmt 4700

58525

individual program for hemp would be
developed, with a set of documented
requirements to capture specific
regulatory, legal, quality assurance and
quality control, and analytical testing
elements. A requirement for a testing
laboratory to be approved by USDA
would be in addition to the requirement
in the final rule that the laboratory be
registered with DEA.
In addition to requiring ISO 17025
accreditation, which assesses general
competence of testing laboratories, the
LAP would provide a way for USDA to
accredit that laboratories perform to a
standard level of quality. When DEA
registers a lab to handle narcotics, they
do not require the lab to be accredited.
This is an important factor, as the issue
of providing assurance as to proper
testing was raised on numerous
occasions during the USDA outreach
process that was conducted prior to
developing this rule. The LAP would
give USDA the proper oversight of the
laboratories doing the testing, providing
quality assurance and control
procedures that ensure a validated and
qualified analysis, and defensible data.
Should USDA establish a lab approval
process, a list of USDA approved
laboratories that are also registered with
the DEA would be posted on the USDA
Domestic Hemp Production Program
website. Although this proposal is not
reflected in the regulatory text of this
interim final rule, USDA is seeking
comment on it to determine whether to
incorporate it in the subsequent final
rule.
Alternatively, USDA is considering
requiring all laboratories testing hemp
to have ISO 17025 accreditation. We are
requesting comment on this requirement
as well and are interested to learn about
the number of labs that already have
this accreditation, the associated
burden, and the potential benefits of
such a requirement.
C. Disposal of Non-Compliant Plants
State and Tribal plans are also
required to include procedures for
ensuring effective disposal of plants
produced in violation of this part. If a
producer has produced cannabis
exceeding the acceptable hemp THC
level, the material must be disposed of
in accordance with the CSA and DEA
regulations because such material
constitutes marijuana, a schedule I
controlled substance under the CSA.
Consequently, the material must be
collected for destruction by a person
authorized under the CSA to handle
marijuana, such as a DEA-registered
reverse distributor, or a duly authorized
Federal, State, or local law enforcement
officer.

E:\FR\FM\31OCR3.SGM

31OCR3

khammond on DSKJM1Z7X2PROD with RULES3

58526

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

D. Compliance With Enforcement
Procedures Including Annual Inspection
of Hemp Producers
State and Tribal plans must include
compliance procedures to ensure hemp
is being produced in accordance with
the requirements of this part. This
includes requirements to conduct
annual inspections of, at a minimum, a
random sample of hemp producers to
verify hemp is not being produced in
violation of this part. These plans also
must include a procedure for handling
violations. In accordance with the 2018
Farm Bill, States and Tribes with their
own hemp production plans have
certain flexibilities in determining
whether hemp producers have violated
their approved plans. However, there
are certain compliance requirements
that all State and Tribal plans must
contain. This includes procedures to
identify and attempt to correct certain
negligent acts, such as failing to provide
a legal description of the land on which
the hemp is produced, not obtaining a
license or other required authorizations
from the State or tribal government or
producing plants exceeding the
acceptable hemp THC level. States and
Tribes may require additional
information in their plans. In the
context of this part, negligence is
defined as a failure to exercise the level
of care that a reasonably prudent person
would exercise in complying with the
regulations set forth under this part.
This definition employed in this rule is
derived from the definition of
negligence in Black’s Law Dictionary.
See BLACK’S LAW DICTIONARY (10th
ed. 2014) (defining negligence as ‘‘[t]he
failure to exercise the standard of care
that a reasonably prudent person would
have exercised in a similar situation’’).
This rule specifies that hemp
producers do not commit a negligent
violation if they produce plants that
exceed the acceptable hemp THC level
and use reasonable efforts to grow hemp
and the plant does not have a THC
concentration of more than 0.5 percent
on a dry weight basis. USDA recognizes
that hemp producers may take the
necessary steps and precautions to
produce hemp, such as using certified
seed, using other seed that has reliably
grown compliant plants in other parts of
the country, or engaging in other best
practices, yet still produce plants that
exceed the acceptable hemp THC level.
USDA seeks comments whether there
are other reasonable efforts to be
considered. We believe that a hemp
producer in that scenario has exercised
a level of care that a reasonably prudent
person would exercise if the plant does
not have a THC concentration of more

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

than 0.5 percent on a dry weight basis.
USDA arrived at that percentage by
examining the test results of samples
taken from several States that have a
hemp research program under the 2014
Farm Bill and by reviewing results from
plants grown from certified seed as well
as uncertified seed and tested using
different testing protocols. Under this
scenario, although a producer would not
be considered ‘‘negligent,’’ they would
still need to dispose of the plants if the
THC concentration exceeded the
acceptable hemp THC level.
In developing the compliance
requirements of State and Tribal plans,
USDA recognizes that there may be
significant differences across States and
Tribes in how they will administer their
respective hemp programs. Accordingly,
as long as, at a minimum, the
requirements of the 2018 Farm Bill are
met, States and Tribes are free to
determine whether or not a licensee
under their applicable plan has taken
reasonable steps to comply with plan
requirements.
In cases where a State or Tribe
determines a negligent violation has
occurred, a corrective action plan shall
be established. The corrective action
plan must include a reasonable date by
which the producer will correct the
negligent violation. Producers operating
under a corrective action plan must also
periodically report to the State or Tribal
government, as applicable, on their
compliance with the plan for a period
of not less than two calendar years
following the violation. A producer who
negligently violates a State or Tribal
plan three times in a five-year period
will be ineligible to produce hemp for
a period of five years from the date of
the third violation. Negligent violations
are not subject to criminal enforcement
action by local, Tribal, State, or Federal
government authorities.
State and Tribal plans also must
contain provisions relating to producer
violations made with a culpable mental
state greater than negligence, meaning,
acts made intentionally, knowingly, or
with recklessness. This definition is
derived from the definition of
negligence in Black’s Law Dictionary.
See BLACK’S LAW DICTIONARY (10th
ed. 2014) (giving as a definition of
negligence ‘‘[t]he failure to exercise the
standard of care that a reasonably
prudent person would have exercised in
a similar situation’’). If it is determined
a violation was committed with a
culpable mental state greater than
negligence, the State department of
agriculture or tribal government, as
applicable, shall immediately report the
producer to the Attorney General,
USDA, and the chief law enforcement

PO 00000

Frm 00006

Fmt 4701

Sfmt 4700

officer of the State or Tribe. State and
Tribal plans also must prohibit any
person convicted of a felony related to
a controlled substance under State or
Federal law before, on, or after the
enactment of the 2018 Farm Bill from
participating in the State or Tribal plan
and from producing hemp for 10-years
following the date of conviction. An
exception applies to a person who was
lawfully growing hemp under the 2014
Farm Bill before December 20, 2018,
and whose conviction also occurred
before that date.
To meet this requirement, the State or
Indian Tribe will need to review
criminal history reports for each
applicant. When an applicant is a
business entity, the State or Indian Tribe
must review the criminal history report
for each key participant in the business.
The State and Tribe may determine the
appropriate method for obtaining the
criminal history report for their
licensees in their plan. Finally, any
person found by the USDA, State, or
Tribal government to have materially
falsified any information submitted to
this program will be ineligible to
participate.
E. Information Sharing
State and Tribal plans also must
contain procedures for reporting
specific information to USDA. This is
separate from the requirement to report
hemp crop acreage with FSA as
discussed above. The information
required here includes contact
information for each hemp producer
covered under the plan including name,
address, telephone number, and email
address (if available). If the producer is
a business entity, the information must
include the full name of the business,
address of the principal business
location, full name and title of the key
participants, an email address if
available, and EIN number of the
business entity. Producers must report
the legal description and geospatial
location for each hemp production area,
including each field, greenhouse, or
other site, used by them, as stated in
section A of this preamble. The report
also shall include the status of the
license or other required authorization
from the State or Tribal government, as
applicable, for each producer under a
hemp production plan. States and
Tribes will submit this information to
USDA not later than 30 days after the
date it is received using the appropriate
reporting requirements as determined
by USDA. These reporting requirements
are found at § 990.70 in this rule.
Further explanation of the specific
information to be submitted, the
appropriate format, and the specific due

E:\FR\FM\31OCR3.SGM

31OCR3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations
dates for the information is discussed
below. This information submitted from
each State and Tribal plan, along with
the equivalent information collected
from individuals participating under the
USDA plan, will be assembled and
maintained by USDA and made
available in real time to Federal, State,
and local law enforcement as required
by the 2018 Farm Bill. All information
supporting, verifying, or documenting
the information submitted to USDA
must be maintained by the States and
Tribes for at least three years.

khammond on DSKJM1Z7X2PROD with RULES3

F. Certification of Resources
All State and Tribal plans submitted
for USDA approval must also have a
certification stating the State or Tribe
has the resources and personnel
necessary to carry out the practices and
procedures described in their plan.
Section 297B of the AMA requires this
certification and the information is
important to USDA’s approval of State
and Tribal plans in that all such plans
must be supported by adequate
resources to effectively administer them.
G. Plan Approval, Technical Assistance
and USDA Oversight
During the plan development process,
States and Tribes are encouraged to
contact USDA so we may provide
technical assistance in developing plan
specifics. USDA will not review,
approve or disapprove plans until after
the effective date of this interim rule.
Once USDA formally receives a plan,
USDA will have 60 days to review the
submitted plan. USDA may approve
plans which comply with the 2018 Farm
Bill and with the provisions of this rule.
If a plan does not comply with all
requirements of the Act and this part it
will be rejected. USDA will consult with
the Attorney General throughout this
process.
When plans are rejected, USDA will
provide a letter of notification outlining
the deficiencies identified. The State or
tribal government may then submit an
amended plan for review. If the State or
Tribe disagrees with the determination
made by USDA regarding the plan, a
request for reconsideration can be
submitted to USDA using the appeal
process as outlined in section V. of this
rule. Plans submitted by States and
Tribes must be approved by USDA
before they can be implemented.
USDA will use the information
outlined here and as directed in the
2018 Farm Bill when evaluating State
and Tribal plans for approval. States
and Tribes can submit their plans to
USDA through electronic mail at
[email protected] or by postal
carrier to USDA. The specific address is

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

provided on the USDA Domestic Hemp
Production Program website.
If the State or Tribal plan application
is complete and meets the criteria of this
part, USDA shall issue an approval
letter. Approved State and Tribal plans,
including their respective rules,
regulations and procedures, shall be
posted on USDA’s hemp program
website.
Once a plan has received approval
from USDA, it will remain in effect
unless revoked by USDA pursuant to
the revocation procedures discussed
below, or unless the State or Tribe
makes substantive revisions to their
plan or their laws that alter the way the
plan meets the requirements of this
regulation. Additionally, changes to the
provisions or procedures under this rule
or to the language in the 2018 Farm Bill
may require plan revision and
resubmission to USDA for approval.
Should States or Tribes have questions
regarding the need to resubmit their
plans, they should contact USDA for
guidance. Statutory amendments could
result in revocation of some or all plans.
A State or tribal government may
submit an amended plan to USDA for
approval if: (1) The Secretary
disapproves a State or Tribal plan; or (2)
The State or Tribe makes substantive
revisions to their plan or to their laws
that alter the way the plan meets the
requirements of this regulation, or as
necessary to bring the plan into
compliance with changes in other
applicable law or regulations.
If the plan, previously approved by
USDA, needs to be amended because of
changes to the State or Tribe’s laws or
regulations, such resubmissions should
be provided to USDA within a calendar
year from when the new State or tribal
law or regulations are effective.
Producers will be held to the
requirements of the previous plan until
such modifications are approved by
USDA. If State or tribal government
regulations in effect under the USDAapproved plan change but the State or
tribal government does not resubmit a
modified plan within the calendar year
of the effective date of the change,
USDA will issue a notification to the
State or tribal government that approval
of its plan will be revoked. The
revocation will be effective no earlier
than the beginning of the next calendar
year. When USDA sends the notification
to the State or Tribe, it will accept
applications for USDA licenses from
producers in the State or territory of the
Indian Tribe for 90 days after the
notification even if that time period
does not coincide with the annual
period in which USDA normally accepts
applications under § 990.21.

PO 00000

Frm 00007

Fmt 4701

Sfmt 4700

58527

USDA has the authority to audit
States and Tribes to determine if they
are in compliance with the terms and
conditions of their approved plans. If a
State or Tribe is noncompliant with
their plan, USDA will work with that
State or Tribe to develop a corrective
action plan following the first case of
noncompliance. However, if additional
instances of noncompliance occur,
USDA has the authority to revoke the
approval of the State or Tribal plan for
one year. USDA believes that one year
is sufficient time for a noncompliant
State or Tribe to evaluate problems with
their plan and make the necessary
adjustments. Should USDA determine
the approval of a State or Tribal plan
should be revoked, such a revocation
would begin after the end of the current
calendar year, so producers will have
the opportunity to adjust their
operations as necessary. This one-year
window will allow producers to apply
for a license under the USDA plan so
that their operations do not become
disrupted due to the revocation of the
State or Tribal plan.
For the 2020 planting season, the
2018 Farm Bill provides that States and
institutions of higher education can
continue operating under the authorities
of the 2014 Farm Bill. The 2018 Farm
Bill extension of the 2014 Farm Bill
authority expires 12 months after the
effective date of this rule.
III. Department of Agriculture Plan
This rule also establishes a USDA
plan to regulate hemp production by
producers in areas where hemp
production is legal but is not covered by
an approved State or Tribal plan. All
hemp produced outside of States and
Tribes with approved plans must meet
the requirements of the USDA plan. The
requirements of the USDA plan are
similar to those under State and Tribal
plans.
A. USDA Hemp Producer License
1. Application
To produce hemp under the USDA
plan, producers must apply for and be
issued a license from USDA. USDA will
begin accepting applications 30 days
after the effective date of this interim
rule. USDA is delaying acceptance of
applications for 30 days to allow States
and Tribal governments to submit their
plans first. This is to prevent USDA
from reviewing and issuing USDA
licenses to producers when there is a
likelihood that there will soon be a State
or Tribal plan in place and producers
will obtain their licenses from the State
or Tribe.

E:\FR\FM\31OCR3.SGM

31OCR3

khammond on DSKJM1Z7X2PROD with RULES3

58528

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

While a State or Tribal government
has a draft hemp production plan
pending for USDA approval, USDA will
not issue USDA hemp production
licenses to individual producers located
in those States or Tribal Nations. Once
USDA approves a draft hemp
production plan from a State or Tribe,
it will deny any license applications
from individuals located in the
applicable State or Tribal Nation. If
USDA disapproves a State or Tribal
hemp production plan, individual
producers located in the State or Tribal
Nation may apply for a USDA hemp
production license.
For the first year after USDA begins to
accept applications, applications can be
submitted any time. For all subsequent
years, license applications and license
renewal applications must be submitted
between August 1 and October 31. For
hemp grown outdoors, harvesting
usually occurs in the late summer and
early fall. This application period is
close to or after the harvest season when
producers are preparing for the next
growing season. USDA requests
comments on whether this application
period is sufficient. USDA may consider
an alternative application window if
experience demonstrates the need for
one. Having an established application
period provides adequate time for
USDA to effectively and efficiently
review and decide on applications,
while also providing producers with a
licensing decision well before planting
season. All applications must comply
with the requirements as described
below. The license application will be
available online at the USDA Domestic
Hemp Production Program website.
Applications may be submitted
electronically or by mail. Copies can be
also requested by email at
[email protected].
The application will require contact
information such as name, address,
telephone number, and email address (if
available). If the applicant represents a
business entity, and that entity will be
the producer, the application will
require the full name of the business,
address of the principal business
location, full name and title of the key
participants on behalf of the entity, an
email address if available, and EIN
number of the business entity.
All applications must be accompanied
by a completed criminal history report.
If the application is for a business
entity, a completed criminal history
report must be provided for each key
participant.
Key participants are a person or
persons who have a direct or indirect
financial interest in the entity producing
hemp, such as an owner or partner in a

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

partnership. A key participant also
includes persons in a corporate entity at
executive levels including chief
executive officer, chief operating officer
and chief financial officer. This does not
include other management positions
like farm, field or shift managers. USDA
is requiring a criminal history records
report for key participants because those
persons are likely to have control over
hemp production, whether production
is owned by an individual, partnership,
or a corporation. USDA considers those
individuals to be responsible for
ensuring compliance with the regulatory
requirements and thereby active
participants in the Domestic Hemp
Production Program. If those persons
have a disqualifying felony, they can no
longer participate in the program as
provided for by section 297B(e)(3)(B)(i)
of the 2018 Farm Bill. An exception
applies to a person who was lawfully
growing hemp under the 2014 Farm Bill
before December 20, 2018, and whose
conviction also occurred before that
date.
USDA will not accept criminal history
reports completed more than 60 days
before the submission of an application,
which provides USDA with an
expectation that the findings of the
report are reasonably current and
accurate.
The criminal history report must
indicate the applicant has not been
convicted of a State or Federal felony
related to a controlled substance for the
10 years prior to the date of when the
report was completed. An exception
applies to a person who was lawfully
growing hemp under the 2014 Farm Bill
before December 20, 2018, and whose
conviction also occurred before that
date.
In addition to providing the
information specified, the application
will also require license applicants to
certify they will adhere to the
provisions of the plan.
Once all the necessary information
has been provided, applications will be
reviewed by USDA for completeness
and to determine an applicant’s
eligibility. USDA will approve or deny
license applications unless the
applicant is from a State or Tribal
Nation that has a plan submitted to or
approved by USDA. Applicants will be
notified if they have been granted or
denied a license either by mail or email.
If an application is denied, the
applicant will receive a notification
letter or email specifying why the
application was denied. If denied,
applicants will have the option of
resubmitting a revised application if the
application was rejected for being
incomplete. Applicants may resubmit

PO 00000

Frm 00008

Fmt 4701

Sfmt 4700

after October 31 as long as the original
application was submitted between
August 1 and October 31. If the
application was rejected for other
reasons, the applicant will have the
opportunity to appeal the USDA’s
decision in accordance with the appeals
process outlined in the regulation.
2. USDA Hemp Producer Licenses
Once a license application has been
approved, USDA will issue the producer
license. Licenses are not transferrable in
any manner. An applicant whose
application has been approved will not
be considered a licensed producer
under the USDA plan until the
applicant receives their producer
license. Licenses do not renew
automatically and must be renewed
every three years. Because of the felony
ban, we believe it is necessary to review
producers’ criminal history to ensure
that they have not committed a felony
since the most recent license approval
that would disqualify them.
Applications for renewal will be
subject to the same terms and approved
under the same criteria as initial
applications unless there has been an
intervening change in the applicable
law or regulations since approval of the
initial or last application. In such a case
the subsequently enacted law or
regulation shall govern renewal of the
license. Licenses will be valid until
December 31 of the year that is at least
three years after the license is issued.
This date is not tied to the harvest and
planting season. Rather it is tied to the
window for applications (Aug. 1–Oct.
31) and the 60 days for USDA to make
a decision. For example, if a producer
applies for a license August 1, 2020 and
is granted a license on September 15,
2020, the license would expire
December 31, 2023. A December 31
expiration date will allow licensed
producers time to apply for a license
renewal prior to their prior license’s
expiration and prevent a gap in
licensing.
Once a producer has been issued a
USDA license, the producer must report
their hemp crop acreage to FSA.
Producers must provide specific
information to FSA, as identified in this
part, including, but not limited to: The
specific location where hemp is
produced, and the acreage, greenhouse,
building, or site where hemp is
produced. The specific location where
hemp is produced must be identified, to
the extent practicable, by the geospatial
location.
If at any time, there is a change to the
information submitted in the license
application, a license modification is
required. A license modification is

E:\FR\FM\31OCR3.SGM

31OCR3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

khammond on DSKJM1Z7X2PROD with RULES3

required if, for example, the licensed
business is sold to a new owner or when
hemp will be produced in a new
location not described on the original
application. Producers must notify
USDA immediately should there be any
change in the information provided on
the license application. USDA will
provide guidance on where producers
will submit this information on its
website.
B. Sampling and Testing for THC
All hemp production must be
sampled and tested for THC
concentration levels. Samples must be
collected by a USDA-approved sampling
agent, or a Federal, State or local law
enforcement agent authorized by USDA
to collect samples. It is the
responsibility of the licensed producer
to pay any fees associated with
sampling. USDA will issue guidance on
sampling procedures that will satisfy
sampling requirements to coincide with
publication of this rule. This guidance
will be provided on the USDA website.
The sampling procedures are
designed to produce a representative
sample for testing. They describe
procedures for entering a growing area
and collecting the minimum number of
plant specimens necessary to accurately
represent the THC content, through
laboratory testing, of the sample to be
tested.
THC levels in representative samples
must test at or below the acceptable
hemp THC level. Testing will be
conducted using post-decarboxylation
or other similarly reliable methods
where the total THC concentration level
measured includes the potential to
convert delta-9-tetrahydrocannabinolic
acid (THCA) into THC. Further, test
results should be determined and
reported on a dry weight basis, meaning
the percentage of THC, by weight, in a
cannabis sample, after excluding
moisture from the sample. The moisture
content is expressed as the ratio of the
amount of moisture in the sample to the
amount of dry solid in the sample.
Based on USDA’s review of scientific
studies, internal research and
information gathered from the United
Nations Office on Drugs and Crime:
Recommended Methods for the
Identification and Analysis of Cannabis
and Cannabis Products (ISBN 978–92–
1–148242–3), USDA has determined
that testing methodologies meeting
these requirements include gas or liquid
chromatography with detection.
USDA requires that all samples tested
for THC concentration levels be
conducted in DEA registered
laboratories. These laboratories must
also meet standards of performance

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

described in this regulation. Standards
of performance ensure the validity and
reliability of test results, and that
analytical method selection, validation,
and verification is appropriate (fit for
purpose) and that the laboratory can
successfully perform the testing.
Furthermore, the standards ensure
consistent, accurate, analytical
performance and that the analytical tests
performed are sufficiently sensitive for
the purposes of the detectability
requirements under this part.
Laboratories who conduct THC testing
must also be registered with DEA to
handle controlled substances under the
CSA and DEA regulations (21 CFR part
1301). USDA is adopting this
requirement because of the potential for
these laboratories to handle cannabis
products testing above 0.3% THC. Such
products are, by definition, marijuana,
and a controlled substance. DEA
registration requirements verify a
laboratory’s ability to properly handle
controlled substances.
As previously explained in the
requirements for State and Tribal plans,
USDA is also considering requiring that
testing for THC concentration levels be
conducted in USDA approved
laboratories for USDA plan licensees.
USDA approved laboratories are
authorized under the USDA, AMS,
Laboratory Approval Service, which
administers the Laboratory Approval
Program (LAP). USDA-approved
laboratories would need to comply with
the LAP requirements, as established
under ‘‘Laboratory Approval Program—
General Policies & Procedures’’
(www.ams.usda.gov/services/labtesting/lab-approval), which describes
the general policies and procedures for
a laboratory to apply for and maintain
status in a LAP. Under the LAP, an
individual program for hemp would be
developed, with a set of documented
requirements to capture specific
regulatory, legal, quality assurance and
quality control, and analytical testing
elements. A requirement for a testing
laboratory to be approved by USDA
would be in addition to the requirement
in the final rule that the laboratory be
registered with DEA.
USDA is considering a LAP for USDA
licensees because it would be tailored to
a commodity to meet specific
requirements in support of domestic
and international trade. In addition to
requiring ISO 17025 accreditation,
which assesses general competence of
testing laboratories, the LAP would
provide a way for USDA to certify that
laboratories perform to a standard level
of quality. This is an important factor,
as the issue of providing assurance as to
proper testing was raised on numerous

PO 00000

Frm 00009

Fmt 4701

Sfmt 4700

58529

occasions during the USDA outreach
process conducted prior to developing
this rule. The LAP would give USDA
the proper oversight of the laboratories
doing the testing, providing quality
assurance and control procedures that
ensure a validated and qualified
analysis, and defensible data. Should
USDA require that testing laboratories
be approved by USDA, a list of USDA
approved laboratories would be posted
on the USDA Domestic Hemp
Production Program website. Although
this proposal is not reflected in the
regulatory text of this interim rule,
USDA is seeking comment on it to
determine whether to incorporate it in
the subsequent final rule.
Alternatively, USDA is considering
requiring all laboratories testing hemp
to have ISO 17025 accreditation. We are
requesting comment on this requirement
as well.
It is the responsibility of the licensed
producer to select the DEA-registered
laboratory that will conduct the testing
and to pay any fees associated with
testing. Laboratories performing THC
testing for hemp produced under this
program will be required to share test
results with the licensed producer and
USDA. USDA will provide instructions
to all approved labs on how to
electronically submit test results to
USDA. Laboratories may provide test
results to licensed producers in
whatever manner best aligns with their
business practices, but producers must
be able to produce a copy of test results.
For this reason, providing test results to
producers through a web portal or
through electronic mail, so the producer
will have ready access to print the
results when needed, is preferred.
Samples exceeding the acceptable
hemp THC level are marijuana and will
be handled in accordance with the
procedures discussed in sections C and
D below.
Any licensee may request that the
laboratory retest samples if it is believed
the original THC concentration level test
results were in error. The licensee
requesting the retest of the second
sample would pay the cost of the test.
The retest results would be issued to the
licensee requesting the retest and a copy
would be provided to USDA or its agent.
C. Disposal of Non-Compliant Product
If the results of a test conclude that
the THC levels exceed the acceptable
hemp THC level, the approved
laboratory will promptly notify the
producer and USDA or its authorized
agent. If a licensed producer is notified
that they have produced cannabis
exceeding the acceptable hemp THC
level, the cannabis must be disposed of

E:\FR\FM\31OCR3.SGM

31OCR3

58530

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

khammond on DSKJM1Z7X2PROD with RULES3

in accordance with the CSA and DEA
regulations as such product is marijuana
and not hemp. The material must be
collected for destruction by a person
authorized under the CSA to handle
marijuana, such as a DEA-registered
reverse distributor, or a duly authorized
Federal, State, or local law enforcement
officer, or official.
Licensed producers notified they have
produced product exceeding the
acceptable hemp THC level must
arrange for disposal of the lot
represented by the sample in
accordance with the CSA and DEA
regulations as specified above. Specific
DEA procedures for arranging for the
disposal of non-compliant product will
be listed on the USDA Domestic Hemp
Production Program website.
Producers must document the
disposal of all marijuana. This can be
accomplished by either providing USDA
with a copy of the documentation of
disposal provided by the reverse
distributor or by using the reporting
requirements established by USDA.
These reports must be submitted to
USDA following the completion of the
disposal process.
D. Compliance
USDA has established certain
compliance requirements for USDA
licensees as part of this rulemaking.
This includes the ability for USDA to
conduct audits of USDA licensees and
to issue corrective action plans for
negligent violations. Negligent
violations by a producer may lead to
suspension or revocation of a producer’s
license.
USDA may conduct random audits of
licensees to verify hemp is being
produced in accordance with the
provisions of this part. The format of the
audit will vary and may include a
‘‘desk-audit’’ where USDA requests
records from a licensee or the audit may
be a physical visit to a licensee’s
facility. When USDA visits a licensee’s
facility, the licensee must provide
access to any fields, greenhouses,
storage facilities or other locations
where the licensee produces hemp.
USDA may also request records from the
licensee to include production and
planting data, testing results, and other
information as determined by USDA.
USDA will conduct an audit of all
USDA licensees no more than every
three years based on available resources.
USDA will issue a summary of the
audit to the licensee after the completed
audit. Licensees who are found to have
a negligent violation will be subject to
a corrective action plan. A negligent
violation includes: (1) Failure to provide
a legal description of the land on which

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

the hemp is produced; (2) not obtaining
a license before engaging in production;
or (3) producing plants exceeding the
acceptable hemp THC level. Similar to
the requirements for State and Tribal
plans, USDA will not consider hemp
producers as committing a negligent
violation if they produce plants
exceeding the acceptable hemp THC
level if they use reasonable efforts to
grow hemp and the plant does not have
a THC concentration of more than 0.5
percent on a dry weight basis.
For sampling and testing violations,
USDA will consider the entire harvest
from a distinct lot in determining
whether a violation occurred. This
means that if testing determines that
each sample of five plants from distinct
lots has a THC concentration exceeding
the acceptable hemp THC level (or 0.5
percent if the hemp producer has made
reasonable efforts to grow hemp), USDA
considers this as one negligent
violation. If an individual produces
hemp without a license, this will be
considered one violation. USDA will
establish and review a corrective action
plan with the licensee and its
implementation may be verified during
a future audit or site visit.
When USDA determines that a
negligent violation has occurred, USDA
will issue a Notice of Violation. This
Notice of Violation will include a
corrective action plan. The corrective
action plan will include a reasonable
date by which the producer will correct
the negligent violation or violations and
require the producer to periodically
report to USDA on its compliance with
the plan for a period of not less than the
next two calendar years. A producer
who has negligently violated this part
three times in a five-year period is
ineligible to produce hemp for a period
of five years from the date of the third
violation. Negligent violations are not
subject to criminal enforcement.
However, USDA will report the
production of hemp without a license
issued by USDA to the Attorney
General.
Hemp found to be produced in
violation of this part, such as hemp
produced on a property not disclosed by
the licensed producer, or without a
license, would be subject to the same
disposal provisions as for cannabis
testing above the acceptable hemp THC
level. Further, if it is determined a
violation was committed with a
culpable mental state greater than
negligence, USDA will report the
violation to the Attorney General and
the chief law enforcement officer of the
State or Tribe as applicable.
The 2018 Farm Bill limited the
participation of certain convicted felons

PO 00000

Frm 00010

Fmt 4701

Sfmt 4700

in hemp production. A person with a
State or Federal felony conviction
relating to a controlled substance is
subject to a 10-year ineligibility
restriction on producing hemp under
the Act. An exception applies to a
person who was lawfully growing hemp
under the 2014 Farm Bill before
December 20, 2018, and whose
conviction also occurred before that
date.
E. Suspension of a USDA License
A USDA license may be suspended if
USDA or its representative receives
credible information that a licensee has
either: (1) Engaged in conduct violating
a provision of this part; or (2) failed to
comply with a written order from the
AMS Administrator related to a
negligent violation of this part.
Examples of credible information are
information from local authorities of
harvested plants without testing or
planting of hemp seed in non-approved
locations.
Any producer whose license has been
suspended shall not handle or remove
hemp or cannabis from the location
where hemp or other cannabis was
located at the time when USDA issued
its notice of suspension without prior
written authorization from USDA. Any
person whose license has been
suspended shall not produce hemp
during the period of suspension. A
suspended license may be restored after
a waiting period of one year. A producer
whose license has been suspended may
be required to comply with a corrective
action plan to fully restore their license.
A USDA license shall be immediately
revoked if the licensee: (1) Pleads guilty
to, or is convicted of, any felony related
to a controlled substance; 7 or (2) made
any materially false statement with
regard to this part to USDA or its
representatives with a culpable mental
state greater than negligence; or (3) was
found to be growing cannabis exceeding
the acceptable hemp THC level with a
culpable mental state greater than
negligence or negligently violated the
provision of this part three times in five
years.
If the licensed producer wants to
appeal any suspension or revocation
decision made by USDA under this
section, they can do so using the appeal
process specified in section V.
F. Reporting and Recordkeeping
The 2018 Farm Bill requires USDA to
develop a process to maintain relevant
7 For a corporation, if a key participant has a
disqualifying felony conviction, the corporation
may remove that person from a key participant
position. Failure to remove that person will result
in a license revocation.

E:\FR\FM\31OCR3.SGM

31OCR3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

khammond on DSKJM1Z7X2PROD with RULES3

information regarding the farm on
which hemp is produced. USDA’s FSA
is best suited to collect this information
for the domestic hemp production
program. FSA has staff throughout the
United States who are trained to work
with farmers to verify land uses. Many
hemp producers are likely to be familiar
with the FSA since they already operate
traditional farms, and therefore already
provide data to FSA on acres and crops
planted. Consequently, licensed
producers will be required to report
their hemp crop acreage with FSA, and
to provide FSA with specific
information regarding field acreage,
greenhouse, or indoor square footage of
hemp planted. This information must
include street address, geospatial
location or other comparable
identification method specifying where
the hemp will be produced, and the
legal description of the land. Geospatial
location or other methods of identifying
the production locations are necessary
as not all rural locations have specific
addresses. This information is required
for each field, greenhouse, building, or
site where hemp will be grown. USDA
will use this information to assemble
and maintain the data USDA must make
available in real time to Federal, State,
and local law enforcement as required
by the 2018 Farm Bill and as specified
in section G below. Specific procedures
for reporting hemp acreage to FSA will
be posted on the USDA Domestic Hemp
Production Program website. This
information will be maintained by
USDA for at least three calendar years.
Licensed producers will be required
to maintain copies of all records and
reports necessary to demonstrate
compliance with the program. These
records include those that support,
document, or verify the information
provided in the forms submitted to
USDA. Records and reports must be
kept for a minimum of three years.
Under the USDA plan, there will be
additional reporting requirements for
licensed producers. These include
specific reporting requirements to
collect the information needed by the
licensing application, and the record
and reporting requirements needed to
document disposal of cannabis
produced in violation of the provisions
of this rule. Specific requirements may
be referenced herein at § 990.71.
G. Information Sharing
USDA will develop and maintain a
database of all relevant and required
information regarding hemp as specified
by the 2018 Farm Bill. This database
will be accessible in real time to
Federal, State, local and Tribal law
enforcement officers through a Federal

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

Government law enforcement system.
USDA AMS will administer and
populate this database, which will
include information submitted by States
and Tribes, laboratories, information
submitted by USDA licensed producers,
and information submitted to FSA.
USDA will use this information to
create a comprehensive list of all
domestic hemp producers. USDA will
also gather the information related to
the land used to produce domestic
hemp. This information will be
comprehensive and include data both
from State and Tribal plans and include
a legal description of the land on which
hemp is grown by each hemp producer
and the corresponding geospatial
location. Finally, USDA will also gather
information regarding the status of all
licenses issued under State and tribal
governments and under the USDA plan.
This information will be made
available in real time to Federal, State,
local and Tribal law enforcement as
required by the 2018 Farm Bill.
USDA has prepared a System of
Records Notice (SORN) and a Privacy
Impact Analysis to be issued
concurrently with this rule.
IV. Definitions
In support of the foregoing regulations
and hemp production plan descriptions,
USDA is establishing definitions for
certain terms. The following terms are
integral to implement the 2018 Farm
Bill and establish the scope and
applicability of the regulations of this
part.
The term ‘‘Act’’ refers to the
Agricultural Marketing Act of 1946. The
2018 Farm Bill amended the
Agricultural Marketing Act of 1946 by
adding Subtitle G which is a new
authority for the Secretary of
Agriculture to administer a national
hemp production program. Section
297D of Subtitle G authorizes and
directs USDA to promulgate regulations
to implement this program.
The Agricultural Marketing Service
(AMS) of the U.S. Department of
Agriculture is the agency the Secretary
of Agriculture has charged with the
responsibility to oversee the
administration of this new program.
The term ‘‘applicant’’ means any State
or Indian Tribe that has applied for
USDA approval of a State or tribal hemp
production plan for the State or Indian
Tribe they represent. This term also
applies to any person or business in a
State or territory of an Indian Tribe not
subject to a State or tribal plan, who
applies for a hemp production license
under the USDA plan established under
this part.

PO 00000

Frm 00011

Fmt 4701

Sfmt 4700

58531

The term ‘‘cannabis’’ is the Latin
name of the plant that, depending on its
THC concentration level, is further
defined as either ‘‘hemp’’ or
‘‘marijuana.’’ Cannabis is a genus of
flowering plants in the family
Cannabaceae of which Cannabis sativa
is a species, and Cannabis indica and
Cannabis ruderalis are subspecies
thereof. For the purposes of this part,
Cannabis refers to any form of the plant
where the delta-9 tetrahydrocannabinol
concentration on a dry weight basis has
not yet been determined. This term is
important in describing regulations that
apply to plant production, sampling or
handling prior to determining its THC
content.
The Controlled Substances Act (CAS)
is the statute, codified in 21 U.S.C. 801–
971, establishing Federal U.S. drug
policy under which the manufacture,
importation, exportation, possession,
use, and distribution of certain
substances is regulated. Because
cannabis containing THC concentration
levels of higher than 0.3 percent is
deemed to be marijuana, a schedule I
controlled substance, its regulation falls
under the authorities of the CSA.
Therefore, for compliance purposes, the
requirements of the CSA are relied upon
for the disposal of cannabis that
contains THC concentrations above the
stated limit of this part.
The rule includes a definition of
‘‘conviction’’ to explain what is
considered a conviction and what is not.
Specifically, a plea of guilty or nolo
contendere or any finding of guilt is a
conviction. However, if the finding of
guilt is subsequently overturned on
appeal, pardoned, or expunged, then it
is not considered a conviction for
purposes of part 990. This definition of
‘‘conviction’’ is consistent with how
some other agencies who conduct
criminal history record searches
determine disqualifying crimes.
A ‘‘corrective action plan’’ is a plan
set forth by a State, tribal government,
or USDA for a licensed hemp producer
to correct a negligent violation of or
non-compliance with a hemp
production plan, its terms, or any other
regulation set forth under this part. This
term is defined in accordance with the
2018 Farm Bill, which mandates certain
non-compliance actions to be addressed
through corrective action plans.
‘‘Culpable mental state greater than
negligence’’ is a term used in the 2018
Farm Bill to determine when certain
actions would be subject to specific
compliance actions. This term means to
act intentionally, knowingly, willfully,
recklessly, or with criminal negligence.
The term ‘‘decarboxylated’’ refers to
the completion of the chemical reaction

E:\FR\FM\31OCR3.SGM

31OCR3

khammond on DSKJM1Z7X2PROD with RULES3

58532

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

that converts THC-acid (THCA) into
delta-9–THC, the intoxicating
component of cannabis. The
decarboxylated value is also calculated
using a conversion formula that sums
delta-9-THC and eighty-seven and seven
tenths (87.7) percent of THCA. This
term, commonly used in scientific
references to laboratory procedures, is
the precursor to the term ‘‘postdecarboxylation,’’ a term used in the
2018 Farm Bill’s mandate over cannabis
testing methodologies to identify THC
concentration levels. This definition is
based on the regulations administered
by the Kentucky Department of
Agriculture as part of the Kentucky
industrial hemp research pilot program.
‘‘Delta-9 tetrahydrocannabinol,’’ also
referred to as ‘‘Delta-9 THC’’ or ‘‘THC’’
is the primary psychoactive component
of cannabis, and its regulation forms the
basis for the regulatory action of this
part. As mandated by the Act, legal
hemp production must be verified as
having THC concentration levels of 0.3
percent on a dry weight basis or below.
For the purposes of this part, delta-9
THC and THC are interchangeable.
‘‘DEA’’ means the ‘‘Drug Enforcement
Administration,’’ a United States
Federal law enforcement agency under
the United States Department of Justice.
The DEA is the lead agency for domestic
enforcement of the Controlled
Substances Act. The DEA plays an
important role in the oversight of the
disposal of marijuana, a schedule I
controlled substance, under the
regulations of this part. The DEA is also
instrumental in registering USDAapproved laboratories to legally handle
controlled substances, including
cannabis samples that test above the 0.3
THC concentration level.
‘‘Dry weight basis’’ refers to a method
of determining the percentage of a
chemical in a substance after removing
the moisture from the substance.
Percentage of THC on a dry weight basis
means the percentage of THC, by
weight, in a cannabis item (plant,
extract, or other derivative), after
excluding moisture from the item.
The Farm Service Agency (FSA) is an
agency of the U.S. Department of
Agriculture, that provides services to
farm operations including loans,
commodity price supports, conservation
payments, and disaster assistance. For
the purposes of this program, FSA will
assist in information collection on land
being used for hemp production.
‘‘Gas chromatography’’ or GC, is a
scientific method (specifically, a type of
chromatography technique) used in
analytical chemistry to separate, detect,
and quantify each component in a
mixture. It relies on the use of heat for

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

separating and analyzing compounds
that can be vaporized without
decomposition. Under the terms of this
part, GC is one of the valid methods by
which laboratories may test for THC
concentration levels.
For the purposes of this part,
‘‘geospatial location’’ means a location
designated through a global system of
navigational satellites used to determine
the precise ground position of a place or
object.
This term ‘‘handle’’ is commonly
understood by AMS and used across
many of its administered programs. For
the purposes of this part, ‘‘handle’’
refers to the actions of cultivating or
storing hemp plants or hemp plant parts
prior to the delivery of such plant or
plant part for further processing. In
cases where cannabis plants exceed the
acceptable hemp THC level, handle may
also refer to the disposal of those plants.
‘‘Hemp’’ is defined by the 2018 Farm
Bill as ‘‘the plant species Cannabis
sativa L. and any part of that plant,
including the seeds thereof and all
derivatives, extracts, cannabinoids,
isomers, acids, salts, and salts of
isomers, whether growing or not, with a
delta-9 tetrahydrocannabinol
concentration of not more than 0.3
percent on a dry weight basis.’’ The
statutory definition is self-explanatory,
and USDA is adopting the same
definition without change for part 990.
‘‘High-performance liquid
chromatography (HPLC) or (LC)’’ is a
scientific method (specifically, a type of
chromatography) used in analytical
chemistry used to separate, identify, and
quantify each component in a mixture.
It relies on pumps to pass a pressurized
liquid solvent containing the sample
mixture through a column filled with a
solid adsorbent material to separate and
analyze compounds. Under the terms of
this part, HPLC is one of the valid
methods by which laboratories may test
for THC concentration levels. UltraPerformance Liquid Chromatography
(UPLC) is an additional method that
may also be used as well as other liquid
or gas chromatography with detection.
‘‘Indian Tribe’’ is defined in the 2018
Farm Bill by reference to section 4 of the
Indian Self-Determination and
Education Assistance Act (25 U.S.C.
5304). The statutory definition is selfexplanatory, and USDA is adopting the
same definition without change for part
990.
A ‘‘key participant’’ is a person or
persons who have a direct or indirect
financial interest in the entity producing
hemp, such as an owner or partner in a
partnership. A key participant also
includes persons in a corporate entity at
executive levels including chief

PO 00000

Frm 00012

Fmt 4701

Sfmt 4700

executive officer, chief operating officer
and chief financial officer. This does not
include such management as farm, field
or shift managers.
‘‘Law enforcement agency’’ refers to
all Federal, State, or local law
enforcement agencies. Under the 2018
Farm Bill, State submissions of
proposed hemp production plans to
USDA must be made in consultation
with their respective Governors and
chief law enforcement officers.
Moreover, the 2018 Farm Bill
contemplates the involvement of law
enforcement in compliance actions
related to offenses identified as being
made under a ‘‘culpable mental state.’’
To assist law enforcement in the
fulfillment of these duties, the 2018
Farm Bill also mandates an information
sharing system that provides law
enforcement with real-time data.
The term ‘‘lot’’ refers to a contiguous
area in a field, greenhouse, or indoor
growing structure containing the same
variety or strain of cannabis throughout.
In addition, ‘‘lot’’ is a common term in
agriculture that refers to the batch or
contiguous, homogeneous whole of a
product being sold to a single buyer at
a single time. Under the terms of this
part, ‘‘lot’’ is to be defined by the
producer in terms of farm location, field
acreage, and variety (i.e., cultivar) and
to be reported as such to the FSA.
As defined in the CSA, ‘‘marihuana’’
(or ‘‘marijuana’’) means all parts of the
plant Cannabis sativa L., whether
growing or not; the seeds thereof; the
resin extracted from any part of such
plant; and every compound,
manufacture, salt, derivative, mixture,
or preparation of such plant, its seeds or
resin. The term ‘marihuana’ does not
include hemp, as defined in section
297A of the Agricultural Marketing Act
of 1946, and does not include the
mature stalks of such plant, fiber
produced from such stalks, oil or cake
made from the seeds of such plant, any
other compound, manufacture, salt,
derivative, mixture, or preparation of
such mature stalks (except the resin
extracted therefrom), fiber, oil, or cake,
or the sterilized seed of such plant
which is incapable of germination (7
U.S.C. 1639o(1)). ‘‘Marihuana’’ also
means all cannabis that tests as having
a concentration level of THC on a dry
weight basis of higher than 0.3 percent.
‘‘Negligence’’ is a term used in the
2018 Farm Bill to describe when certain
actions are subject to specific
compliance actions. For the purposes of
this part, the term means failure to
exercise the level of care that a
reasonably prudent person would
exercise in complying with the
regulations set forth under this part.

E:\FR\FM\31OCR3.SGM

31OCR3

khammond on DSKJM1Z7X2PROD with RULES3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations
Used in relation to the other terms
and regulations in this part,
‘‘phytocannabinoids’’ are cannabinoid
chemical compounds found in the
cannabis plant, two of which are Delta9 tetrahydrocannabinol (delta-9 THC)
and cannabidiol (CBD). Testing
methodologies under this part will refer
to the presence of ‘‘phytocannabinoids’’
as either THC or CBD.
Under the terms of this program,
‘‘plan’’ refers to a set of criteria or
regulations under which a State or tribal
government, or USDA, monitors and
regulates the production of hemp.
‘‘Plan’’ may refer to a State or Tribal
plan, whether approved by USDA or
not, or the USDA hemp production
plan.
The 2018 Farm Bill mandates that all
cannabis be tested for THC
concentration levels using
‘‘postdecarboxylation’’ or similar
methods. In the context of this part,
‘‘postdecarboxylation’’ means testing
methodologies for THC concentration
levels in hemp, where the total potential
delta-9-tetrahydrocannabinol content,
derived from the sum of the THC and
THCA content, is determined and
reported on a dry weight basis. The
postdecarboxylation value of THC can
be calculated by using a chromatograph
technique using heat, known as gas
chromatography, through which THCA
is converted from its acid form to its
neutral form, THC. The result of this test
calculates total potential THC. The
postdecarboxylation value of THC can
also be calculated by using a highperformance liquid chromatograph
technique, which keeps the THCA
intact, and requires a conversion
calculation of that THCA to calculate
total potential THC. See also the
definition for decarboxylation.
The term ‘‘produce,’’ when used as a
verb, is a common agricultural term that
is often used synonymously with
‘‘grow’’ and means to propagate plants
for market, or for cultivation for market,
in the United States. In the context of
this part, ‘‘produce’’ refers to the
propagation of cannabis to produce
hemp.
The 2018 Farm Bill mandates that
USDA maintain a real-time
informational database that identifies
registered hemp production sites,
whether under a State, tribal, or USDA
plan, for the purposes of compliance
and tracking with law enforcement.
AMS will maintain this system with the
information collection assistance of
FSA. In order to maintain consistency
and uniformity of hemp production
locations, USDA is recommending that
FSA collect this information through
their crop acreage reporting system. In

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

this context, a common use of the term
‘‘producer’’ is essential to maintaining a
substantive database. For this reason,
the definition of ‘‘producer’’
incorporates the FSA definition of
‘‘producer’’ with the additional qualifier
that the producer is licensed or
authorized to produce hemp under the
Hemp Program.
‘‘Secretary’’ means the Secretary of
Agriculture of the United States.
Section 297A of the Act defines
‘‘State’’ to mean any of one of the fifty
States of the United States of America,
the District of Columbia, the
Commonwealth of Puerto Rico, and any
other territory or possession of the
United States. The statutory definition
is self-explanatory, and USDA is
adopting the same definition without
change for part 990.
This term ‘‘State department of
agriculture’’ is defined by the 2018 Farm
Bill as the agency, commission, or
department of a State government
responsible for agriculture in the State.
The statutory definition is selfexplanatory, and USDA is adopting the
same definition without change for part
990.
The term ‘‘store’’ is part of the term
‘‘handle’’ under this part and means to
deposit hemp plants or hemp plant
product in a storehouse, warehouse or
other identified location by a producer
for safekeeping prior to delivery to a
recipient for further processing.
As defined by the 2018 Farm Bill, the
term ‘‘tribal government’’ means the
governing body of an Indian Tribe. The
statutory definition is self-explanatory,
and USDA is adopting the same
definition without change for part 990.
The ‘‘U.S. Attorney General’’ is the
Attorney General of the United States.
‘‘USDA’’ is synonymous with the
United States Department of
Agriculture.
In the context of this part, ‘‘licensee’’
or ‘‘USDA licensed hemp producer’’
means a person or business authorized
by USDA to grow hemp under the terms
established in this part and who
produces hemp.
V. Appeals
An applicant for a USDA hemp
production program license may appeal
a license denial to the AMS
Administrator. Licensees may appeal
denials of license renewals, license
suspensions, or license revocations to
the AMS Administrator. All appeals
must be submitted in writing and
received within 30 days of the denial.
This submission deadline should
provide adequate time to prepare the
necessary information required to
formulate the appeal. States or Tribes

PO 00000

Frm 00013

Fmt 4701

Sfmt 4700

58533

may appeal USDA decisions either
denying, suspending or revoking State
or Tribal hemp production plans. As
with the USDA license plans, these
appeals must be submitted in writing to
the AMS Administrator and explain the
reasoning behind the appeal, e.g. why
the Administrator’s decision is not
justified or is improper. The appeal
should include any additional
information or documentation the
appellant or licensee believes USDA
should consider when reviewing its
decision. The Administrator will take
into account the applicant or licensee’s
justification for why the license should
not be denied, suspended, or revoked,
and then issue a final determination.
Determinations made by the
Administrator under the appeals
process will be final unless the
applicant or licensee requests a formal
adjudicatory proceeding to review the
decision, which will be conducted
pursuant to the U.S. Department of
Agriculture’s Rules of Practice
Governing Formal Adjudicatory
Proceedings, 7 CFR part 1, subpart H. If
the applicant or licensee does not
request that the Administrator initiate a
formal adjudicatory proceeding within
30 days of the Administrator’s adverse
ruling, such ruling becomes final. The
following paragraphs explain when and
how a State or Tribe may appeal a
USDA decision. State or Tribal plans
may include similar appeal procedures;
this following section is not applicable
to individuals subject to State or Tribal
plans.\
Appeals Under a State or Tribe Hemp
Production Plan
A State or Tribe may appeal the
denial of a proposed hemp production
plan, or the proposed suspension or
revocation of a plan by the USDA.
USDA will consult with States and
Tribes to help ensure their draft plans
meet statutory requirements, and that
existing plan requirements are
monitored and enforced by States and
Tribes. If, however, a proposed State or
Tribal plan is denied, or an existing
plan is suspended or terminated, the
decision may be appealed.
If the AMS Administrator sustains a
State or Tribe’s appeal of a denied hemp
plan application, the proposed State or
Tribal hemp production plan shall be
established as proposed. If the AMS
Administrator denies an appeal,
prospective producers located in the
State or Tribe may apply for hemp
licenses under the terms of the USDA
hemp production plan. Similarly, if an
appeal to a proposed State or Tribal
plan revocation is denied, producers
located in the impacted State or Tribal

E:\FR\FM\31OCR3.SGM

31OCR3

58534

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

territory may apply for licenses under
the USDA plan.
The appeal of a State or Tribal hemp
production plan suspension or
termination must explain the reasoning
behind the appeal and be filed within
the time-period provided in the letter of
notification or within 30 business days
from receipt of the notification,
whichever occurs later. This timeframe
should be adequate for the assembly of
the information required to be
submitted as part of the appeal.
VI. Interstate Commerce
Nothing in this rule prohibits the
interstate commerce of hemp. No State
or Indian Tribe may prohibit the
transportation or shipment of hemp
produced in accordance with this part
and with section 7606 of the 2014 Farm
Bill through the State or the territory of
the Indian Tribe, as applicable.8

khammond on DSKJM1Z7X2PROD with RULES3

VII. Outreach
As part of this rulemaking process,
USDA engaged in numerous discussions
with industry stakeholders prior to
issuing this rule. This included
numerous meetings with different State
and tribal groups and representatives,
industry organizations, groups and
individuals with experience in the
hemp industry, and representatives of
law enforcement.
In addition, USDA also conducted a
listening session on March 13, 2019,
that had more than 2,100 participants,
and included comments from 46
separate speakers representing States,
Tribes, producers, end-users, hemp
organizations, and others. The recording
of the listening session is available on
the USDA website. On May 1 and 2,
2019, USDA also participated in tribal
consultation meetings.
As required by the Farm Bill, the
Secretary has developed these
regulations and guidelines in
consultation with the Attorney General.
In addition, USDA will submit an
annual report to the Committee on
Agriculture of the House of
Representatives and the Committee on
Agriculture, Nutrition, and Forestry of
the Senate containing updates on the
implementation of the hemp
requirements in the Farm Bill.
VIII. Severability
This interim rule includes a
severability provision. This is a
standard provision in regulations. This
section provides that if any provision of
8 See

section 10114 of the 2018 Farm Bill and the
USDA General Counsel’s Legal Opinion on the
Authorities for Hemp Production at https://
www.ams.usda.gov/content/legal-opinionauthorities-hemp-production.

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

part 990 is found to be invalid, the
remainder of the part shall not be
affected.
Paperwork Reduction Act
In accordance with section 3507(d) of
the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), through this
document AMS announces its intent to
request approval from OMB for a new
information collection OMB No. 0581–
NEW and comments are invited on this
new information collection. All
comments received on this information
collection will be summarized and
included in the final request for OMB
approval.
Based on our review of the hemp
production under the 2014 Farm Bill,
we estimate that there will be
approximately 6,700 9 producers under
State and Tribal plans, approximately
1,000 producers under the USDA plan,
and 100 State and Tribal plans. We
estimate that each producer will have an
average of two lots of hemp with most
producers growing one lot per year but
larger producers growing many different
lots. Each lot will need to be tested for
THC concentration.
Comments are invited on: (1) Whether
the proposed collection of information
is necessary for the proper performance
of the functions of the agency, including
whether the information will have
practical utility; (2) the accuracy of the
agency’s estimate of the burden of the
proposed collection of information,
including the validity of the
methodology and assumptions used; (3)
ways to enhance the quality, utility, and
clarity of the information to be
collected; and (4) ways to minimize the
burden of the collection of information
on those who are to respond, including
the use of appropriate automated,
electronic, mechanical, or other
technological collection techniques or
other forms of information technology.
Title: Domestic Hemp Production
Program; 7 CFR 990.
OMB Number: 0581–NEW.
Type of Request: New Collection.
Abstract: The proposed information
collection and reporting requirements
will facilitate the effective
administration and oversight of the
Domestic Hemp Production Program, as
described above. The Hemp Program
includes provisions, among others,
requiring licensed producers to
maintain information on the land where
hemp is produced, hemp testing for
9 The 6,700 figure represents the average number
of growers operating under State and Tribal plans
over the three years of the program. In actuality, we
estimate 5,500 such growers in 2020, 6,700 growers
in 2021 and 8,000 growers in 2022 who will
participate through State and Tribal programs.

PO 00000

Frm 00014

Fmt 4701

Sfmt 4700

delta-9 tetrahydrocannabinol, and
disposal of plants not meeting necessary
requirements. Additionally, as
explained above, all licensed producers
must report hemp crop acreage to the
USDA Farm Service Agency (FSA). The
licensed producer must maintain
information that supports, verifies, or
documents information on all reports
for a minimum of three years. This
includes, but is not limited to, the
producer’s completed criminal history
report, any records of required disposal,
notifications of THC test results, and the
license. This new information collection
proposes to create seven new forms.
These forms will be available on the
USDA domestic hemp website, or
copies can be requested from
[email protected]. AMS is in the
process of building a database for
applicants and producers to submit
applications and reports. The forms and
information collected on those forms are
described below. The information
reported for data collected under State
and Tribal plans incorporates the
burden to producers licensed under
State and Tribal plans associated with
providing the required information.
State and Tribal Hemp Producer
Report. Every State or Tribe with an
approved plan must provide AMS with
information on the hemp producers
covered under their plan using the State
and Tribal Hemp Producer Report form.
States and Tribes are required to submit
this information to USDA not later than
30 days after the date it is received
using this report. This report should be
submitted to USDA on the first day of
each month. If this date falls on a
holiday or weekend, the report is due
the next business day. This information
should be submitted to USDA using a
digital format compatible with USDA’s
information sharing systems, whenever
possible.
If there are no changes from the
previous reporting cycle, States and
Tribes could check the box indicating
there were no changes during the
current reporting cycle. This
information will be collected and
maintained by USDA and made
available in real time to Federal, State,
and local law enforcement. States and
Tribes will need to retain the
information used to populate this form
for three calendar years.
State and Tribal Hemp Producer Report
Estimate of Burden: Public burden for
States and Tribes completing and
maintaining this form is estimated to be
an average of 0.34 hours per response.
Respondents: States and Tribes with
USDA approved hemp production
plans.

E:\FR\FM\31OCR3.SGM

31OCR3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

khammond on DSKJM1Z7X2PROD with RULES3

Estimated Number of Respondents:
100.
Estimated Number of Responses per
Respondent: 12.
Estimated Total Annual Responses:
1,200.
Estimated Total Annual Hours per
Respondent: 0.333 hours.
Estimated Total Annual Reporting
Hours: 400 hours (rounded).
Estimated Number of Record Keepers:
100.
Estimated Total Annual Hours per
Record Keeper: 0.083 hours.
Estimated Record Keeping Hours: 8.3
hours.
Estimated Total Annual Burden
Hours (Including 8.3 hours): 408.3
hours.
Information and Record Keeping for
State and Tribal Producer Report
Responses
Estimate of Burden: Public burden for
State and Tribal producers providing
and maintaining the information for this
form is estimated to be an average of
0.25 hours per response.
Estimated Number of Respondents:
8,000.
Estimated Number of Responses per
Respondent: 0.3330.
Estimated Total Annual Responses:
2,664.
Estimated Total Annual Hours per
Respondent: 0.167 hours.
Estimated Total Annual Burden
Hours: 444.9 hours (2,664 × 0.1670
hours (10 mins)).
Estimated Number of Record Keepers:
2,664.
Estimated Total Annual Hours per
Record Keeper: 0.083 hours.
Estimated Record Keeping Hours:
221.1 hours.
Estimated Total Annual Burden and
Record Keeping Hours for State and
Tribal Producer Responses (Including
221.1 hours): 666 hours.
State and Tribal Hemp Disposal
Report: States or Indian Tribes operating
under approved hemp production plans
must notify USDA of any occurrence of
non-conforming plants or plant material
and provide the disposal record of those
plants and materials monthly. This
includes plants or plant material which
test above the acceptable hemp THC
level or hemp otherwise produced in
violation of this part. This information
should be submitted to USDA using a
digital format compatible with USDA’s
information sharing systems, whenever
possible.
State and Tribal Hemp Disposal Report
Estimate of Burden: Public burden for
the States and Tribes completing and
maintaining this form is estimated to be
an average of 0.34 hours per response.

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

Respondents: States and Tribes with
USDA approved hemp production
plans.
Estimated Number of Respondents:
100.
Estimated Number of Responses per
Respondent: 12.
Estimated Total Annual Responses:
1,200.
Estimated Total Annual Hours per
Respondent: 0.333 hours.
Estimated Total Annual Reporting
Hours: 400 hours (rounded).
Estimated Number of Record Keepers:
100.
Estimated Total Annual Hours per
Record Keeper: 0.083 hours.
Estimated Record Keeping Hours: 8.3
hours.
Estimated Total Annual Burden
Hours (Including the 8.3 hours: 408.3
hours.
Information and Record Keeping for
State and Tribal Producer Report
Responses
Estimate of Burden: Public burden for
State and Tribal producers providing
and maintaining the information for this
form is estimated to be an average of
0.25 hours per response.
Estimated Number of Respondents:
2,680.
Estimated Number of Responses per
Respondent: 1.
Estimated Total Annual Responses:
2,680.
Estimated Total Annual Hours per
Respondent: 0.167 hours.
Estimated Total Annual Burden
Hours: 447.6 hours.
Estimated Number of Record Keepers:
2,680.
Estimated Total Annual Hours per
Record Keeper: 0.083 hours.
Estimated Record Keeping Hours:
222.4 hours.
Estimated Total Annual Burden and
Record Keeping Hours for State and
Tribal Producer Responses (Including
222.4 hours): 670 hours.
State and Tribal Hemp Annual
Report: Each year, AMS is required to
provide an annual report to Congress
regarding the implementation Subtitle G
of the AMA. In order to ensure that
AMS has the best available information
on U.S. hemp production to populate
this report, AMS is requiring States and
Tribes to submit an annual report to
AMS. This report includes a summary
for all hemp planted, destroyed, and
harvested under each State or Tribe’s
hemp production plan. States and
Tribes would submit this information to
USDA using the ‘‘State and Tribal Hemp
Annual Report’’ form annually by
December 15.

PO 00000

Frm 00015

Fmt 4701

Sfmt 4700

58535

State and Tribal Hemp Annual Report
Estimate of Burden: Public burden for
completing and maintaining the
information on this form is estimated to
be an average of 0.42 hours per
response.
Respondents: States and Tribes with
USDA approved hemp production
plans.
Estimated Number of Respondents:
100.
Estimated Number of Responses per
Respondent: 1.
Estimated Total Annual Responses:
100.
Estimated Total Annual Hours per
Respondent: 0.333 hours.
Estimated Total Annual Reporting
Hours: 33.3 hours.
Estimated Number of Record Keepers:
100.
Estimated Total Annual Hours per
Record Keeper: 0.083 hours.
Estimated Record Keeping Hours: 8.3
hours.
Estimated Total Annual Burden
Hours (Including the 8.3 hours): 41.6
hours.
Information and Record Keeping for
State and Tribal Producer Report
Responses
Estimate of Burden: Public burden for
completing and maintaining the
information for this form is estimated to
be an average of 0.25 hours per
response.
Estimated Number of Respondents:
6,700.
Estimated Number of Responses per
Respondent: 1.
Estimated Total Annual Responses:
6,700.
Estimated Total Annual Hours per
Respondent: 0.167 hours.
Estimated Total Annual Burden
Hours: 1,118.9 hours.
Estimated Number of Record Keepers:
6,700.
Estimated Total Annual Hours per
Record Keeper: 0.083 hours.
Estimated Record Keeping Hours:
556.10 hours.
Estimated Total Annual Burden and
Record Keeping Hours for State and
Tribal Producer Responses (Including
556.1 hours): 1,675 hours.
USDA Hemp Producer Licensing
Application: To obtain a license from
USDA, producers would need to
complete the ‘‘USDA Hemp Plan
Producer Licensing Application’’ form.
This form will collect the information
identified in § 990.21. By signing the
application, the applicant would certify,
should they become a licensed
producer, they would abide by all rules
and regulations relating to the USDA

E:\FR\FM\31OCR3.SGM

31OCR3

58536

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

khammond on DSKJM1Z7X2PROD with RULES3

plan, and to the truth and accuracy of
the information provided in the
application.
For the first application cycle, USDA
will accept license applications for the
first year after the effective date of the
rule. After this initial period, license
applications must be submitted between
August 1 and October 31 of each year.
Licenses do not renew automatically
and must be renewed every three years.
Applications for license renewal would
be subject to the same terms and
approved under the same criteria as
initial license applications, unless there
has been an intervening change in the
applicable law or regulations since
approval of the initial or last
application. In such a case, the
subsequently enacted change in law or
regulation shall govern renewal of the
license. Licenses will be valid until
December 31 of the year three after the
year in which license is issued. For
example, if you apply for a license
August 1, 2020 and are granted a license
on September 15, 2020, the license
would expire December 31, 2022. The
license application will be available
online at the USDA domestic hemp
production program website, or copies
can be requested by email at
[email protected]. Applications
may be submitted electronically or
through U.S. mail.
USDA Hemp Plan Producer Licensing
Application
Estimate of Burden: Public burden for
completing and maintaining this form is
estimated to be an average of 0.25 hours
per response.
Respondents: Producers applying for
the USDA plan.
Estimated Number of Respondents:
1,000.
Estimated Number of Responses per
Respondent: 0.3333.
Estimated Total Annual Responses:
333.
Estimated Total Annual Hours per
Respondent: 0.167 hours.
Estimated Total Annual Reporting
Hours: 55.6 hours.
Estimated Number of Record Keepers:
333.
Estimated Total Annual Hours per
Record Keeper: 0.083 hours.
Estimated Record Keeping Hours: 27.7
hours.
Estimated Total Annual Burden
Hours (Including the 27.7 hours): 83.3
hours.
USDA Hemp Plan Disposal
Notification: Producers licensed by
USDA must test hemp prior to harvest,
dispose of all non-compliant cannabis
plants, and report to USDA disposal of
all non-compliant cannabis plants.

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

Producers must document the disposal
of all marijuana in accordance with
§ 990.27. Reporting can be
accomplished by either providing USDA
with a copy of the documentation of
disposal provided by the reverse
distributor or by submitting a ‘‘USDA
Hemp Plan Producer Disposal Form’’ to
document the disposal process.
USDA Hemp Plan Producer Disposal
Form
Estimate of Burden: Public burden for
completing and maintaining this form is
estimated to be an average of 0.42 hours
per response.
Respondents: Producers covered
under the USDA plan.
Estimated Number of Respondents:
400.
Estimated Number of Responses per
Respondent: 1.
Estimated Total Annual Responses:
400.
Estimated Total Annual Hours per
Respondent: 0.333 hours.
Estimated Total Annual Reporting
Hours: 133.3 hours.
Estimated Number of Record Keepers:
400.
Estimated Total Annual Hours per
Record Keeper: 0.083 hours.
Estimated Record Keeping Hours: 33.3
hours.
Estimated Total Annual Burden
Hours (Including the 33.3 hours): 166.6
hours (rounded).
End of Year Harvest Reporting
Requirements: The Farm Bill requires
AMS to prepare and submit an annual
report to Congress on the
implementation of the domestic hemp
production program. To ensure AMS
has adequate planting, production, and
harvest data necessary for this report,
we are requiring producers to submit an
annual harvest report. Each producer
would need to submit to USDA an
annual report of their total acreage
planted, harvested, and, if applicable,
disposed. If a producer has multiple
growing and harvesting cycles
throughout the year (e.g., greenhouse
and producers in warm climates) they
should all be summarized and
submitted on this form. Producers
would submit this information to USDA
using the ‘‘USDA Hemp Plan Producer
Annual Report’’ form by December 15
each year.
USDA Hemp Plan Producer Annual
Report
Estimate of Burden: Public burden for
completing and maintaining this form is
estimated to be an average of 0.42 hours
per response.
Respondents: Producers applying for
the USDA plan.

PO 00000

Frm 00016

Fmt 4701

Sfmt 4700

Estimated Number of Respondents:
1,000.
Estimated Number of Responses per
Respondent: 1.
Estimated Total Annual Responses:
1,000.
Estimated Total Annual Hours per
Respondent: 0.333 hours.
Estimated Total Annual Reporting
Hours: 333.3 hours.
Estimated Number of Record Keepers:
1,000.
Estimated Total Annual Hours per
Record Keeper: 0.083 hours.
Estimated Record Keeping Hours: 83.3
hours.
Estimated Total Annual Burden
Hours (Including the 83.3 hours): 416.6
hours rounded.
Report of Acreage: Producers shall
report name, address, license or
authorizing number, geospatial location
for each lot or greenhouse where hemp
will be produced and hemp crop
acreage to FSA. This will establish an
identification system for hemp
production nationwide and complies
with the information sharing
requirements of the 2018 Farm Bill.
Report of Acreage FSA 578
Estimate of Burden: Public burden for
completing and maintaining this form is
estimated to be an average of 0.58 hours
per response.
Respondents: Producers under State,
Tribal or the USDA plan.
Estimated Number of Respondents:
7,700.
Estimated Annual Number of
Responses per Respondent: 1.
Estimated Total Annual of Responses:
7,700.
Estimated Total Annual Hours per
Respondent: 0.5 hours.
Estimated Total Annual Reporting
Hours: 3,850.
Estimated Number of Record Keepers:
7,700.
Estimated Total Annual Hours per
Record Keeper: 0.083 hours.
Estimated Record Keeping Hours:
639.1 hours.
Estimated Total Annual Burden
Hours (Including the 639.1 hours):
4,489.1 hours.
Laboratory Test Results Report: The
Farm Bill requires that all domestically
produced hemp be tested for total THC
content on a dry weight basis. All test
results, whether passing, failing, or retests must be reported to USDA.
Laboratory Test Results Report
Estimate of Burden: Public burden for
completing and maintaining this form is
estimated to be an average of 1.08 hours
per response.
Respondents: Laboratories testing
hemp for THC content.

E:\FR\FM\31OCR3.SGM

31OCR3

Estimated Number of Respondents:
7,700.
Estimated Annual Number of
Responses per Respondent: 2.
Estimated Total Annual of Responses:
15,400.
Estimated Total Annual Hours per
Respondent: 0.5 hours.
Estimated Total Annual Reporting
Hours: 7,700.
Estimated Number of Record Keepers:
7,700.

Estimated Total Annual Hours per
Record Keeper: 0.083 hours.
Estimated Record Keeping Hours:
639.1 hours.
Estimated Total Annual Burden
Hours (Including the 639.1 hours):
8,339.1 hours.
This new information collection
assumes 9,100 total respondents, 17,363
burden hours, and annual costs of
$989,714.94. This is calculated by

multiplying the mean hourly wage of
$57 by 17,363 hours. The mean hourly
wage of a compliance officer, as
reported in the May 2018 Occupational
Employment Statistics Survey of the
Bureau of Labor and Statistics, was $35
per hour. Assuming 39 percent of total
compensation accounts for benefits,
assumed total compensation of a
compliance officer is $57 per hour.

E-Government Act

gender, religion, age, disability, sexual
orientation, marital or family status,
political beliefs, parental status, or
protected genetic information. This
review included persons that are
employees of the entities who are
subject to these regulations. This
interim rule does not require affected
entities to relocate or alter their
operations in ways that could adversely
affect such persons or groups. Further,
this rule would not deny any persons or
groups the benefits of the program or
subject any persons or groups to
discrimination.
A 60-day comment period is provided
to allow interested persons to respond
to this interim rule. All written
comments received in response to this
rule by the date specified will be
considered.

Executive Order 13132 Federalism
AMS has examined the effects of
provisions in the interim final rule on
the relationship between the Federal
Government and the States, as required
by Executive Order 13132 on
‘‘Federalism.’’ Our conclusion is that
this rule does have federalism
implications because the rule has
substantial direct effects on States, on
the relationship between the national
government and States, and on the
distribution of power and
responsibilities among the various
levels of government. The federalism
implications of the rule, however, flow
from and are consistent with the
underlying statute. Section 297B of the
AMA, 7 U.S.C. 1639p, directs USDA to
review and approve State plans that
meet statutory requirements and to
audit a State’s compliance with its State
plans. Overall, the final rule attempts to

AMS is committed to complying with
the E-Government Act, to promote the
use of the internet and other
information technologies to provide
increased opportunities for citizen
access to Government information and
services, and for other purposes. We
recognize using an electronic system
will promote efficiencies in developing
and implementing the new USDA
Domestic Hemp Production Program.
Since this is a new program, AMS is
working to make this process as
effective and user-friendly as possible.
khammond on DSKJM1Z7X2PROD with RULES3

58537

Civil Rights Review
AMS has considered the potential
civil rights implications of this rule on
minorities, women, and persons with
disabilities to ensure that no person or
group shall be discriminated against on
the basis of race, color, national origin,

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

PO 00000

Frm 00017

Fmt 4701

Sfmt 4700

E:\FR\FM\31OCR3.SGM

31OCR3

ER31OC19.008

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

khammond on DSKJM1Z7X2PROD with RULES3

58538

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

balance both the autonomy of the States
with the necessity to create a Federal
framework for the regulation of hemp
production.
Section 3(b) of E.O. 13132 recognizes
that national action limiting the
policymaking discretion of States will
be imposed ‘‘. . . only where there is
constitutional and statutory authority
for the action and the national activity
is appropriate in light of the presence of
a problem of national significance.’’
Section 297B of the AMA is the
statutory authority underlying the rules
for USDA to review, approve,
disapprove, or revoke State plans for
hemp production. Until the passage of
the 2018 Farm Bill, hemp was a
schedule I controlled substance as it fell
within the CSA definition of marijuana.
When hemp was exempted from the
definition of marijuana as part of the
2018 Farm Bill, in connection with
removing it from that list, Congress
established a national regulatory
framework for the production of hemp.
Because cannabis plants with a THC
level higher than 0.3 are marijuana and
on the Federal controlled substances
list, ensuring that hemp produced under
this program is not marijuana is of
national significance.
In addition to establishing a national
regulatory framework for hemp
production, Congress expressly
preempted State law with regard to the
interstate transportation of hemp.
Section 10114 of the 2018 Farm Bill
States that ‘‘[n]o State or Indian Tribe
shall prohibit the transportation or
shipment of hemp or hemp products
produced in accordance with subtitle G
of the Agricultural Marketing Act of
1946 (as added by section 10113)
through the State or the territory of the
Indian Tribe, as applicable.’’ Thus,
States and Indian Tribes may not
prevent the movement of hemp through
their States or territories even if they
prohibit its production. Congress also
expressly preempted a State’s ability to
prosecute negligent violations of its plan
as a criminal act in section
297B(e)(2)(c). That preemption is
incorporated into this rule.
Section 3(d)(2) of the E.O. 13132
requires the Federal Government to
defer to the States to establish standards
where possible. Section 4(a), however,
expressly contemplates preemption
when there is a conflict between
exercising State and Federal authority
under Federal statute. Section 297C of
the AMA requires State plans to include
six practice and procedures and a
certification. It also expressly states that
it does not preempt a State’s ability to
adopt more stringent requirements or to
prohibit the production of hemp.

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

Section 297D of the AMA requires
USDA to promulgate regulations to
implement subtitle G of the AMA which
includes section 297B. Subpart B of the
final rule repeats those requirements,
providing more detail where necessary.
States have wide latitude to develop the
required practice and procedures.
Subpart B includes more details on the
testing and sampling of hemp plants to
establish a national standard to
determine whether the plants meet the
statutory definition of hemp. Likewise,
the final rule requires States to follow
DEA requirements for disposal of
marijuana for cannabis plants exceeding
the acceptable hemp THC level. Finally,
the interim final rule also reaffirms that
States may adopt more stringent
standards and prohibit hemp
production within their jurisdiction.
Section 6 of E.O. 13132 requires
consultation with State officials in
development of the regulations. AMS
conducted significant outreach with
State officials including individual
meetings, participation in conferences
with State officials, and listening
session where State officials from all
States were invited. During our
consultation with the States,
representatives from various State
agencies and offices expressed the
following concerns about sampling and
testing procedures. Most requested that
USDA adopt uniform, national
requirements to facilitate the marketing
of hemp. Some States advocated that
USDA defer to each State to determine
the appropriate procedures for its plan.
USDA recognizes the value of a national
standard to promote consistency while
allowing States the flexibility to adopt
procedures that fit their circumstances.
As explained above, USDA is adopting
performance standards for sampling and
testing. As long as the procedures in the
State plans meet those standards, AMS
will find those procedures acceptable.
As AMS implements this new
program, we will continue to consult
with State officials to obtain their
feedback on implementation. We
encourage States to submit comments
on this interim final rule during the
comment period which closes on
December 30, 2019.
Finally, we have considered the cost
burden that this rule would impose on
States as discussed in the Regulatory
Impact Analysis of this document.
AMS has assessed this final rule in
light of the principles, criteria, and
requirements in Executive Order 13132.
We conclude that this final rule: Is not
inconsistent with that E.O.; will not
impose significant additional costs and
burdens on the States; and will not
affect the ability of the States to

PO 00000

Frm 00018

Fmt 4701

Sfmt 4700

discharge traditional State governmental
functions.
E.O. 13175 Consultation and
Coordination With Indian Tribal
Governments
AMS has examined the effects of
provisions in the final rule on the
relationship between the Federal
Government and Tribal governments, as
required by E.O. 13175 on
‘‘Consultation and Coordination with
Indian Tribal Governments.’’ We
conclude that the final rule does have
substantial direct effects on tribal
governments, on the relationship
between the national government and
tribal governments, and on the
distribution of power and
responsibilities among the various
levels of government. The effects of the
rule, however, flow from and are
consistent with the underlying statute.
Section 297B of the AMA, 7 U.S.C.
1639p, directs USDA to review and
approve Tribal plans that meet statutory
requirements and to audit a tribal
government’s compliance with its Tribal
plans. Overall, the final rule attempts to
balance both the autonomy of the tribal
governments with the necessity to create
a Federal framework for the regulation
of hemp production.
As with State plans, tribal
governments will have wide latitude in
adopting the required procedures
including adopting requirements that
are more stringent than the statutory
ones. For reasons stated above in the
federalism analysis, AMS is adopting
national standards for sampling, testing,
and disposal of non-compliant plants
that Tribal plans must adhere to.
AMS has conducted extensive
outreach to tribal governments. On May
1 and 2, 2019, USDA held a formal
tribal consultation on the 2018 Farm
Bill including a session on hemp
production. In addition to the listening
sessions for the general public, USDA
hosted one for tribal governments
following the formal tribal consultation
on May 2, 2019. USDA officials
attended meetings with representatives
of tribal governments.
During those outreach events, tribal
representatives from several Tribal
Governments expressed their opinion
that the 2018 Farm Bill permitted the
USDA Secretary to allow AMS to
approve Tribe plans ahead of issuing
regulations of the USDA plan.
Approving plans immediately would
allow those Tribes (and States) with a
plan to begin planting for the
commercial production of hemp in
2019. The USDA Secretary released a
Notice to Trade (NTT) on February 27,
2019 to explain that tribal and State

E:\FR\FM\31OCR3.SGM

31OCR3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

khammond on DSKJM1Z7X2PROD with RULES3

plans would not be reviewed or
approved until AMS finalized
regulations ahead of the 2020 planting
season. Additionally, the NTT stated
that until regulations were in place,
States, Tribes, and institutions of higher
education can continue operating under
authorities of the 2014 Farm Bill. The
2018 Farm Bill extension of the 2014
authority expires 12 months after USDA
has established the plan and regulations
required under the 2018 Farm Bill. A
second Notice to Trade was issued on
May 27, 2019 to clarify again that Tribal
governments through the authorities in
the 2014 Farm Bill are permitted grow
industrial hemp for research purposes
during the 2019 growing season. USDA
appreciates the urgency in which the
Indian Tribes wish to engage in this new
economic opportunity. We have worked
expeditiously to develop and
promulgate this interim final rule so
that States and Tribes will be able to
submit their plans in time for the 2020
season.
Some tribal representatives stated that
the Act requires that the tribal plans
have the specified practice and
procedures and USDA is not authorized
to evaluate them as part of the review
and approval process. We note that the
statute requires that USDA approve
plans that include procedures that meet
the statutory requirements. For example,
section 297B(a)(2)(A)(iii) required a
procedure for effective disposal and
USDA must evaluate whether the plan’s
procedure is effective.
Although Indian Tribes will incur
costs in complying with final rule, those
costs should be outweighed by the
benefits that the Indian Tribes realize in
commercial hemp production occurring
within their territories.
Executive Orders 12866, 13563, and
13771
USDA is issuing this rule in
conformance with Executive Orders
12866 and 13563, which direct agencies
to assess all costs and benefits of
available regulatory alternatives and, if
regulation is necessary, to select
regulatory approaches that maximize
net benefits, which include potential
economic, environmental, public health
and safety effects, distributive impacts,
and equity. Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits,
reducing costs, harmonizing rules, and
promoting flexibility.
This rule meets the definition of an
economically significant regulatory
action under Executive Order 12866, as
it is likely to result in an annual effect
on the economy of $100 million or
more. USDA considers this to be a

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

deregulatory action as it allows the
development of a niche market that
cannot exist under current regulation.
This action will expand production
options and enable interested farmers to
grow hemp.
USDA requests public comment on
the estimated impacts of the rule,
specifically whether there is
information or data that may inform
whether or not the market will
experience a significant shift, either
positive or negative, in the developing
hemp market and on consumers. In
addition, USDA seeks comments and
requests any data or information on
what impacts the regulation may have
on current and future innovation in the
areas of industrial hemp usages and
how much such impacts on innovation
may affect rural communities.
Regulations must be designed in the
most cost-effective manner possible to
obtain the regulatory objective while
imposing the least burden on society.
This rule would establish a national
regulatory oversight program for the
production of hemp. This program is
necessary to effectuate the Farm Bill
mandate to coordinate State and tribal
government hemp production
regulations with the newly established
Federal regulations for hemp production
in States not regulated by State or Tribal
plans. This program is intended to
provide consistency in production,
sampling and testing of hemp product to
ensure compliance with the acceptable
hemp THC level.
This rule has been reviewed under
Executive Order 12988, Civil Justice
Reform. This rule is not intended to
have retroactive effect. The discussion
on E.O. 13132, Federalism, above,
addressed the extent in which the 2018
Farm Bill and the interim rule preempt
State law. The discussion on E.O.
13179, Consultation and Coordination
with Tribal governments, above,
addresses the impact that the interim
rule impacts tribal governments. The
discussion above regarding appeals
under new part 990, subpart D,
describes the administrative procedures
that must be exhausted prior to a
judicial challenge.
Regulatory Impact Analysis/Initial
Regulatory Flexibility Analysis
Introduction
The future of the hemp industry in
the United States (U.S.) is anything but
certain. While hemp was produced
previously in the U.S. for hundreds of
years, its usage diminished in favor of
alternatives. Hemp fiber, for instance,
which had been used to make rope and
clothing, was replaced by less expensive

PO 00000

Frm 00019

Fmt 4701

Sfmt 4700

58539

jute and abaca imported from Asia.
Ropes made from these materials were
lighter and more buoyant, and more
resistant to salt water than hemp rope,
which required tarring. Improvements
in technology further contributed to the
decline in hemp usage. The cotton gin,
for example, eased the harvesting of
cotton, which replaced hemp in the
manufacture of textiles.10
Hemp production in the U.S. has seen
a massive resurgence in the last five
years; however, it remains unclear
whether consumer demand will meet
the supply. From 2017 to 2018, acreage
planted for hemp tripled, reaching
77,844 acres. Hemp planted acreage in
2018 was eight times the acreage
planted just two years prior in 2016.
Acreage in 2019 is expected to at least
double from 2018.11
High prices for hemp, driven
primarily by demand for use in
producing CBD, relative to other crops,
have driven increases in planting. Prices
for hemp products vary from source to
source. Prices for hemp fiber range from
$0.07 per pound to $0.67 per pound,
and prices for hemp grain or seed range
from $0.65 per pound to $1.70 per
pound. Prices for hemp flowers, in
which concentrations of the
cannabinoid cannabidiol, or CBD, are
located, range from $3.50 to $30.00 per
pound or more, depending on the CBD
content. Producer interest in hemp
production is largely driven by the
potential for high returns from sales of
hemp flowers to be processed into CBD
oil. From 2017 to 2018, the number of
licensed producers of hemp more than
doubled to reach 3,543 producers.
The hemp plant is a varietal of the
species Cannabis sativa. While
belonging to the same species as the
plant that produces marijuana, hemp is
distinctive from marijuana in its
chemical makeup. The marijuana plant
contains high levels of the cannabinoid
delta-9 tetrahydrocannabinol (THC),
which is the chemical that produces
psychoactive effects. Hemp may contain
no greater than 0.3 percent THC on a
dry weight basis.
The 2018 Farm Bill explicitly
preserved the authority of the U.S. Food
and Drug Administration (FDA) to
regulate hemp products under the
Federal Food, Drug, and Cosmetic Act
(FD&C Act) and section 351 of the
Public Health Service Act (PHS Act).
Accordingly, products containing
cannabis and cannabis-derived
10 Presentation to USDA by Dr. Eric Walker,
Assistant Professor in the Department of Plant
Sciences at the University of Tennessee, on May 21,
2019.
11 Vote Hemp, U.S. Hemp Crop Reports.

E:\FR\FM\31OCR3.SGM

31OCR3

58540

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

compounds are subject to the same
authorities and requirements as FDAregulated products containing any other
substance.

khammond on DSKJM1Z7X2PROD with RULES3

Legislative History
The production of hemp has a long
history in the United States (U.S.). Prior
to the mid-20th century, hemp had been
cultivated in the U.S. for hundreds of
years to make flags, sails, rope, and
paper. The first regulation of hemp
occurred in 1937 with the Marihuana
Tax Act, which required all producers
of the species Cannabis sativa to register
with and apply for a license from the
Federal Government. The ‘‘Hemp for
Victory’’ Campaign during World War II
promoted production of hemp for rope
to be used by U.S. military forces, but
at the end of the war, the requirements
in the Marihuana Tax Act resumed. In
1970, Congress passed the Controlled
Substances Act, granting the Attorney
General the authority to regulate
production of hemp.
The Agricultural Act of 2014, also
known as the 2014 Farm Bill, defined
hemp as the plant Cannabis sativa L.
and any part of that plant with
concentrations of THC no greater than
0.3 percent on a dry weight basis. Prior
to the 2014 Farm Bill, hemp had never
been designated in a Federal law as
different from cannabis generally. The
2014 Farm Bill authorized institutions
of higher education and State
departments of agriculture to allow for
cultivation of hemp as part of a pilot
program as authorized by State law for
research. Research allowed under pilot
programs included market research, so
hemp was cultivated and sold as inputs
into various consumer products under
the 2014 Farm Bill. This analysis
assumes that such cultivation would
have continued and even expanded in
the absence of the 2018 Farm Bill.
Need for Regulation
The Agriculture Improvement Act of
2018, known as the 2018 Farm Bill,
removed hemp from the list of
controlled substances, decontrolling
hemp production in all U.S. States, and
in territories of Indian Tribes, unless
prohibited by State or Tribal Law. This
action eliminates the uncertain legal
status at the Federal level of hemp
production and allows the U.S.
Department of Agriculture (USDA) to
provide hemp producers with crop
insurance programs, potentially
reducing risk to producers and
providing easier access to capital. The
statute also prohibits interference in the
interstate transport of hemp by States,
including those States which prohibit
hemp production and sales. As a result,

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

hemp producers will have access to
nationwide markets. The rule is
necessary to facilitate this market by
creating a set of minimum standards to
ensure that hemp being produced under
this program meets all statutory
requirements. Moreover, both the
declassification of hemp, and the
prohibition on interference with
interstate transportation apply to hemp
that is grown under an approved State
or Tribal plan, or under a Federal
license. As a result, this regulation
facilitates provisions of the Farm Bill
that would otherwise be selfimplementing.
Overview of the Action
The 2018 Farm Bill granted regulatory
authority of domestic hemp production
to the State departments of agriculture,
Tribal governments, and USDA. States
and Tribes must submit to USDA plans
which include provisions for
maintaining information regarding the
land on which hemp is produced, for
testing the levels of THC, for disposal of
plants that do not meet necessary
requirements, and for procedures to
ensure compliance with the
requirements of the new part. State and
Tribal Plans must be approved by
USDA. This rule outlines requirements
by which the USDA would approve
plans submitted by States and Tribal
governments for oversight of hemp
production. The 2018 Farm Bill also
directs USDA to develop a plan for use
by hemp producers in States or Tribes
where no State or Tribal Plan has been
approved and which do not prohibit the
cultivation of hemp. These actions will
promote consistency in regulations
governing the legal production of hemp
across the country.
Baseline Definition
In order to measure the impacts of
this rule on affected entities, AMS
defines the baseline such that sales of
hemp products from 2014 through 2019
will be treated as attributable to the
2014 Farm Bill only. While the 2018
Farm Bill permits commercial
production of hemp, and the 2014 Farm
Bill permits production of hemp for
research purposes only, AMS assumes
some of the increasing trend of U.S.
hemp production would have continued
under the provisions of the 2014 Farm
Bill in the absence of the 2018 Farm
Bill. AMS assumes, therefore, that only
50 percent of the growth in sales of
hemp products from 2020 and beyond
will be attributable to the 2018 Farm
Bill. This assumption considers the rate
at which hemp acreage has increased in
recent years, the number of States
whose hemp pilot programs produced a

PO 00000

Frm 00020

Fmt 4701

Sfmt 4700

crop in recent years, and the number of
States which have passed legislation
following the signing of the 2018 Farm
Bill in anticipation of this rule’s
enactment in time for the 2020 growing
season. As this rule enables the 2018
Farm Bill, 50 percent of the growth in
sales of hemp products beginning in
2020 will be attributable to this rule.
The 2018 Farm Bill provided that
States, Tribes, and institutions of higher
education may continue to operate
under the authorities of the 2014 Farm
Bill for the 2019 planting season. Under
the 2018 Farm Bill, the authority of the
2014 Farm Bill expires one year from
the time that USDA establishes the plan
and regulations required under the 2018
Farm Bill. As this will occur in the fall
of 2019, growers could continue to grow
hemp under the provisions of the 2014
Farm Bill in the 2020 planting season.
For the purpose of this analysis,
however, AMS defines the 2020
planting season as the first year of this
rule’s impact, with 50 percent of the
growth in sales in 2020 being counted
as attributable to the 2018 Farm Bill and
this enabling rule. This analysis
considers the impact of this rule on
affected entities from 2020 to 2022. This
analysis utilizes hemp market data from
industry associations, state departments
of agriculture, and universities.
While the 2018 Farm Bill permits
commercial production of hemp, and
the 2014 Farm Bill permits production
of hemp for research purposes only,
AMS assumes the increasing trend of
U.S. hemp production would have
continued under the provisions of the
2014 Farm Bill in the absence of the
2018 Farm Bill. AMS assumes,
therefore, that 50 percent of the growth
in sales of hemp products from 2020
and beyond will be attributable to the
2018 Farm Bill. This assumption
considers the rate at which hemp
acreage has increased in recent years,
the number of States whose hemp pilot
programs produced a crop in recent
years, and the number of States which
have passed legislation following the
signing of the 2018 Farm Bill in
anticipation of this rule’s enactment in
time for the 2020 growing season. As
this rule enables the 2018 Farm Bill, 50
percent of the growth in sales of hemp
products beginning in 2020 will be
attributable to this rule.
The 2018 Farm Bill provided that
States, Tribes, and institutions of higher
education may continue to operate
under the authorities of the 2014 Farm
Bill for the 2019 planting season. Under
the 2018 Farm Bill, the authority of the
2014 Farm Bill expires one year from
the time that USDA establishes the plan
and regulations required under the 2018

E:\FR\FM\31OCR3.SGM

31OCR3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

khammond on DSKJM1Z7X2PROD with RULES3

Affected Entities
Hemp producers in States and
territories of Indian Tribes that allow for
hemp production will be impacted by
this rule.
State departments of agriculture and
Tribal governments will also be affected
by this rule. State departments of
agriculture and Tribal governments will
bear the responsibility to ensure that
hemp producers abide by the State and
Tribal plans for regulating hemp. Prior
to the passage of the 2018 Farm Bill, at
least 40 States had enacted hemp
legislation.12 With the passage of the
2018 Farm Bill, nearly all of the
remaining U.S. States have followed
suit. Discussions with State departments
of agriculture that currently oversee
hemp pilot programs indicate that the
authorization requirements for growing
hemp for research purposes are similar
to those included in State Plans
submitted to USDA for approval. The
2018 Farm Bill, however, includes
greater requirements for authorization
than what the 2014 Farm Bill mandated,
such as information sharing and a
criminal history report for licensees.

Variable costs per acre to producers,
as estimated by the University of
12 Vote

Hemp, 2017 U.S. Hemp Crop Report.
Hemp, U.S. Hemp Crop Report available
at https://www.votehemp.com/u-s-hemp-cropreport/.
13 Vote

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

States that oversaw pilot programs
under the 2014 Farm Bill, therefore, will
likely need additional resources to run
the State programs under the 2018 Farm
Bill. States and Indian Tribes that did
not have a pilot program under the 2014
Farm Bill and that submit plans to
USDA for a program under the 2018
Farm Bill may require hiring of new
staff to oversee the program. States and
Tribes will also be subject to reporting
and recordkeeping requirements
resulting from this rule. If a State or
Tribe chooses not to develop its own
plan, then hemp producers within that
State or Tribe may utilize the plan
developed by USDA, unless prohibited
by State or Tribal Law.

Expected Benefits and Costs of the Rule
The 2018 Farm Bill grants
authorization for production of hemp to
all States and Indian Tribes, unless
prohibited by State or Tribal Law. This
rule enables States, Tribes, and USDA to
regulate this authorization. This rule is
expected to generate benefits and costs
to hemp producers and State
departments of agriculture and Tribal
governments. The benefits of this rule
are expected to outweigh the costs,
however, and the burden on the
impacted entities is anticipated to be
minimal.
Benefits and Costs of Production

Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives when an action is deemed
to have significant impacts. If regulation
is necessary, then agencies must select
the action that maximizes net benefits,
including potential economic,
environmental, public health and safety
effects, and equity.
Executive Order 13771 mandates that
agencies provide the best approximation
of total costs associated with a new or
repealed regulation. AMS has prepared
this Regulatory Impact Analysis with
the purpose of accomplishing these
objectives.
USDA considers this to be a
deregulatory action under Executive
Order 13771 as it allows for the
development of a niche market that
cannot exist under current regulation.
This rule removes barriers to entry and
enables domestic farmers to grow hemp.

Farmers grow hemp for three
products: Floral material, fiber, and
grain. Based on data from State
departments of agriculture and from
surveys by the National Industrial Hemp
Regulators, a working group comprised
of industrial hemp program managers
from State departments of agriculture,
AMS estimates that about two-thirds of
hemp acreage planted is for floral
material, while the remaining third is
divided evenly between fiber and grain.
The nascent market for industrial
hemp causes estimates of yield and
price for hemp products to vary widely
from source to source. Table 1 shows a
range of potential gross revenues
received by producers using ranges of
yield and price estimates from Vote
Hemp, the University of Kentucky, the
Kentucky Department of Agriculture,
and the Congressional Research
Service.13 Using low and high estimates
for yield and price from these sources,
AMS calculated a potential range of
gross revenue to producers of hemp
products of $2,443 per acre to $25,682
per acre.

Kentucky, are shown in Table 2. These
variable costs are weighted by the

portion of planted acreage for each
product as estimated in Table 1. The

Mark, Tyler and Shepherd, Jonathan, Hemp &
Enterprise CBD Budget Model available at http://
hemp.ca.uky.edu/.

Johnson, Renee, Hemp as an Agricultural
Commodity, Congressional Research Service, June
2018.

Regulatory Impact Analysis

PO 00000

Frm 00021

Fmt 4701

Sfmt 4700

E:\FR\FM\31OCR3.SGM

31OCR3

ER31OC19.009

Farm Bill. As this will occur in the fall
of 2019, growers could continue to grow
hemp under the provisions of the 2014
Farm Bill in the 2020 planting season.
For the purpose of this analysis,
however, AMS defines the 2020
planting season as the first year of this
rule’s impact, with 50 percent of the
growth in sales in 2020 being counted
as attributable to the 2018 Farm Bill and
this enabling rule. This analysis
considers the impact of this rule on
affected entities from 2020 to 2022. This
analysis utilizes hemp market data from
industry associations, state departments
of agriculture, and universities.

58541

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

result is a weighted variable cost of

$19,421 to produce one acre of hemp
products.

To estimate producer returns above
variable cost, the weighted variable cost
per acre is subtracted from the low and
high estimates of gross revenue per acre
under the scenario of lowest yield and
lowest price received per acre and the
scenario of highest yield and highest
price received per acre. Under the low
estimate of gross revenue per acre, a
hemp producer who plants two-thirds of
an acre for flowers, and the remaining
one-third acre split between fiber and
grain loses $16,978 per acre. Under the
high estimate of gross revenue per acre,
a hemp producer sees a return of $6,260
above variable costs. It is important to
consider that fixed costs are not
included among these estimates;
therefore, net returns will likely be
lower than these results.
In addition to the previouslymentioned variable costs to grow hemp,
AMS considered the opportunity costs
to the hemp producer of crops that may
have otherwise been planted. Using data
from the National Agricultural Statistics
Service (NASS), AMS calculated an
average gross return per acre of
cropland, weighted by area planted or
bearing, of $591. This estimate
represents the potential revenue per
acre of the crop that a potential hemp
producer foregoes to plant hemp instead
of other crops including traditional field
crops. However, hemp may also attract
new producers not currently growing
other crops. Subtracting this
opportunity cost from the average gross
revenue per acre (discussed in more
detail below) yields a net social benefit
estimate of approximately $2,060 per

acre. For individual growers, however,
returns may vary widely—and even be
negative.
The per acre net return estimates are
based largely on crop enterprise budgets
which represent expected costs and
returns assuming the grower actually
brings a crop to market. There are many
things that can preclude actually
bringing a planted crop to market
including; loss due to weather, pests, or
disease, reduced output due to
inexperience with the crop, and growing
a crop that exceeds the acceptable hemp
THC level.
The gross social benefit of the crop is
best represented by what customers are
willing to pay for the crop. To generate
a social benefit per acre, we looked at
data from the 2018 Processor/Handler
Production Reports to the Kentucky
Department of Agriculture. In 2018
Kentucky farmers were paid $17.75
million for harvested hemp materials
from 6,700 planted acres. This results in
a societal willingness to pay (assuming
Kentucky is sufficiently representative
of the United States) of around $2,650
per acre. Using this average accounts for
acres with unusually high returns as
well as acres with low or no returns.
So, while individual growers may see
returns ranging from a loss of $17,578 to
a return of $5,669 per acre, society can
expect a benefit of $2,058 (=
$2,650¥$591) per acre.
Estimated Number of Producers

ER31OC19.011

In each year since the 2014 Farm Bill,
the number of licensed producers and
the amount of acreage planted has

increased substantially. According to
Vote Hemp, there were a total of 3,543
producer licenses issued by States in
2018, up from 1,456 in 2017, and 817
licenses in 2016. Planted acreage in
2018 was 77,844 acres, up from 25,723
in 2017, and 9,649 acres in 2016. No
official estimates of hemp planted
acreage, or the number of producer
licenses exist for 2019 as of yet;
however, industry members agree that
2019 planted acreage will likely at least
double acreage planted in 2018. If this
occurs, then hemp planted acreage will
reach almost 160,000 acres in 2019. See
Table 3 below. This increase in acreage
is likely due in part to new producers
entering the market and in part to
current producers expanding their
acreage.
Based on data from the State
departments of agriculture in Colorado,
Kentucky, and Oregon, which together
make up 47 percent of planted acreage
and 45 percent of producer licenses
nationwide, average planted acreage per
producer is 24 acres. Assuming that all
77,844 additional acres in 2019 are
planted by new producers entering the
market, and that each one plants the
average of 24 acres, then 2019 should
see approximately 3,244 new producers.
This is a reasonable assumption given
the growth in licenses year over year.
Based on this, there should be
approximately 6,787 U.S. hemp
producers in 2019, as shown in Table 3.
For purposes of this analysis, we expect
the number of producers to increase at
the same rate as increased hemp sales as
discussed below.

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

PO 00000

Frm 00022

Fmt 4701

Sfmt 4725

E:\FR\FM\31OCR3.SGM

31OCR3

ER31OC19.010

khammond on DSKJM1Z7X2PROD with RULES3

58542

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations
Projected Growth in Gross Revenues

food and dietary supplements. FDA has
stated that they are actively considering
this issue. If FDA does not provide
clarity about their plans for future
regulation of CBD, there will continue to
be uncertainty and downward pressure
on the CBD portion of the hemp market.
This is important because the Hemp
Business Journal estimates appear to
assume that there are no prohibitions on
adding CBD to consumer products. As a
result, full realization of the benefits
estimated here could be delayed
pending regulatory certainty.

ER31OC19.013

BILLING CODE 3410–02–P

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

PO 00000

Frm 00023

Fmt 4701

Sfmt 4725

E:\FR\FM\31OCR3.SGM

31OCR3

ER31OC19.012

khammond on DSKJM1Z7X2PROD with RULES3

The Hemp Business Journal estimates
sales of U.S. hemp-based products from
2018 to 2022. The growth rates of these
sales from year to year are shown in
Chart 1. It is important to remember that
even though the 2018 Farm Bill
removed hemp from the list of
controlled substances, it preserved the
authority of the Food and Drug
Administration (FDA) to regulate
products which contain cannabis. Sales
of hemp-based products are expected to
increase about 15 percent from 2018 to

2019. In 2020, sales are expected to
grow about 14 percent, in 2021, 19
percent, and in 2022, 16 percent. While
these growth rates represent consumer
sales and may not necessarily accurately
depict the state of the hemp market at
the producer level, these estimates are
the best available to AMS at this time.
Although certain cannabis-derived
compounds are generally prohibited to
be added to food and dietary
supplements, because of their status as
pharmaceutical ingredients, the FDA
has authority to issue a regulation
allowing the use of such ingredients in

58543

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

Data from the 2018 Processor/Handler
Production Reports to the Kentucky
Department of Agriculture also show
that gross sales by processors reached

$57.75 million in 2018. Of this, gross
returns to farmers was approximately 31
percent of total processor gross sales.
Applying 31 percent to the consumer

sales estimates in the chart above
provides an estimate of gross producer
returns (and social willingness to pay)
over the next four years.

BILLING CODE 3410–02–C

anticipation of this rule’s enactment in
time for the 2020 growing season.
Because we would expect hemp
production to continue to grow under
preexisting State programs, we do not
believe it is appropriate to attribute all
production growth beyond 2020 to this
rule. Since roughly half of the States
had operating programs in 2018, we
assumed that half of future projected
growth could have occurred in the
absence of this rule. Based on the total
estimated producer returns, AMS
estimates that increases in hemp sales
directly resulting from the rule will be
approximately $25.5 million in 2020,
$64.5 million, cumulative, in 2021, and
$104 million, cumulative, in 2022.
Media reports about the 2018 Farm
Bill’s approach to hemp seem to
indicate that there may be future
innovation that would increase
producer returns and investment. We
request comment about the potential for
innovation and the uncertainty and its
impact on the market vis a vis steady
state.

State departments of agriculture that
oversee hemp pilot programs indicate
that the provisions for growing hemp for
research purposes will be similar to
those in the State Plans submitted to
USDA for approval. While the 2018
Farm Bill added additional
requirements for growing hemp that
were not in the 2014 Farm Bill, it is
difficult to determine how these
additional requirements will impact fees
for licensing, sampling, and testing paid
by producers to States. For the purpose
of this analysis, AMS finds that a cost
of $1,000 per producer is the most
reasonable estimate of these annual fees
and, by extension the cost to States and
Tribes of administering a regulatory
program. We have no reason at this time
to assume that the Federal government
will be any more or less efficient at
implementing the Federal program for
producers who operate under a USDA
license rather than a State or Tribal
program. The Federal plan does not
require licensed producers to use
certified seed, nor will USDA provide
producers with access to certified seed.
Accordingly, we use this same $1,000
estimate as a proxy for the cost of
administering a program by the Federal
Government as well.
In addition to these fees, a producer
bears the burden of gathering the
information for and filling out an
application for licensing. AMS estimates
that the time required of a producer to
apply for a license to grow hemp will
be approximately 10 minutes or 0.17
hours. The mean hourly wage of a
compliance officer, as reported in the
May 2018 Occupational Employment

If gross producer returns are 31
percent of total consumer sales,
estimated total producer returns in 2018
were approximately $315 million. In
2019, estimated total producer returns
will be approximately $362 million, in
2020, approximately $413 million, in
2021, approximately $491 million, and
in 2022, approximately $570 million.
Not all of the producer sales in Chart 3
are the direct result of this rule,
however. The forecasts shown in Chart
1 were published by the Hemp Business
Journal in the summer of 2018, before
the 2018 Farm Bill was passed by
Congress. This indicates that the hemp
market was expected to grow regardless
of the hemp provisions in the 2018
Farm Bill.
Total costs for State licensing,
sampling, and testing under the pilot
programs generally amounted to about
$1,000 per producer. This includes
administration of certified seed schemes
in certain States. Measurable impacts to
the hemp industry resulting from this
rule will not occur until 2020. It is
difficult to estimate the increase in total
returns to producers as a result of this
rule. AMS estimates that this rule is
responsible for as much as 50 percent of
the increase in total producer returns
from year to year. This assumption
considers the rate at which hemp
acreage has increased in recent years,
the number of States whose hemp pilot
programs produced a crop in recent
years, and the number of States which
have passed legislation following the
signing of the 2018 Farm Bill in

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

Costs of State and Tribal Plans
Under most State pilot programs
administered under the 2014 Farm Bill,
hemp producers paid fees to State
departments of agriculture for State
licenses to grow hemp, and for sampling
and testing of THC content. These fees
generally fully fund the program’s
operation and are a reasonable proxy for
the costs to States of administering a
plan. Total costs for State licensing,
sampling, and testing under the pilot
programs generally amounted to about
$1,000 per producer. Discussions with

PO 00000

Frm 00024

Fmt 4701

Sfmt 4700

E:\FR\FM\31OCR3.SGM

31OCR3

ER31OC19.014

khammond on DSKJM1Z7X2PROD with RULES3

58544

Statistics Survey of the Bureau of Labor
and Statistics, was $35 per hour.
Assuming 39 percent of total
compensation accounts for benefits,
total compensation of a compliance
officer is $57 per hour. Multiplying this
wage by the time spent to complete a
license application results in an annual
burden cost to producers of about $10
per license application.
State departments of agriculture and
Tribal governments will likely need to
increase their staff to successfully
oversee hemp programs. States with
pilot programs typically employ about
four full-time staff members to manage
their industrial hemp programs. The
estimated increase in hemp acreage in
2019 indicates a likely increase in
licenses and applications; therefore,
States with hemp programs may need to
hire additional employees. States and

Tribes without hemp pilot programs
under the 2014 Farm Bill that have their
own plans in place under the 2018 Farm
Bill will also need to hire new staff
members. The fees paid by producers to
States and Tribes to participate in the
hemp program will likely cover the
staffing costs.

The hourly total compensation, which
includes wage and benefits, for a
federally-contracted inspector who
conducts sampling is $152, and the
hourly total compensation for a
federally-employed lab technician who
tests the sample is $161. The standard
rate for reimbursement for miles driven
at the Federal level is $0.58 per mile.
With information from State
departments of agriculture, AMS
calculated a range of time spent on
sampling, and an average of time spent
driving and miles driven by an
inspector to and from the sampling
location. The range of time spent on
testing and of costs for testing and
reporting were calculated using input
from licensing and testing specialists
within AMS. Depending upon the

quality of the sample taken and the time
spent on sampling and testing, the total
cost of sampling and testing to a
producer ranges from $599 to $830 per
tested sample per 24-acre lot. AMS
notes that transportation costs are fixed
under this analysis assuming all lots
tested are at the same farm. If a producer
grows multiple varieties of hemp, or
designates multiple lots of hemp with
the same variety, then each lot is subject
to individual sampling and testing.
Total sampling and testing costs,
therefore, depend upon the number and
size of lots.

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

Costs of USDA Plan
AMS has developed a Federal Plan for
hemp producers to utilize when their
State or Tribe does not have its own
plan in place. The Federal Plan requires
an initial application for a license. The
license must then be renewed every
three years. A criminal history report is
required with every license application.
The costs to a producer of completing a
license application and of submitting a
criminal history report will be
quantified in the ‘‘Costs of Reporting

Costs of Reporting and Recordkeeping
The 2018 Farm Bill requires AMS to
prepare and submit an annual report
containing updates on the

PO 00000

Frm 00025

Fmt 4701

Sfmt 4700

58545

and Recordkeeping’’ section. The
Federal Plan also includes sampling and
testing provisions, which will result in
costs to producers. USDA will bear the
costs of program administration and
does not intend to charge producers a
licensing fee unless Congress provides
the authority to USDA to charge fees for
this program in the future. On average,
the annual fee that producers paid to
States to participate in the pilot
programs, which included licensing,
was $1,000 per license. This will be
used as a proxy for the cost to USDA of
program administration.
Sampling and testing costs under the
Federal Plan are tied to acreage and how
licensees designate the lots where hemp
is grown. Projected costs for sampling
and testing an average 24-acre lot are
summarized in Table 4.

implementation of the domestic hemp
production program to the Committee
on Agriculture of the House of
Representatives and the Committee on
Agriculture, Nutrition, and Forestry of
the Senate. To help collect the
information necessary to complete this
report, and to collect additional
information, as necessary, to administer
the hemp program, AMS has developed
seven new forms. These forms require
specific information be submitted by
States and Tribes operating their own
domestic hemp plans, from producers
participating in the USDA Plan, and
from laboratories testing for THC
content. The annual burden in time and
cost has been evaluated for each form.
These time and cost figures have been

E:\FR\FM\31OCR3.SGM

31OCR3

ER31OC19.015

khammond on DSKJM1Z7X2PROD with RULES3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

58546

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

khammond on DSKJM1Z7X2PROD with RULES3

approximated to the nearest whole
number.
Respondents: States and Tribes
Operating Their Own Plans
States and Tribes with approved plans
are required to report certain
information to USDA. USDA will collect
this information from States and Tribes
through three forms: The ‘‘State and
Tribal Hemp Producer Report’’ form, the
‘‘State and Tribal Hemp Disposal
Report’’ form, and the ‘‘State and Tribal
Hemp Annual Report’’ form. AMS
estimates that the time required of
States and Tribes to fill in the
information for each of these forms will
be 20 minutes or 0.33 hours. The time
required of producers to supply the
information for the ‘‘State and Tribal
Hemp Producer Report’’ form and the
‘‘State and Tribal Hemp Disposal
Report’’ form will be 10 minutes, or 0.17
hours, apiece. The ‘‘State and Tribal
Hemp Producer Report’’ form and the
‘‘State and Tribal Hemp Disposal
Report’’ form are due to USDA every
month. The annual time burden for
States and Tribes to respond to each of
these two forms, therefore, is 4 hours
per respondent. The annual time burden
for producers to supply the information
for each of these forms will be 10
minutes, or 0.167 hours, per respondent,
plus an additional 5 minute
recordkeeping burden per form. The
‘‘State and Tribal Hemp Annual Report’’
form must be submitted to USDA once
per year; the annual time burden,
therefore, remains 0.33 hours per
respondent. The ‘‘State and Tribal
Hemp Annual Report’’ form is
anticipated to place a burden on
producers participating in the State and
Tribal Plan of 15 minutes per producer
(10 minutes for reporting and 5 minutes
for recordkeeping).
Each of these forms required from
States and Tribes is expected to generate
a recordkeeping burden of 5 minutes or
0.08 hours, apiece, per recordkeeper.
Altogether, the annual time burden of
reporting and recordkeeping per State
and Tribe operating under its own plan
is estimated to be 9 hours. The mean
hourly wage of a compliance officer, as
reported in the May 2018 Occupational
Employment Statistics Survey of the
Bureau of Labor and Statistics, was $35
per hour. Assuming 39 percent of total
compensation accounts for benefits,
total compensation of a compliance
officer is $57 per hour. Multiplying this
by 9 hours results in a total annual
burden cost to each State and Tribe
operating under its own plan of $490.
AMS estimates that 100 States and
Tribes will operate under their own
plans. The annual burden for these 100

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

States and Tribes of reporting and
recordkeeping is 858 hours costing
$49,046 per year.
The information necessary for States
and Tribes to submit the ‘‘States and
Tribal Hemp Producer Report comes
from the information supplied by
producers in their license applications.
AMS estimates that 8,000 producers
will submit license applications over
three years. AMS estimates a cost of
approximately $10 per license
application (based on approximately 10
minutes of burden). These costs will not
occur uniformly over the three years as
both new and existing processors will
need to provide this information in the
first year of the program. As result, AMS
estimates a cost to producers operating
under State and Tribal plans of $55,000
in 2020, $12,000 in 2021, and $13,000
in 2022—or an average cost of $27,000
per year.
In addition, producers will be
required to prove that they do not have
prior drug related convictions that
would disqualify them from
participation in the program. States
have some flexibility in what they
require of applicants to make this
demonstration. However, for purposes
of this analysis, we will use the same
cost for States and Tribes that we use for
USDA licensees, which is $54 per
licensee. This results in estimated costs
of $291,000 in 2020, $65,000 in 2021,
and $70,000 in 2022—or an average cost
of $142,000.
Additionally, AMS estimates that an
average of 2,680 14 producers will
supply information to States and Tribes
for the ‘‘State and Tribal Hemp Disposal
Report’’ form each year at an estimated
cost of $38,000 per year.
The total average annual burden on
producers to supply information to
States and Tribes associated with these
two reports will be 1,169 hours, with an
estimated cost (including criminal
history information) of $230,000.
In addition, growers of crops that test
above the acceptable hemp THC level
are responsible for the proper disposal
of those non-compliant crops. While the
rule makes the producer responsible for
the costs of this disposal, such disposal
represents a real expenditure of societal
resources; as such they are a cost of the
rule irrespective of who is directly
responsible for those costs. The
opportunity cost of lost sales is already
incorporated in our calculation of
14 There is no way to know for certain how many
samples will test beyond the 0.3 percent threshold
for THC on a dry-weight basis; however, based on
information discussions with States that have a
hemp program under the 2014 Farm Bill, AMS
estimates that 20 percent of lots per year will
produce cannabis that tests high for THC content.

PO 00000

Frm 00026

Fmt 4701

Sfmt 4700

benefits since our average benefits per
acre are based on total sales and total
planted acres and non-compliant acres
(which have zero value as hemp) are
included in the average expected
benefit. However, the additional
physical costs of disposal are not
represented in the calculation of
benefits. As a result, we need to
calculate the additional cost imposed by
the disposal requirement.
We have no information on the cost
of disposing of non-compliant hemp.
So, we developed an assumed disposal
cost of $200 per acre based on the
estimated cost of the physical activities
related to disposal. According to the
University of Kentucky crop enterprise
budgets for hemp, the cost of harvesting
and transporting hemp grown for fiber
is roughly $100 per acre.15 We double
this amount to account for the
likelihood that there will be additional
oversight and documentation required
to demonstrate legal disposal. However,
we still have no way to estimate any
additional cost associated with the
physical destruction required after the
crop is removed from the farm.
Using this rough cost estimate, the
average annual quantified cost of
disposal under State and Tribal
programs is $6.432 million.
Respondents: Producers Participating in
the USDA Plan
To produce hemp under the USDA
Plan, a producer, which may be an
individual producer or a business,
would need to complete the ‘‘USDA
Hemp Plan Producer Licensing
Application’’ form and be issued a
license. AMS estimates the time
required of a producer to fill out this
form to be 10 minutes or 0.17 hours.
The recordkeeping required for this
form is estimated to be 5 minutes, or
0.08 hours. The total burden per
respondent of this form is 15 minutes,
or .25 hours. Licenses under the USDA
Plan must be renewed every three years.
Assuming that there will be 1,000
participants in the USDA Plan, AMS
estimates that over a three-year period,
there will be 667 respondents in each
year. The total annual burden for this
form, therefore, will be 167 hours with
a cost of $9,541.
In addition to the ‘‘USDA Hemp Plan
Producer Licensing Application’’ form
to be submitted once every three years,
producers must submit criminal history
reports for each of their key
participants. AMS estimates each
15 We used hemp grown for fiber as the basis for
our assumption because hemp grown for flower or
seed use more refined methods of harvesting that
are no longer necessary if the resultant product
(flower or seed) no longer has market value.

E:\FR\FM\31OCR3.SGM

31OCR3

khammond on DSKJM1Z7X2PROD with RULES3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations
producer to have three key participants
that would submit criminal history
reports to USDA. The cost of a criminal
history report is $18 apiece, which
results in a cost of $54 per participant.
As stated previously, AMS estimates
that it will receive 333 license renewals
in each year over a three-year period.
The average annual cost of the criminal
history reports that will accompany
these renewals is $17,982 annually.
Similar to the required annual report
submitted by States and Tribes to
USDA, producers operating under the
USDA Plan must submit the ‘‘USDA
Hemp Plan Producer Annual Report’’ to
USDA each year. AMS estimates the
time burden of submitting this form to
be 20 minutes, or 0.33 hours. The
recordkeeping burden of this form is
estimated to be 5 minutes, or 0.08 hours.
Together, the burden of this form is 25
minutes, or 0.42 hours, per respondent.
AMS estimates 1,000 participants in the
USDA Plan. The total burden of this
form, therefore, is 417 hours, costing
$23,808 annually.
When a hemp sample tests above the
acceptable hemp THC level, the material
from the production area which the
sample represents must be destroyed by
a person authorized under the CSA to
handle marijuana, such as a DEAregistered reverse distributor, or a duly
authorized Federal, State, or local law
enforcement officer or their designee.
Producers must document the disposal
of all marijuana. This can be
accomplished by either providing USDA
with a copy of the documentation of
disposal provided by the reverse
distributor or with the ‘‘USDA Hemp
Plan Producer Disposal Form’’. AMS
estimates the time required to complete
this form to be 20 minutes, or 0.33
hours, which would be split between
the producer and authorized agent who
carries out the disposal. The
recordkeeping required for this form
would amount to 5 minutes, or 0.08
hours, per respondent. The total burden
of this form is, therefore, 15 minutes, or
0.25 hours, for a producer, and 10
minutes, or 0.17 hours, for an
authorized agent. Together, the burden
is 25 minutes, or 0.42 hours, per
respondent.
Using the same assumptions regarding
the prevalence of non-compliant crops
and the costs of disposal that were used
in generating the estimates of hemp
disposal reporting (and disposal) for
State and Tribal programs, the 1,000
producers that will participate in the
USDA Plan will generate 400 samples
will test high for THC content. The total
reporting burden of this form will
amount to 167 hours and cost $9,523
annually. Additionally, producers

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

operating under USDA licenses are
expected to incur quantified disposal
costs of $960,000 annually.
Altogether, the annual burden of the
‘‘USDA Hemp Plan Producer Licensing
Application’’, the ‘‘USDA Hemp Plan
Producer Disposal Form’’, and the
‘‘USDA Hemp Plan Producer Annual
Report’’ amounts to an annual total of
666 hours and a cost of $37,962. Adding
in the criminal history report cost brings
the total to $55,962 annually.
Respondents: Laboratories
The Farm Bill requires that all
domestically produced hemp be tested
for total THC content on a dry-weight
basis, whether produced under a State
or Tribal Plan or the USDA Plan. To
facilitate this, AMS is requiring all
laboratories testing hemp for THC to
submit all test results, whether passing
or failing, via the ‘‘Laboratory Test
Results Report’’. AMS estimates this
form to generate a total annual reporting
burden of 30 minutes, or 0.5 hours, per
test or submitted form, and a total
annual recordkeeping burden of 5
minutes, or 0.08 hours, per producer.
Together, the reporting and
recordkeeping burden for this form is 35
minutes, or .58 hours.
There is no way to know for certain
how many tests laboratories will
conduct in a single year and how many
of them will be subject to re-testing.
AMS estimates, however, that
laboratories will receive two samples
representing two lots of hemp material
from 7,700 producers, resulting in
15,400 tests annually. The total annual
burden of these tests and the
accompanying ‘‘Laboratory Test Results
Report’’ form is, therefore, 8,399 hours,
and costs of $478,743.
Respondents: All Producers
The Farm Service Agency (FSA)
collects information on crop acreage
through the ‘‘Report of Acreage’’ form.
All hemp producers will be required to
fill in the information for this form once
they receive their license or
authorization from USDA, a State, or
Tribe. AMS estimates this form to
generate a reporting burden of 30
minutes, or 0.5 hours, and a
recordkeeping burden of 5 minutes, or
0.08 hours. AMS assumes that an
average of 7,700 producers will respond
to this form each year, resulting in a
total annual burden of 4,466 hours, and
a cost of $254,562.
Total Reporting and Recordkeeping
Costs for All Respondents
Altogether, the annual burden for
reporting and recordkeeping for all
respondents is 17,362 hours, costing a

PO 00000

Frm 00027

Fmt 4701

Sfmt 4700

58547

total of $$989,634 per year. This is the
sum of the annual burden of reporting
and recordkeeping to States and Tribes
operating their own plans, to producers
participating in the State and Tribal
Plans, to producers participating in the
USDA Plan, including the cost of a
criminal history report for three key
participants, and to laboratories testing
samples for THC content.
Alternatives to the Rule
The actions in this rule are mandated
by the 2018 Farm Bill, which enables
States, Tribes, and USDA to establish
rules and regulations for the domestic
production of hemp. The statute
requires USDA to develop criteria for
approval of plans submitted by State
and Tribal governments for regulation of
domestic hemp production. If no State
or Tribal Plan has been approved, then
hemp producers in these States or
Tribes may utilize the plan developed
by USDA. These plans will promote a
greater level of consistency in
regulations governing the legal
production of hemp across the United
States.
In developing the sampling
procedures for the Federal Plan, AMS
considered the protocols for sampling
used by State departments of agriculture
and by countries that regulate hemp
production. In addition, AMS reviewed
sampling methods recommended by
Codex Alimentarius, which is the
central part of the Joint Food and
Agriculture Organization (FAO)/World
Health Organization (WHO) Food
Standards Program and was established
by FAO and WHO to protect consumer
health and promote fair practices in
food trade. After research and review of
multiple sampling protocols, AMS
adopted the best option among the
alternatives.
The 2018 Farm Bill mandates testing
using post-decarboxylation or other
similarly reliable methods where the
total THC concentration level considers
the potential to convert delta-9tetrahydrocannabinolic acid (THC-A)
into THC. Testing methodologies
meeting these requirements include
those using gas or liquid
chromatography with detection. These
methods are the industry standard for
post-decarboxylation testing. While
these methods were chosen by AMS as
the best option for testing, alternative
sampling and testing protocols will be
considered if they are comparable to the
baseline mandated by the 2018 Farm
Bill and established under the USDA
Plan and Procedures.
Alternatives to the selected
procedures for sampling and testing for
THC content included connecting a

E:\FR\FM\31OCR3.SGM

31OCR3

58548

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

khammond on DSKJM1Z7X2PROD with RULES3

producer lot of cultivated hemp to a
standard unit of measure. AMS
considered describing one lot as one
acre of hemp. This alternative was
abandoned, however, as it would have
required every acre of hemp to be
sampled and tested, which would have
resulted in high costs to producers and
overwhelming volume to laboratories.
Net Benefits From the Rule
AMS has provided the approximation
of the total costs and benefits associated
with this new regulation. Using the
costs and benefits introduced in the
preceding sections, AMS has calculated
the net benefits of this rule in Table 5
using an upper bound estimate of costs.
The results shown in Table 5 were
calculated using many assumptions.
These figures are only estimates using
the data that was available to AMS. The
absence of industry and government
data along with the high degree of
uncertainty regarding the future of the
hemp market makes accurately
capturing the impact of this rule on the
hemp industry an impossible task.
Regardless, AMS estimated the net
benefits of this rule in years 2020, 2021,
and 2022 as shown in Table 5. AMS has
also calculated the net benefits of the
rule using a lower bound estimate of
costs. The results of that analysis are
shown in Table 5a. The assumptions
used to calculate the lower bound
estimate are discussed later in this
document.
The costs and benefits associated with
this rule will begin in the year 2020.
From the signing of the 2018 Farm Bill
to the enactment of this rule in time for
the 2020 growing season, the domestic
hemp market will be in a state of
transition as cultivation of hemp moves
from research only to
commercialization. The hemp industry
in 2018 represents the baseline of this
analysis, and the first year which will
see impacts from this rule is 2020. The
time between will be considered a
transitional period as the hemp industry
adjusts to incorporate the provisions
authorized in the 2018 Farm Bill.
The benefits of this rule primarily
include producer sales that are
estimated to be due to the hemp
provisions in the 2018 Farm Bill and
this rule which enables those
provisions. Gross revenues represent the
best proxy for consumer willingness to
pay and social benefits.16 As the
16 We note that if gross willingness-to-pay is
presented as a regulatory benefit, then marginal
costs of production must be included as a line item
in the regulatory cost analysis. An alternative,
reduced-form approach would be to include only
producer surplus (or the related concept of profits)
and consumer surplus in the benefits analysis.

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

demand for and sales of hemp increase
over time, the number of licensees is
estimated to grow proportionally (for
the purposes of this analysis). As a
result, we estimate the number of
licensees (State, Tribal, or Federal) to
increase from roughly 6,494 in 2020 to
7,720 in 2021, to 8,962 in 2022.
The benefits and cost of this rule are
shown in Tables 5 (summarizing upperbound cost estimates and associated net
benefits) and 5a (summarizing lowerbound cost estimates and associated net
benefits). In Table 5, the estimated net
benefits of this rule amount to a loss of
$4 million in 2020, a benefit of $23
million in 2021, and a benefit of $49
million in 2022. As noted previously,
this calculation is based on an upper
bound estimate of the costs of the rule.
This estimate includes costs to all
growers, not just the new entrants
resulting from the rule. (In other words,
we are incorporating a significant
amount of cost that would have been
incurred by producers even in the
absence of this rule.)
Benefits are based on a share of
growth being attributable to the rule
while the cost calculations include the
costs of compliance borne by all
producers, including those that are
already growing hemp under the 2014
program and those that would expect to
grow hemp under that program in the
event that USDA did not promulgate
this rule. This leads to costs being
overstated relative to the benefits
calculated. Many of the costs estimated
as attributable to this rule actually
represent expenditures of resources that
would have taken place under the 2014
program.
We did this for two reasons. The first
is simply to demonstrate what we think
the full cost of a program similar to the
one we are promulgating would be. The
second is because the specific
requirements of this rule may be slightly
different from requirements already in
place in States operating hemp
programs under the 2014 Farm Bill and
we did not want to ignore the fact that
these changes may have costs. Put
another way, producers under the 2014
plan may already have been required to
submit license applications, but not
applications that were identical to what
is being required. The preexisting State
requirement may have been more or less
costly, but this assumed that new and
existing growers would bear the full cost
of providing the information required
under this program. Because we believe
the 2018 requirements for producers are
very similar to the plans already in
operation, we think the estimates used
to this point represent an upper bound
estimate.

PO 00000

Frm 00028

Fmt 4701

Sfmt 4700

We have also developed a lower
bound estimate of costs based on
applying costs related to the rule only
to those producers who would not have
produced hemp in the absence of this
rule. Requirements for States and Tribes
are all new and will remain attributed
to the rule. Similarly, the costs
associated with producers reporting
information to States and Tribes to
facilitate State and Tribal reporting
requirements will still be attributable to
this rule.
The largest changes in estimated costs
result from a reduction in the number of
acres (and, by extension growers)
directly attributable to this rule. In the
upper bound cost case we include the
transactions cost (e.g., permit
application, crop reporting, testing,
disposal etc.) to every producer required
to produce the $491 million worth of
hemp in 2021—or 7,700 producers. In
the lower bound we recognize that $362
million of that production is estimated
to occur in 2019 before any new rule is
published, so only $129 million could
possibly be related to publication of a
new rule. We also acknowledge that
there were avenues available to further
increase production under the 2014
program and that up to half of that $129
million in increased revenue could
occur without this rule. As a result, only
$65 million of that new growth in 2021
is attributable to this rule. It only takes
1,000 new growers to meet this level of
increased demand. So, the lower bound
is based on the costs associated with
those 1,000 growers vs. the 7,700 used
in calculating the upper bound.
This alignment of new producers to
new growth allows costs and benefits to
be measured relative to a consistent
baseline. However, we also
acknowledge that this rule will impose
costs on entities beyond just those new
entrants into the market who supply a
portion of the projected growth in
demand for hemp. For example, States
and Tribes face new reporting
requirements under this rule. Those
reporting requirements are independent
of the number of licensed producers in
their programs that produce to meet
existing demand as opposed to those
who’s production is enabled by this
rule. So, the reporting burden for States
and Tribes is the same in both the upper
bound and lower bound estimates. On
the other hand, since State
administrative costs are directly tied to
the number of program participants,
those costs to the State only grow as a
function of the number of new entrants
into the market. As a result,
administrative costs for States and
Tribes (as well as the Federal
Government) are estimated to be

E:\FR\FM\31OCR3.SGM

31OCR3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

khammond on DSKJM1Z7X2PROD with RULES3

significantly lower in the lower bound
estimate.
The following is a discussion of how
each major cost or benefit category is
modified to move from the upper bound
estimate to the lower bound estimate.
Both revenues and opportunity cost
were already based on only the new
acres enabled by the rule, so those
estimates do not change.
The estimate of State and Tribal
administrative costs will decline. The
upper bound cost estimate included the
total cost of administering a hemp
program. The lower bound recognizes
that States and Tribes were already
incurring administrative costs
associated with existing production and
would expect such costs to increase
with increased production under the
2014 program. State and Tribal
administrative costs would only
increase as a result of new entrants
directly enabled by the rule. Using 2021
as an example, 7,700 producers are
required to produce all $491 million in
projected demand for hemp. However,
only 1,000 producers are required to
produce the approximately $65 million
in projected demand attributable to the
rule. Some of those producers will
operate under State and Tribal programs
and some under USDA license. Based
on the proportions used in calculating
the upper bound cost, we assume 13
percent of growers to be operating under
USDA license and 87 percent to be
operating under State license. So, of the
7,700 producers operating in 2021 only
870 are expected to be growing under
State or Tribal authority to meet
demand increases attributable to the
rule. So, the estimate of State and Tribal
administrative costs goes from $6.7
million in the upper bound to $870,000
in the lower bound estimate.
Similarly, we assume that all
producers will be subject to some form
of licensing. In the upper bound
estimate, we attribute all licensing costs
to this rule even though we know that
most, if not all, States already have
some form of licensing as part of their
2014 programs. So, if we only account
for the licensing costs of producers
enabled under this rule, the upper

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

bound estimate is $77,000 to $35,000 in
2021.
Like State and Tribal administrative
costs, USDA administrative costs are
tied to the number of entrants into the
market in response to demand increases
that can be fulfilled as a result of the
rule. As previously discussed, this is
estimated to be 130 producers in 2021
(the 1,000 new producers minus the 870
who register under State or Tribal
programs) at a cost of $130,000.
Like licensing, we expect that most, if
not all, State programs already have
some form of product testing. As a
result, only the testing of acres
attributable to this rule should be
included in the estimated cost of the
rule. This results in a change from the
upper bound estimate of $11.6 million
to an estimated lower bound cost of $1.5
million. It should be noted, however,
that existing sampling and testing
regimes may be more or less stringent
than the one imposed by this rule. As
a result, this rule could impose
additional costs, or represent cost
savings, on producers not directly
enabled by this rule. These cost changes
are not reflected in the lower bound
estimate.
As previously mentioned the
reporting and recordkeeping burden on
the States is independent of the number
of program participants and is the same
in both upper and lower bound
estimates. Also, the burden on
producers to supply the information
required to be reported by the States and
Tribes is required of all producers, so
the estimate of those costs also remains
the same under upper and lower bound
estimates.
The reporting burden for producers
operating under USDA license, on the
other hand is a function of the number
of new licensees and the lower bound
estimates reflects this smaller number.
The reporting of information to the
Farm Services Agency is a new
requirement that applies to all
producers. As a result, the estimated
cost associated with these provisions of
the rule are identical in both upper and
lower bound estimates. Similarly, the
requirement of testing labs to submit

PO 00000

Frm 00029

Fmt 4701

Sfmt 4700

58549

information is new and applies to all
tests irrespective of whether or not the
producer is new as a result of this rule.
Laboratory reporting costs are, therefore,
also the same in the upper and lower
bound estimates.
Like sampling and testing, we assume
that existing producers are already
required to dispose of non-compliant
crops. As a result, the estimated
disposal cost (in 2021) goes from $7.4
million in the upper bound estimate to
$960,000 in the lower bound estimate.
Also, like sampling and testing, the
validity of the estimate is a function of
the relative costs of Federal disposal
requirements relative to existing State
disposal requirements. Any change in
the costs of disposal (positive or
negative) would apply to all producers,
not just those new as a result of this
rule.
The benefits and cost of this rule
using the lower bound cost estimate are
shown in Table 5a. The estimated net
benefits of this rule amount to $18
million in 2020, a benefit of $47 million
in 2021, and a benefit of $79 million in
2022.
The benefits of this rule primarily
include producer sales that are
estimated to be due to the hemp
provisions in the 2018 Farm Bill and
this rule which enables those
provisions. Gross revenues represent the
best proxy for consumer willingness to
pay and social benefits. 17 As the
demand for and sales of hemp increase
over time, the number of licensees is
estimated to grow proportionally (for
the purposes of this analysis). As a
result, we estimate the number of
licensees (State, Tribal, or Federal) to
increase from roughly 7,584 in 2020 to
8,818 in 2021, to 10,054 in 2022 and
beyond.
BILLING CODE 3410–02–P
17 We note that if gross willingness-to-pay is
presented as a regulatory benefit, then marginal
costs of production must be included as a line item
in the regulatory cost analysis. An alternative,
reduced-form approach would be to include only
producer surplus (or the related concept of profits)
and consumer surplus in the benefits analysis.

E:\FR\FM\31OCR3.SGM

31OCR3

VerDate Sep<11>2014

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

17:04 Oct 30, 2019

Jkt 250001

PO 00000

Frm 00030

Fmt 4701

Sfmt 4725

E:\FR\FM\31OCR3.SGM

31OCR3

ER31OC19.016

khammond on DSKJM1Z7X2PROD with RULES3

58550

BILLING CODE 3410–02–C

The net benefits in each of the three
years have been discounted to reflect
their present value and annualized. The
results of these calculations are
presented in Table 6 at using a discount

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

rate of three percent and in Table 6a
using a discount rate of seven percent.
The final result of this analysis indicates
that this rule is estimated to have
annual net benefits of between 23 and

PO 00000

Frm 00031

Fmt 4701

Sfmt 4700

58551

47 million dollars at a discount rate of
three percent and between 21 and 44
million dollars at a discount rate of
seven percent.

E:\FR\FM\31OCR3.SGM

31OCR3

ER31OC19.017

khammond on DSKJM1Z7X2PROD with RULES3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

58552

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations
TABLE 6—ANNUALIZED COSTS, BENEFITS, AND NET BENEFIT
[At 3 percent]
Lower bound

Upper bound

Benefit ......................................................................................................................................................................
Cost ..........................................................................................................................................................................

$65,810,000
19,016,000

$65,810,000
43,172,000

Net Benefit ........................................................................................................................................................

46,794,000

22,638,000

TABLE 6a—ANNUALIZED COSTS, BENEFITS, AND NET BENEFIT
[At 7 percent]
Lower bound
Benefit ......................................................................................................................................................................
Cost ..........................................................................................................................................................................

$62,440,000
18,053,000

$62,440,000
41,283,000

Net Benefit ........................................................................................................................................................

44,386,000

21,156,000

Reasons Action Is Being Considered
The Agriculture Improvement Act of
2018 mandates that States and Tribes
submit to USDA plans for regulation of
hemp to include procedures for
information management, testing for
THC, and compliance with the
regulation. State and Tribal plans must
be approved by USDA. If no State or
Tribal Plan has been approved, then

With a gross revenue of $3,293 per
acre, a producer with no more than 228
acres would be considered small under
SBA standards. Based on this estimate
of gross revenue per acre, 99 percent of
producers would meet the SBA
definition of a small agricultural service
firm. ‘‘Using estimated costs from the
RIA, anticipated costs per entity that
want to enter the hemp industry are
expected to be about $2,941 in 2020,
and $2,900 in 2021. However, entry into
this market is voluntary and benefits are

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

hemp producers in those States or
Tribes may use the plan developed by
USDA, unless prohibited by State or
Tribal Law.
Potentially Affected Small Entities
The Small Business Administration
(SBA) defines, in 13 CFR part 121, small
agricultural producers as those having
annual receipts of no more than
$750,000. Unfortunately, very little data
exists that shows the annual receipts of
industrial hemp producers. To conduct
this analysis, however, AMS utilized
State acreage data and an estimate of
gross revenue per acre received by
producers calculated using the 2018
Processor/Handler Production Reports
to the Kentucky Department of
Agriculture. USDA seeks comments on
other reliable data sources that may be
available.
AMS used State acreage data by
producer from three of the four States

anticipated to outweigh the estimated
costs.’’
Alternatives To Minimize Impacts of the
Rule
The actions in this rule are mandated
by the 2018 Farm Bill, which enables
States, Tribes, and USDA to establish
rules and regulations for the domestic
production of hemp. The statute
requires USDA to develop criteria for
approval of plans submitted by State
and Tribal governments for regulation of
domestic hemp production. If no State

PO 00000

Frm 00032

Fmt 4701

Sfmt 4700

with the largest amount of licensed
acreage to serve as a proxy for the
portion of small producers nationwide.
Together, Colorado, Oregon, and
Kentucky make up about 47 percent of
planted acreage and 45 percent of
producer licenses nationwide, according
to Vote Hemp data. While acreage data
by producer was not available for
Montana, its State department of
agriculture reported that very few hemp
operations in Montana received annual
receipts in excess of $750,000 in 2018.
Vote Hemp estimates that on average,
about 70 percent of licensed acreage is
planted. AMS applied this percentage to
2018 licensed acreage data from
Colorado, Oregon, and Kentucky to
estimate 2018 cultivated acreage. The
estimate of gross revenue per acre to
producers of $3,293 was used to find the
number of acres required to generate an
annual receipt of $750,000. The result is
shown in Table 7.

or Tribal Plan has been approved, then
hemp producers in these States or
Tribes may utilize the plan developed
by USDA. These plans will promote
consistency in regulations governing the
legal production of hemp across the U.S.
In developing the sampling
procedures for the Federal Plan, AMS
considered the protocols for sampling
used by State departments of agriculture
and by countries that regulate hemp
production. In addition, AMS reviewed
sampling methods recommended by
Codex Alimentarius, which is the

E:\FR\FM\31OCR3.SGM

31OCR3

ER31OC19.018

Regulatory Flexibility Analysis
Pursuant to the requirements set forth
in the Regulatory Flexibility Act (5
U.S.C. 601–612), AMS has considered
the economic impact of this action on
small entities. AMS has prepared this
Regulatory Flexibility Analysis and has
determined that this rule will have a
significant economic impact on a
substantial number of small businesses
because many small businesses will not
be able to participate in the hemp
market without this rule.

khammond on DSKJM1Z7X2PROD with RULES3

Upper bound

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

khammond on DSKJM1Z7X2PROD with RULES3

central part of the Joint Food and
Agriculture Organization (FAO)/World
Health Organization (WHO) Food
Standards Program and was established
by FAO and WHO to protect consumer
health and promote fair practices in
food trade. After research and review of
multiple sampling protocols, AMS
adopted the best option among the
alternatives.
The 2018 Farm Bill mandates testing
using post-decarboxylation or other
similarly reliable methods where the
total THC concentration level considers
the potential to convert delta-9tetrahydrocannabinolic acid (THC-A)
into THC. Testing methodologies
meeting these requirements include
those using gas or liquid
chromatography with detection. These
methods are the industry standard for
post-decarboxylation testing. While
these methods were chosen by AMS as
the best option for testing, alternative
sampling and testing protocols will be
considered if they are comparable to the
baseline mandated by the 2018 Farm
Bill and established under the USDA
Plan and Procedures.
Alternatives to the selected
procedures for sampling and testing for
THC content included connecting a
producer lot of cultivated hemp to a
standard unit of measure. AMS
considered describing one lot as one
acre of hemp. This alternative was
abandoned, however, as it would have
required every acre of hemp to be
sampled and tested, which would have
resulted in high costs to producers and
overwhelming volume to laboratories.
Good Cause Analysis
Pursuant to the Administrative
Procedure Act (APA), notice and
comment are not required prior to the
issuance of a final rule if an agency, for
good cause, finds that ‘‘notice and
public procedure thereon are
impracticable, unnecessary, or contrary
to the public interest.’’ (5 U.S.C.
553(b)(B)).
USDA recognizes that courts have
held that the good cause exception to
notice and comment rulemaking is to be
narrowly construed and only reluctantly
countenanced. USDA does not take
lightly its decision to forego a formal
notice and comment process, but under
a totality of the circumstances analysis,
has concluded that this interim final
rule (IFR), accompanied by a 60-day
comment period, best balances
Congress’s interest in the expeditious
implementation of a regulatory program
for domestic hemp production with its
longstanding interest in ensuring that an
agency’s decisions be informed and
responsive. The IFR will also provide

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

sorely needed guidance to the many
stakeholders whose coordinated efforts
are critical to the success of the
domestic hemp production economy,
and will serve the public’s interest by
expediting hemp entry into that market.
Congress’s intention that USDA
expeditiously develop a regulatory
program for domestic hemp production
is clear from language in the Agriculture
Improvement Act of 2018, Public Law
115–334 (2018 Farm Bill), which the
President signed into law on December
20, 2018. The 2018 Farm Bill amended
the Agricultural Marketing Act of 1946
(Act) (7 U.S.C. 1621 et seq.) by adding
subtitle G, Hemp Production. Upon
enactment of the 2018 Farm Bill, hemp,
as defined therein, is no longer a
controlled substance. Section 10114 of
the 2018 Farm Bill further clarifies that
the interstate commerce of hemp is not
prohibited, and that States and Indian
Tribes cannot prohibit the
transportation or shipment of hemp or
hemp products produced in accordance
with the Agricultural Marketing Act of
1946 through the State or territory of the
Indian Tribe. However, the Act also
states that it is unlawful to produce
hemp unless produced pursuant to a
State, Tribal, or USDA plan. See 7
U.S.C. 1639p(a)(1) and 1639q(c)(1).
Congress provided that the Secretary
approve or disapprove of any State or
Tribal plan within 60 days of its
submission. 7 U.S.C. 1639(p)(b).
In order to meet this 60-day approval
deadline, Congress understood that
USDA would need time to establish its
own plan and develop a process for
quickly (i.e., within 60 days of
submission) approving or disapproving
of State and Tribal plans. Although the
Act does not contain an express enddate by which such regulations and
guidelines must be issued, in section
10113 of the 2018 Farm Bill, Congress
provided that ‘‘[t]he Secretary shall
promulgate regulations and guidelines
to implement this subtitle as
expeditiously as practicable.’’ (emphasis
added). ‘‘To ensure that the Secretary
moved forward with issuing regulations
in as timely a fashion as possible,’’ the
Act requires the Secretary to
‘‘periodically report to Congress with
updates regarding implementation of
this title.’’ H.R. Rep. 115–1072, at 738
(Dec. 10, 2018) (Conf. Rep.).
USDA takes seriously Congress’s
directive to issue regulations as
expeditiously as practicable. USDA also
understands that while Congress did not
expect USDA to issue regulations within
60 days, it also did not anticipate the
process extending two years into 2021.
This is apparent from Congress’s
continued legislation on hemp. In

PO 00000

Frm 00033

Fmt 4701

Sfmt 4700

58553

Section 107 of the Additional
Supplemental Appropriations for
Disaster Relief Act, 2019, Public Law
116–20, (Disaster Relief Act), Congress
required: ‘‘Beginning not later than the
2020 reinsurance year, the Federal Crop
Insurance Corporation [FCIC] shall offer
coverage under the whole farm revenue
protection insurance policy (or a
successor policy or plan of insurance)
for hemp (as defined in section 297A of
the Agricultural Marketing Act of 1946
(7 U.S.C. 1639o)).’’ Congress anticipated
that regulations governing the interstate
commerce of hemp would be issued
prior to 2020; otherwise, the deadline in
Section 107 of the Disaster Relief Act
would be irrelevant. Additionally,
several Members of Congress and
Senators urged USDA to expedite the
rulemaking or take steps to allow
farmers to begin hemp production in
2019.
Despite USDA’s diligence, the
complexity of establishing a new
regulatory program for domestic hemp
production, a crop that could not be
legally grown on a commercial basis
under Federal law for several decades,
has taken a substantial amount of time
and resources. Adding a formal notice
and comment period on top of that
would push the effective date of USDA’s
domestic hemp production regulatory
program well beyond 2020 and into
2021. This IFR effectuates Congress’s
will, which is one of several factors that
provide good cause to justify foregoing
a notice and comment period.
A second factor justifying good cause
is that this rule not only affects AMS’s
ability to implement the congressionally
mandated regulatory framework for a
domestic program, but also provides
critical guidance to numerous
stakeholders that anxiously await the
publication of this IFR. The FCIC’s
insurance policy program discussed
above is just one of these. For FCIC to
offer the whole farm revenue protection
insurance policy in 2020 to lawful
producers of hemp under the Act, the
IFR must take effect this fall to provide
the Risk Management Agency (RMA)
sufficient time to take the necessary
steps to authorize FCIC to offer the
insurance coverage and for producers to
engage in activities to qualify for the
coverage for their hemp production.
In addition, the FSA, the Rural
Business-Cooperative Service, and the
Natural Resources and Conservation
Service provide financial incentives and
support used by agricultural producers
and private sector entities. These
agencies similarly need regulatory
guidance to develop commercial
instruments such as loan documents, reinsurance contracts, and commodity

E:\FR\FM\31OCR3.SGM

31OCR3

khammond on DSKJM1Z7X2PROD with RULES3

58554

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

disaster program provisions that are
typically done on a crop year basis.
Individuals and commercial entities
also need the IFR’s guidance to engage
in the production, harvesting,
transportation, storage, and processing
of hemp and hemp products. Absent an
interim rule promptly implementing the
regulatory program required by the 2018
Farm Bill, there are no procedures in
place to determine whether a cannabis
crop qualifies as hemp as defined in
section 297A of the Agricultural
Marketing Act of 1946. It is necessary to
issue the IFR now to provide
individuals and entities sufficient time
to make the required plans and
purchases and to obtain financing ahead
of planting hemp in 2020.
The banking industry is awaiting
these regulations in order to develop
guidance regarding deposits derived
from hemp operations. Without these
regulations, the banking industry is not
willing to take the risk of accepting
deposits or lending money to these
businesses. Additionally, with the IFR
effective this fall, producers will be able
to plan and execute the steps necessary
to plant during the 2020 crop year.
Those steps include identifying the land
and acreage for the planting, contract for
seed and other supplies, obtain
financing, and identify and contract
with potential buyers. Those steps are
also necessary for producers to qualify
for the USDA programs and products
described above.
Finally, and importantly, law
enforcement needs guidance from the
IFR. While the States and Tribes may
not prohibit the transportation of hemp
produced under the 2014 Farm Bill, law
enforcement does not currently have the
means to quickly verify whether the
cannabis being transported is hemp or
marijuana. The IFR will assist law
enforcement in identifying lawfullyproduced hemp versus other forms of
cannabis that may not be lawfully
transported in interstate commerce.
Adding a formal notice and comment
period would push the effective date of
USDA’s regulatory program well beyond
2020 and into 2021 and delay the
guidance these stakeholders sorely
need.
A third factor justifying good cause
for this rule is that the Administrator
has solicited comments through
listening sessions and webinar that
solicited the public participation and
consultations with State and Tribal
officials.18 He is also allowing for a 6018 For example, public comments from the March
19, 2019 webinar can be found at https://
www.ams.usda.gov/rules-regulations/farmbillhemp/webinar-comments.

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

day comment period for this IFR. The
Administrator recognizes the value of
public comment to refine the IFR and
will keep an open mind as to any and
all comment submissions. All written
comments timely received will be
considered before a final determination
is made on this matter.
Finally, a fourth factor justifying good
cause for the IFR is the public’s interest
in expediting the ability of the nation’s
farmers to enter the new agricultural
market presented by hemp. As
explained in the regulatory impact
analysis above, USDA estimates that the
industry should gain annualized
benefits of almost $66 million once the
rule becomes effective and the domestic
hemp production program is
implemented. Any delay in the issuing
regulations will cause producers to
forgo realizing those benefits in 2020. In
fact, earlier this year, USDA faced
litigation from a party who believed that
the language in 7 U.S.C. 1639(p)(b)
required USDA to approve State and
tribal plans submitted to it in 60 days
as soon as the law went into effect. See
Flandreau Santee Sioux Tribe v. United
States Dep’t of Agriculture et al., 4:19–
cv–04094–KES (D.S.D.). The end of the
spring planting season temporarily
lowered the urgency felt by farmers
seeking to enter the hemp market, but
fall preparations for spring 2020’s
planting season are fast approaching.
USDA has no doubt that it will again be
subject to litigation if the IFR is not
adopted in time for parties to prepare
for the 2020 spring planting season.
Accordingly, the Administrator finds
that, under the totality of the
circumstances presented, there is good
cause to forego notice and comment
through the issuance of a notice of
proposed rulemaking. By publishing
this rule and making it effective this fall,
USDA is complying with Congress’s
will, providing sorely needed guidance
to all stakeholders, permitting public
comment, and serving the public’s
interest in engaging in a new and
promising economic endeavor. For
similar reasons, the Administrator also
finds good cause for the IFR to be
effective upon publication in the
Federal Register.
List of Subjects in 7 CFR Part 990
Acceptable hemp THC level,
Agricultural commodities, Cannabis,
Corrective action plan, Delta-9
tetrahydrocannabinol, Drugs, Dry
weight basis, Hemp, High-performance
liquid chromatography, Laboratories,
Marijuana.
■ For the reasons set forth in the
preamble, and under authority of 7
U.S.C. 601–674 and Public Law 107–

PO 00000

Frm 00034

Fmt 4701

Sfmt 4700

171, add 7 CFR part 990 to read as
follows:
PART 990—DOMESTIC HEMP
PRODUCTION PROGRAM
Subpart A—Definitions
Sec.
990.1 Meaning of terms.
Subpart B—State and Tribal Hemp
Production Plans
990.2 State and Tribal plans; General
authority.
990.3 State and Tribal plans; Plan
requirements.
990.4 USDA approval of State and Tribal
plans.
990.5 Audit of State or Tribal plan
compliance.
990.6 Violations of State and Tribal plans.
990.7 Establishing records with USDA Farm
Service Agency.
990.8 Production under Federal law.
Subpart C—USDA Hemp Production Plan
990.20 USDA requirements for the
production of hemp.
990.21 USDA hemp producer license.
990.22 USDA hemp producer license
approval.
990.23 Reporting hemp crop acreage with
USDA Farm Service Agency.
990.24 Responsibility of a USDA licensed
producer prior to harvest.
990.25 Standards of performance for
detecting delta-9 tetrahydrocannabinol
(THC) concentration levels.
990.26 Responsibility of a USDA producer
after laboratory testing is performed.
990.27 Non-compliant cannabis plants.
990.28 Compliance.
990.29 Violations.
990.30 USDA producers; License
suspension.
990.31 USDA licensees; Revocation.
990.32 Recordkeeping requirements.
Subpart D—Appeals
990.40 General adverse action appeal
process.
990.41 Appeals under the USDA hemp
production plan.
990.42 Appeals under a State or Tribal
hemp production plan.
Subpart E—Administrative Provisions
990.60 Agents.
990.61 Severability.
990.62 Expiration of this part.
990.63 Interstate transportation of hemp.
Subpart F—Reporting Requirements
990.70 State and Tribal hemp reporting
requirements.
990.71 USDA plan reporting requirements.
Authority: 7 U.S.C. 1639o note, 1639p,
16939q, and 1639r.

Subpart A—Definitions
§ 990.1

Meaning of terms.

Words used in this subpart in the
singular form shall be deemed to impart
the plural, and vice versa, as the case
may demand. For the purposes of

E:\FR\FM\31OCR3.SGM

31OCR3

khammond on DSKJM1Z7X2PROD with RULES3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations
provisions and regulations of this part,
unless the context otherwise requires,
the following terms shall be construed,
respectively, to mean:
Acceptable hemp THC level. When a
laboratory tests a sample, it must report
the delta-9 tetrahydrocannabinol
content concentration level on a dry
weight basis and the measurement of
uncertainty. The acceptable hemp THC
level for the purpose of compliance with
the requirements of State, Tribal, or
USDA hemp plans is when the
application of the measurement of
uncertainty to the reported delta-9
tetrahydrocannabinol content
concentration level on a dry weight
basis produces a distribution or range
that includes 0.3% or less. For example,
if the reported delta-9
tetrahydrocannabinol content
concentration level on a dry weight
basis is 0.35% and the measurement of
uncertainty is +/¥0.06%, the measured
delta-9 tetrahydrocannabinol content
concentration level on a dry weight
basis for this sample ranges from 0.29%
to 0.41%. Because 0.3% is within the
distribution or range, the sample is
within the acceptable hemp THC level
for the purpose of plan compliance.
This definition of ‘‘acceptable hemp
THC level’’ affects neither the statutory
definition of hemp, 7 U.S.C. 1639o(1), in
the 2018 Farm Bill nor the definition of
‘‘marihuana,’’ 21 U.S.C. 802(16), in the
CSA.
Act. Agricultural Marketing Act of
1946.
Agricultural Marketing Service or
AMS. The Agricultural Marketing
Service of the U.S. Department of
Agriculture.
Applicant. An applicant is:
(1) A State or Indian Tribe that has
submitted a State or Tribal hemp
production plan to USDA for approval
under this part; or
(2) A producer in a State or territory
of an Indian Tribe who is not subject to
a State or Tribal hemp production plan
and who has submitted an application
for a license under the USDA hemp
production plan under this part.
Cannabis. A genus of flowering plants
in the family Cannabaceae of which
Cannabis sativa is a species, and
Cannabis indica and Cannabis ruderalis
are subspecies thereof. Cannabis refers
to any form of the plant in which the
delta-9 tetrahydrocannabinol
concentration on a dry weight basis has
not yet been determined.
Controlled Substances Act (CSA). The
Controlled Substances Act as codified in
21 U.S.C. 801 et seq.
Conviction. Means any plea of guilty
or nolo contendere, or any finding of
guilt, except when the finding of guilt

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

is subsequently overturned on appeal,
pardoned, or expunged. For purposes of
this part, a conviction is expunged
when the conviction is removed from
the individual’s criminal history record
and there are no legal disabilities or
restrictions associated with the
expunged conviction, other than the fact
that the conviction may be used for
sentencing purposes for subsequent
convictions. In addition, where an
individual is allowed to withdraw an
original plea of guilty or nolo
contendere and enter a plea of not guilty
and the case is subsequently dismissed,
the individual is no longer considered
to have a conviction for purposes of this
part.
Corrective action plan. A plan
established by a State, Tribal
government, or USDA for a licensed
hemp producer to correct a negligent
violation or non-compliance with a
hemp production plan and this part.
Criminal History Report. Criminal
history report means the Federal Bureau
of Investigation’s Identity History
Summary.
Culpable mental state greater than
negligence. To act intentionally,
knowingly, willfully, or recklessly.
Decarboxylated. The completion of
the chemical reaction that converts
THC-acid (THC-A) into delta-9-THC, the
intoxicating component of cannabis.
The decarboxylated value is also
calculated using a conversion formula
that sums delta-9-THC and eighty-seven
and seven tenths (87.7) percent of THCacid.
Decarboxylation. The removal or
elimination of carboxyl group from a
molecule or organic compound.
Delta-9 tetrahydrocannabinol or THC.
Delta-9-THC is the primary
psychoactive component of cannabis.
For the purposes of this part, delta-9THC and THC are interchangeable.
Drug Enforcement Administration or
DEA. The United States Drug
Enforcement Administration.
Dry weight basis. The ratio of the
amount of moisture in a sample to the
amount of dry solid in a sample. A basis
for expressing the percentage of a
chemical in a substance after removing
the moisture from the substance.
Percentage of THC on a dry weight basis
means the percentage of THC, by
weight, in a cannabis item (plant,
extract, or other derivative), after
excluding moisture from the item.
Entity. A corporation, joint stock
company, association, limited
partnership, limited liability
partnership, limited liability company,
irrevocable trust, estate, charitable
organization, or other similar
organization, including any such

PO 00000

Frm 00035

Fmt 4701

Sfmt 4700

58555

organization participating in the hemp
production as a partner in a general
partnership, a participant in a joint
venture, or a participant in a similar
organization.
Farm Service Agency or FSA. An
agency of the United States Department
of Agriculture.
Gas chromatography or GC. A type of
chromatography in analytical chemistry
used to separate, identify, and quantify
each component in a mixture. GC relies
on heat for separating and analyzing
compounds that can be vaporized
without decomposition.
Geospatial location. For the purposes
of this part, ‘‘geospatial location’’ means
a location designated through a global
system of navigational satellites used to
determine the precise ground position
of a place or object.
Handle. To harvest or store hemp
plants or hemp plant parts prior to the
delivery of such plants or plant parts for
further processing. ‘‘Handle’’ also
includes the disposal of cannabis plants
that are not hemp for purposes of
chemical analysis and disposal of such
plants.
Hemp. The plant species Cannabis
sativa L. and any part of that plant,
including the seeds thereof and all
derivatives, extracts, cannabinoids,
isomers, acids, salts, and salts of
isomers, whether growing or not, with a
delta-9 tetrahydrocannabinol
concentration of not more than 0.3
percent on a dry weight basis.
High-performance liquid
chromatography or HPLC. A type of
chromatography technique in analytical
chemistry used to separate, identify, and
quantify each component in a mixture.
HPLC relies on pumps to pass a
pressurized liquid solvent containing
the sample mixture through a column
filled with a solid adsorbent material to
separate and analyze compounds.
Indian Tribe. As defined in section 4
of the Indian Self-Determination and
Education Assistance Act (25 U.S.C.
5304).
Information sharing system. The
database mandated under the Act which
allows USDA to share information
collected under State, Tribal, and USDA
plans with Federal, State, Tribal, and
local law enforcement.
Key participants. A sole proprietor, a
partner in partnership, or a person with
executive managerial control in a
corporation. A person with executive
managerial control includes persons
such as a chief executive officer, chief
operating officer and chief financial
officer. This definition does not include
non-executive managers such as farm,
field, or shift managers.

E:\FR\FM\31OCR3.SGM

31OCR3

khammond on DSKJM1Z7X2PROD with RULES3

58556

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

Law enforcement agency. Any
Federal, State, or local law enforcement
agency.
Lot. A contiguous area in a field,
greenhouse, or indoor growing structure
containing the same variety or strain of
cannabis throughout the area.
Marijuana. As defined in the CSA,
‘‘marihuana’’ means all parts of the
plant Cannabis sativa L., whether
growing or not; the seeds thereof; the
resin extracted from any part of such
plant; and every compound,
manufacture, salt, derivative, mixture,
or preparation of such plant, its seeds or
resin. The term ‘marihuana’ does not
include hemp, as defined in section
297A of the Agricultural Marketing Act
of 1946, and does not include the
mature stalks of such plant, fiber
produced from such stalks, oil or cake
made from the seeds of such plant, any
other compound, manufacture, salt,
derivative, mixture, or preparation of
such mature stalks (except the resin
extracted therefrom), fiber, oil, or cake,
or the sterilized seed of such plant
which is incapable of germination (7
U.S.C. 1639o). ‘‘Marihuana’’ means all
cannabis that tests as having a
concentration level of THC on a dry
weight basis of higher than 0.3 percent.
Measurement of Uncertainty (MU).
The parameter, associated with the
result of a measurement, that
characterizes the dispersion of the
values that could reasonably be
attributed to the particular quantity
subject to measurement.
Negligence. Failure to exercise the
level of care that a reasonably prudent
person would exercise in complying
with the regulations set forth under this
part.
Phytocannabinoid. Cannabinoid
chemical compounds found in the
cannabis plant, two of which are Delta9 tetrahydrocannabinol (delta-9 THC)
and cannabidiol (CBD).
Plan. A set of criteria or regulations
under which a State or Tribal
government, or USDA, monitors and
regulates the production of hemp.
Postdecarboxylation. In the context of
testing methodologies for THC
concentration levels in hemp, means a
value determined after the process of
decarboxylation that determines the
total potential delta-9
tetrahydrocannabinol content derived
from the sum of the THC and THC-A
content and reported on a dry weight
basis. The postdecarboxylation value of
THC can be calculated by using a
chromatograph technique using heat,
gas chromatography, through which
THCA is converted from its acid form to
its neutral form, THC. Thus, this test
calculates the total potential THC in a

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

given sample. The postdecarboxylation
value of THC can also be calculated by
using a high-performance liquid
chromatograph technique, which keeps
the THC-A intact, and requires a
conversion calculation of that THC-A to
calculate total potential THC in a given
sample. See the definition for
decarboxylation.
Produce. To grow hemp plants for
market, or for cultivation for market, in
the United States.
Producer. Producer means a producer
as defined in 7 CFR 718.2 that is
licensed or authorized to produce hemp
under this part.
Reverse distributor. A person who is
registered with the DEA in accordance
with 21 CFR 1317.15 to dispose of
marijuana under the Controlled
Substances Act.
Secretary. The Secretary of
Agriculture of the United States.
State. Any one of the fifty States of
the United States of America, the
District of Columbia, the
Commonwealth of Puerto Rico, and any
other territory or possession of the
United States.
State department of agriculture. The
agency, commission, or department of a
State government responsible for
agriculture in the State.
Territory of the Indian Tribe has the
same meaning as ‘‘Indian Country’’ in
18 U.S.C. 1151.
Tribal government. The governing
body of an Indian Tribe.
USDA licensed hemp producer or
licensee. A person, partnership, or
corporation authorized by USDA to
produce hemp.
Subpart B—State and Tribal Hemp
Production Plans
§ 990.2 State and Tribal plans; General
authority.

States or Indian Tribes desiring to
have primary regulatory authority over
the production of hemp in the State or
territory of the Indian Tribe for which
it has jurisdiction shall submit to the
Secretary for approval, through the State
department of agriculture (in
consultation with the Governor and
chief law enforcement officer of the
State) or the Tribal government, as
applicable, a plan under which the State
or Indian Tribe monitors and regulates
that production.
§ 990.3 State and Tribal plans; Plan
requirements.

(a) General requirements. A State or
Tribal plan submitted to the Secretary
for approval must include the practice
and procedures described in this
paragraph (a).

PO 00000

Frm 00036

Fmt 4701

Sfmt 4700

(1) A State or Tribal plan must
include a practice to collect, maintain,
and report to the Secretary relevant,
real-time information for each producer
licensed or authorized to produce hemp
under the State or Tribal plan regarding:
(i) Contact information as described in
§ 990.70(a)(1);
(ii) A legal description of the land on
which the producer will produce hemp
in the State or territory of the Indian
Tribe including, to the extent
practicable, its geospatial location; and
(iii) The status and number of the
producer’s license or authorization.
(2) A State or Tribal plan must
include a procedure for accurate and
effective sampling of all hemp
produced, to include the requirements
in this paragraph (a)(2).
(i) Within 15 days prior to the
anticipated harvest of cannabis plants, a
Federal, State, local, or Tribal law
enforcement agency or other Federal,
State, or Tribal designated person shall
collect samples from the flower material
from such cannabis plants for delta-9
tetrahydrocannabinol concentration
level testing as described in §§ 990.24
and 990.25.
(ii) The method used for sampling
from the flower material of the cannabis
plant must be sufficient at a confidence
level of 95 percent that no more than
one percent (1%) of the plants in the lot
would exceed the acceptable hemp THC
level. The method used for sampling
must ensure that a representative
sample is collected that represents a
homogeneous composition of the lot.
(iii) During a scheduled sample
collection, the producer or an
authorized representative of the
producer shall be present at the growing
site.
(iv) Representatives of the sampling
agency shall be provided with complete
and unrestricted access during business
hours to all hemp and other cannabis
plants, whether growing or harvested,
and all land, buildings, and other
structures used for the cultivation,
handling, and storage of all hemp and
other cannabis plants, and all locations
listed in the producer license.
(v) A producer shall not harvest the
cannabis crop prior to samples being
taken.
(3) A State or Tribal plan must
include a procedure for testing that is
able to accurately identify whether the
sample contains a delta-9
tetrahydrocannabinol content
concentration level that exceeds the
acceptable hemp THC level. The
procedure must include a validated
testing methodology that uses
postdecarboxylation or other similarly
reliable methods. The testing

E:\FR\FM\31OCR3.SGM

31OCR3

khammond on DSKJM1Z7X2PROD with RULES3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations
methodology must consider the
potential conversion of delta-9
tetrahydrocannabinolic acid (THC-A) in
hemp into THC and the test result
measures total available THC derived
from the sum of the THC and THC-A
content. Testing methodologies meeting
the requirements of this paragraph (a)(3)
include, but are not limited to, gas or
liquid chromatography with detection.
The total THC concentration level shall
be determined and reported on a dry
weight basis.
(i) Any test of a representative sample
resulting in higher than the acceptable
hemp THC level shall be conclusive
evidence that the lot represented by the
sample is not in compliance with this
part. Lots tested and not certified by the
DEA-registered laboratory at or below
the acceptable hemp THC level may not
be further handled, processed or enter
the stream of commerce and the
producer shall ensure the lot is disposed
of in accordance with § 990.27.
(ii) Samples of hemp plant material
from one lot shall not be commingled
with hemp plant material from other
lots.
(iii) Analytical testing for purposes of
detecting the concentration levels of
THC shall meet the following standards:
(A) Laboratory quality assurance must
ensure the validity and reliability of test
results;
(B) Analytical method selection,
validation, and verification must ensure
that the testing method used is
appropriate (fit for purpose), and that
the laboratory can successfully perform
the testing;
(C) The demonstration of testing
validity must ensure consistent,
accurate analytical performance;
(D) Method performance
specifications must ensure analytical
tests are sufficiently sensitive for the
purposes of the detectability
requirements of this part; and
(E) An effective disposal procedure
for hemp plants that are produced that
do not meet the requirements of this
part. The procedure must be in
accordance with DEA reverse distributor
regulations found at 21 CFR 1317.15.
(F) Measurement of uncertainty (MU)
must be estimated and reported with
test results. Laboratories shall use
appropriate, validated methods and
procedures for all testing activities and
evaluate measurement of uncertainty.
(4) A State or Indian Tribe shall
promptly notify the Administrator by
certified mail or electronically of any
occurrence of cannabis plants or plant
material that do not meet the definition
of hemp in this part and attach the
records demonstrating the appropriate
disposal of all of those plants and

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

materials in the lot from which the
representative samples were taken.
(5) A State or Tribal plan must
include a procedure to comply with the
enforcement procedures in § 990.6.
(6) A State or Tribal plan must
include a procedure for conducting
annual inspections of, at a minimum, a
random sample of producers to verify
that hemp is not produced in violation
of this part. These procedures must
enforce the terms of violations as stated
in the Act and defined under § 990.6.
(7) A State or Tribal plan must
include a procedure for submitting the
information described in § 990.70 to the
Secretary not more than 30 days after
the date on which the information is
received. All such information must be
submitted to the USDA in a format that
is compatible with USDA’s information
sharing system.
(8) The State or Tribal government
must certify that the State or Indian
Tribe has the resources and personnel to
carry out the practices and procedures
described in paragraphs (a)(1) through
(7) of this section.
(9) The State or Tribal plan must
include a procedure to share
information with USDA to support the
information sharing requirements in 7
U.S.C. 1639q(d). The procedure must
include the requirements described in
this paragraph (a)(9).
(i) The State or Tribal plan shall
require producers to report their hemp
crop acreage to the FSA, consistent with
the requirement in § 990.7.
(ii) The State or Tribal government
shall assign each producer with a
license or authorization identifier in a
format prescribed by USDA.
(iii) The State or Tribal government
shall require producers to report the
total acreage of hemp planted,
harvested, and, if applicable, disposed.
The State or Tribal government shall
collect this information and report it to
AMS.
(b) Relation to State and Tribal law.
A State or Tribal plan may include any
other practice or procedure established
by a State or Indian Tribe, as applicable;
Provided, That the practice or procedure
is consistent with this part and Subtitle
G of the Act.
(1) No preemption. Nothing in this
part preempts or limits any law of a
State or Indian Tribe that:
(i) Regulates the production of hemp;
and
(ii) Is more stringent than this part or
Subtitle G of the Act.
(2) References in plans. A State or
Tribal plan may include a reference to
a law of the State or Indian Tribe
regulating the production of hemp, to

PO 00000

Frm 00037

Fmt 4701

Sfmt 4700

58557

the extent that the law is consistent with
this part.
§ 990.4
plans.

USDA approval of State and Tribal

(a) General authority. No plans will be
accepted by USDA prior to October 31,
2019. No later than 60 calendar days
after the receipt of a State or Tribal plan
for a State or Tribal Nation in which
production of hemp is legal, the
Secretary shall:
(1) Approve the State or Tribal plan
only if the State or Tribal plan complies
with this part; or
(2) Disapprove the State or Tribal plan
if the State or Tribal plan does not
comply with this part. USDA shall
provide written notification to the State
or Tribe of the disapproval and the
cause for the disapproval.
(b) Amended plans. A State or Tribal
government, as applicable, must submit
to the Secretary an amended plan if:
(1) The Secretary disapproves a State
or Tribal plan if the State or Tribe
wishes to have primary jurisdiction over
hemp production within its State or
territory of the Indian Tribe; or
(2) The State or Tribe makes
substantive revisions to its plan or its
laws which alter the way the plan meets
the requirements of this part. If this
occurs, the State or Tribal government
must re-submit the plan with any
modifications based on laws and
regulation changes for USDA approval.
Such re-submissions should be
provided to USDA within 365 days from
the date that the State or Tribal laws and
regulations are effective. Producers shall
continue to comply with the
requirements of the existing plan while
such modifications are under
consideration by USDA. If State or
Tribal government laws or regulations
in effect under the USDA-approved plan
change but the State or Tribal
government does not re-submit a
modified plan within one year from the
effective date of the new law or
regulation, the existing plan is revoked.
(3) USDA approval of State or Tribal
government plans shall remain in effect
unless an amended plan must be
submitted to USDA because of a
substantive revision to a State’s or
Tribe’s plan, a relevant change in State
or Tribal laws or regulations, or
approval of the plan is revoked by
USDA.
(c) Technical assistance. The
Secretary may provide technical
assistance to help a State or Indian Tribe
develop or amend a plan. This may
include the review of draft plans or
other informal consultation as
necessary.

E:\FR\FM\31OCR3.SGM

31OCR3

58558

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

(d) Approved State or Tribal plans. If
the Secretary approves a State or Tribal
plan, the Secretary shall notify the State
or Tribe by letter or email.
(1) In addition to the approval letter,
the State or Tribe shall receive their
plan approval certificate either as an
attachment or assessable via website
link.
(2) The USDA shall post information
regarding approved plans on its website.
(3) USDA approval of State or Tribal
government plans shall remain in effect
unless:
(i) The State or Tribal government
laws and regulations in effect under the
USDA-approved plan change, thus
requiring such plan to be re-submitted
for USDA approval.
(ii) A State or Tribal plan must be
amended in order to comply with
amendments to Subtitle G the Act and
this part.
(e) Producer rights upon revocation of
State or Tribal plan. If USDA revokes
approval of the State or Tribal plan due
to noncompliance as defined in § 990.5,
producers licensed or authorized to
produce hemp under the revoked State
or Tribal plan may continue to produce
for the remainder of the calendar year in
which the revocation became effective.
Producers may then apply to be licensed
under the USDA plan for 90 days after
the notification even if the time period
does note coincide with the annual
application window.

khammond on DSKJM1Z7X2PROD with RULES3

§ 990.5 Audit of State or Tribal plan
compliance.

The Secretary may conduct an audit
of the compliance of a State or Indian
Tribe with an approved plan.
(a) Frequency of audits. Compliance
audits may be scheduled, at minimum,
once every three years and may include
an onsite-visit, a desk-audit, or both.
The USDA may adjust the frequency of
audits if deemed appropriate based on
program performance, compliance
issues, or other relevant factors
identified and provided to the State or
Tribal governments by USDA.
(b) Scope of audit review. The audit
may include, but is not limited to, a
review of the following:
(1) The resources and personnel
employed to administer and oversee its
approved plan;
(2) The process for licensing and
systematic compliance review of hemp
producers;
(3) Sampling methods and laboratory
testing requirements and components;
(4) Disposal of non-compliant hemp
plants or hemp plant material practices,
to ensure that correct reporting to the
USDA has occurred;

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

(5) Results of and methodology used
for the annual inspections of producers;
and
(6) Information collection procedures
and information accuracy (i.e.,
geospatial location, contact information
reported to the USDA, legal description
of land).
(c) Audit reports. (1) Audit reports
will be issued to the State or Tribal
government within 60 days after the
audit concluded. If the audit reveals that
the State or Tribal government is not in
compliance with its USDA approved
plan, USDA will advise the State or
Indian Tribe of non-compliances and
the corrective measures that must be
completed to come into compliance
with the regulations in this part. The
USDA will require the State or Tribe to
develop a corrective action plan, which
will be reviewed and approved by the
USDA, and the State or Tribe will be
able to demonstrate its compliance with
the regulations in this part through a
second audit by USDA. If the State or
Tribe requests USDA assistance to
develop a corrective action plan in the
case of a first instance of
noncompliance, the State or Tribe must
request this assistance not later than 30
days after the issuance of the audit
report. The USDA will approve or deny
the corrective action plan within 60
days of its receipt.
(2) If the USDA determines that the
State or Indian Tribe is not in
compliance after the second audit, the
USDA may revoke its approval of the
State or Tribal plan for a period not to
exceed one year. USDA will not approve
a State or Indian Tribe’s plan until the
State or Indian Tribe demonstrates upon
inspection that it is in compliance with
all regulations in this part.
§ 990.6
plans.

Violations of State and Tribal

(a) Producer violations. Producer
violations of USDA-approved State and
Tribal hemp production plans shall be
subject to enforcement in accordance
with the terms of this section.
(b) Negligent violations. Each USDAapproved State or Tribal plan shall
contain provisions relating to negligent
producer violations as defined under
this part. Negligent violations shall
include, but not be limited to:
(1) Failure to provide a legal
description of land on which the
producer produces hemp;
(2) Failure to obtain a license or other
required authorization from the State
department of agriculture or Tribal
government, as applicable; or
(3) Production of cannabis with a
delta-9 tetrahydrocannabinol
concentration exceeding the acceptable

PO 00000

Frm 00038

Fmt 4701

Sfmt 4700

hemp THC level. Hemp producers do
not commit a negligent violation under
this paragraph (b)(3) if they make
reasonable efforts to grow hemp and the
cannabis (marijuana) does not have a
delta-9 tetrahydrocannabinol
concentration of more than 0.5 percent
on a dry weight basis.
(c) Corrective action for negligent
violations. Each USDA-approved State
or Tribal plan shall contain rules and
regulations providing for the correction
of negligent violations. Each correction
action plan shall include, at minimum,
the following terms:
(1) A reasonable date by which the
producer shall correct the negligent
violation.
(2) A requirement that the producer
shall periodically report to the State
department of agriculture or Tribal
government, as applicable, on its
compliance with the State or Tribal plan
for a period of not less than the next 2
years from the date of the negligent
violation.
(3) A producer that negligently
violates a State or Tribal plan approved
under this part shall not as a result of
that violation be subject to any criminal
enforcement action by the Federal,
State, Tribal, or local government.
(4) A producer that negligently
violates a USDA-approved State or
Tribal plan three times in a 5-year
period shall be ineligible to produce
hemp for a period of 5 years beginning
on the date of the third violation.
(5) The State or Tribe shall conduct an
inspection to determine if the corrective
action plan has been implemented as
submitted.
(d) Culpable violations. Each USDAapproved State or Tribal plan shall
contain provisions relating to producer
violations made with a culpable mental
state greater than negligence, including
that:
(1) If the State department of
agriculture or Tribal government with
an approved plan determines that a
producer has violated the plan with a
culpable mental state greater than
negligence, the State department of
agriculture or Tribal government, as
applicable, shall immediately report the
producer to:
(i) The U.S. Attorney General; and
(ii) The chief law enforcement officer
of the State or Indian Tribe, as
applicable.
(2) Paragraphs (b) and (c) of this
section shall not apply to culpable
violations.
(e) Felonies. Each USDA-approved
State or Tribal plan shall contain
provisions relating to felonies. Such
provisions shall state that:

E:\FR\FM\31OCR3.SGM

31OCR3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations
(1) A person with a State or Federal
felony conviction relating to a
controlled substance is subject to a 10year ineligibility restriction on
participating in the plan and producing
hemp under the State or Tribal plan
from the date of the conviction. An
exception applies to a person who was
lawfully growing hemp under the 2014
Farm Bill before December 20, 2018,
and whose conviction also occurred
before that date.
(2) Any producer growing hemp
lawfully with a license, registration, or
authorization under a pilot program
authorized by section 7606 of the
Agricultural Act of 2014 (7 U.S.C. 5940)
before October 31, 2019 shall be
exempted from paragraph (e)(1) of this
section.
(3) For producers that are entities, the
State or Tribal plan shall determine
which employee(s) of a producer shall
be considered to be participating in the
plan and subject to the felony
conviction restriction for purposes of
paragraph (e)(1) of this section.
(f) False statement. Each USDAapproved State or Tribal plan shall state
that any person who materially falsifies
any information contained in an
application to participate in such
program shall be ineligible to participate
in that program.
(g) Appeals. For States and Tribes
who wish to appeal an adverse action,
subpart D of this part will apply.

khammond on DSKJM1Z7X2PROD with RULES3

§ 990.7 Establishing records with USDA
Farm Service Agency.

All producers licensed to produce
hemp under an USDA-approved State or
Tribal plan shall report hemp crop
acreage with FSA and shall provide, at
minimum, the following information:
(a) Street address and, to the extent
practicable, geospatial location for each
lot or greenhouse where hemp will be
produced. If an applicant operates in
more than one location, that information
shall be provided for all production
sites.
(b) If an applicant has production
sites licensed under a USDA-approved
State or Tribal plan, those sites will be
covered under the respective plan and
will not need to be included under the
producer’s application to become
licensed under the USDA plan.
(c) Acreage dedicated to the
production of hemp, or greenhouse or
indoor square footage dedicated to the
production of hemp.
(d) License or authorization identifier.
§ 990.8

Production under Federal law.

Nothing in this subpart prohibits the
production of hemp in a State or the
territory of an Indian Tribe for which a

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

State or Tribal plan is not approved
under this subpart if the production of
that hemp is in accordance with subpart
C of this part, and if the production of
hemp is not otherwise prohibited by the
State or Indian Tribe.
Subpart C—USDA Hemp Production
Plan
§ 990.20 USDA requirements for the
production of hemp.

(a) General hemp production
requirements. The production of hemp
in a State or territory of an Indian Tribe
where there is no USDA approved State
or Tribal plan must be produced in
accordance with this subpart provided
that the production of hemp is not
prohibited by the State or territory of an
Indian Tribe where production will
occur.
(b) Convicted felon ban. A person
with a State or Federal felony
conviction relating to a controlled
substance is subject to a 10-year
ineligibility restriction on participating
in the plan and producing hemp under
the USDA plan from the date of the
conviction. An exception applies to a
person who was lawfully growing hemp
under the 2014 Farm Bill before
December 20, 2018, and whose
conviction also occurred before
December 20, 2018.
(c) Falsifying material information on
application. Any person who materially
falsifies any information contained in an
application to for a license under the
USDA plan shall be ineligible to
participate in the USDA plan.
§ 990.21

USDA hemp producer license.

(a) General application
requirements—(1) Requirements and
license application. Any person
producing or intending to produce
hemp must have a valid license prior to
producing, cultivating, or storing hemp.
A valid license means the license is
unexpired, unsuspended, and
unrevoked.
(2) Application window. Applicants
may submit an application for a new
license to USDA between December 2,
2019 and November 2, 2020. In
subsequent years, applicants may
submit an application for a new license
or renewal of an existing license to
USDA from August 1 through October
31 of each year.
(3) Required information on
application. The applicant shall provide
the information requested on the
application form, including:
(i) Contact information. Full name,
residential address, telephone number
and email address. If the applicant is a
business entity, the full name of the

PO 00000

Frm 00039

Fmt 4701

Sfmt 4700

58559

business, the principal business location
address, full name and title of the key
participants, title, email address (if
available) and employer identification
number (EIN) of the business; and
(ii) Criminal history report. A current
criminal history report for all key
participants dated within 60 days prior
to the application submission date. A
license application will not be
considered complete without all
required criminal history reports.
(4) Submission of completed
application forms. Completed
application forms shall be submitted to
USDA.
(5) Incomplete application
procedures. Applications missing
required information shall be returned
to the applicant as incomplete. The
applicant may resubmit a completed
application.
(6) License expiration. USDA-issued
hemp producer licenses shall be valid
until December 31 of the year three
years after the year in which license was
issued.
(b) License renewals. USDA hemp
producer licenses must be renewed
prior to license expiration. Licenses are
not automatically renewed.
Applications for renewal shall be
subject to the same terms, information
collection requirements, and approval
criteria as provided in this subpart for
initial applications unless there has
been an amendment to the regulations
in this part or the law since approval of
the initial or last application.
(c) License modification. A license
modification is required if there is any
change to the information submitted in
the application including, but not
limited to, sale of a business, the
production, handling, or storage of
hemp in a new location, or a change in
the key participants producing under a
license.
§ 990.22 USDA Hemp producer license
approval.

(a) A license shall not be issued
unless:
(1) The application submitted for
USDA review and approval is complete
and accurate.
(2) The criminal history report(s)
submitted with the license application
confirms that all key participants to be
covered by the license have not been
convicted of a felony, under State or
Federal law, relating to a controlled
substance within the past ten (10) years
unless the exception in § 990.20(b)
applies.
(3) The applicant has submitted all
reports required as a participant in the
hemp production program by this part.

E:\FR\FM\31OCR3.SGM

31OCR3

58560

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

(4) The application contains no
materially false statements or
misrepresentations and the applicant
has not previously submitted an
application with any materially false
statements or misrepresentations.
(5) The applicant’s license is not
currently suspended.
(6) The applicant is not applying for
a license as a stand-in for someone
whose license has been suspended,
revoked, or is otherwise ineligible to
participate.
(7) The State or territory of Indian
Tribe where the person produces or
intends to produce hemp does not have
a USDA-approved plan or has not
submitted a plan to USDA for approval
and is awaiting USDA’s decision. For
the first year, USDA will not accept
request for licenses under the USDA
plan until December 2, 2019 to allow
States and Tribes to submit their plans.
(8) The State or territory of Indian
Tribe where the person produces or
intends to produce hemp does not
prohibit the production of hemp.
(b) USDA shall provide written
notification to applicants whether the
application has been approved or
denied unless the applicant is from a
State or territory of an Indian Tribe that
has a plan submitted to USDA and is
awaiting USDA approval.
(1) If an application is approved, a
license will be issued. Information
regarding approved licenses will be
available on the AMS website.
(2) Licenses will be valid until
December 31 of the year three after the
year in which the license was issued.
(3) Licenses may not be sold,
assigned, transferred, pledged, or
otherwise disposed of, alienated or
encumbered.
(4) If a license application is denied,
the notification from USDA will explain
the cause for denial. Applicants may
appeal the denial in accordance with
subpart D of this part.
(c) If the applicant is producing in
more than one location, the applicant
may have more than one license to grow
hemp. If the applicant has operations in
a location covered under a State or
Tribal plan, that operation must be
licensed under the State or Tribal plan,
not a USDA plan.

khammond on DSKJM1Z7X2PROD with RULES3

§ 990.23 Reporting hemp crop acreage
with USDA Farm Service Agency.

All USDA plan producers shall report
hemp crop acreage with FSA and shall
provide, at minimum, the following
information:
(a) Street address and, to the extent
practicable, geospatial location of the
lot, greenhouse, building, or site where
hemp will be produced. All locations

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

where hemp is produced must be
reported to FSA.
(b) Acreage dedicated to the
production of hemp, or greenhouse or
indoor square footage dedicated to the
production of hemp.
(c) The license number.
§ 990.24 Responsibility of a USDA
licensed producer prior to harvest.

(a) Within 15 days prior to the
anticipated harvest of cannabis plants, a
producer shall have an approved
Federal, State, local law enforcement
agency or other USDA designated
person collect samples from the flower
material of such cannabis material for
delta-9 tetrahydrocannabinol
concentration level testing.
(b) The method used for sampling
from the flower material of the cannabis
plant must be sufficient at a confidence
level of 95 percent that no more than
one percent (1%) of the plants in the lot
would exceed the acceptable hemp THC
level. The method used for sampling
must ensure that a representative
sample is collected that represents a
homogeneous composition of the lot.
(c) During a scheduled sample
collection, the producer or an
authorized representative of the
producer shall be present at the growing
site.
(d) Representatives of the sampling
agency shall be provided with complete
and unrestricted access during business
hours to all hemp and other cannabis
plants, whether growing or harvested,
and all land, buildings, and other
structures used for the cultivation,
handling, and storage of all hemp and
other cannabis plants, and all locations
listed in the producer license.
(e) A producer shall not harvest the
cannabis crop prior to samples being
taken.
§ 990.25 Standards of performance for
detecting delta-9 tetrahydrocannabinol
(THC) concentration levels.

(a) Analytical testing for purposes of
detecting the concentration levels of
delta-9 tetrahydrocannabinol (THC) in
the flower material of the cannabis plant
shall meet the following standard:
(1) Laboratory quality assurance must
ensure the validity and reliability of test
results;
(2) Analytical method selection,
validation, and verification must ensure
that the testing method used is
appropriate (fit for purpose) and that the
laboratory can successfully perform the
testing;
(3) The demonstration of testing
validity must ensure consistent,
accurate analytical performance; and
(4) Method performance
specifications must ensure analytical

PO 00000

Frm 00040

Fmt 4701

Sfmt 4700

tests are sufficiently sensitive for the
purposes of the detectability
requirements of this part.
(b) At a minimum, analytical testing
of samples for delta-9
tetrahydrocannabinol concentration
levels must use post-decarboxylation or
other similarly reliable methods
approved by the Secretary. The testing
methodology must consider the
potential conversion of delta-9
tetrahydrocannabinolic acid (THCA) in
hemp into delta-9 tetrahydrocannabinol
(THC) and the test result reflect the total
available THC derived from the sum of
the THC and THC-A content. Testing
methodologies meeting the
requirements of this paragraph (b)
include, but are not limited to, gas or
liquid chromatography with detection.
(c) The total delta-9
tetrahydrocannabinol concentration
level shall be determined and reported
on a dry weight basis. Additionally,
measurement of uncertainty (MU) must
be estimated and reported with test
results. Laboratories shall use
appropriate, validated methods and
procedures for all testing activities and
evaluate measurement of uncertainty.
(d) Any sample test result exceeding
the acceptable hemp THC level shall be
conclusive evidence that the lot
represented by the sample is not in
compliance with this part.
§ 990.26 Responsibility of a USDA
producer after laboratory testing is
performed.

(a) The producer shall harvest the
crop not more than fifteen (15) days
following the date of sample collection.
(b) If the producer fails to complete
harvest within fifteen (15) days of
sample collection, a secondary preharvested sample of the lot shall be
required to be submitted for testing.
(c) Harvested lots of hemp plants shall
not be commingled with other harvested
lots or other material without prior
written permission from USDA.
(d) Lots that meet the acceptable
hemp THC level may enter the stream
of commerce.
(e) Lots tested and not certified by the
DEA-registered laboratory not exceeding
the acceptable hemp THC level may not
be further handled, processed, or enter
the stream of commerce and the licensee
shall ensure the lot is disposed of in
accordance with § 990.27.
(f) Any producer may request
additional testing if it is believed that
the original delta-9
tetrahydrocannabinol concentration
level test results were in error.
§ 990.27

Non-compliant cannabis plants.

(a) Cannabis plants exceeding the
acceptable hemp THC level constitute

E:\FR\FM\31OCR3.SGM

31OCR3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations
marijuana, a schedule I controlled
substance under the Controlled
Substances Act (CSA), 21 U.S.C. 801 et
seq., and must be disposed of in
accordance with the CSA and DEA
regulations found at 21 CFR 1317.15.
(b) Producers must notify USDA of
their intent to dispose of nonconforming plants and verify disposal
by submitting required documentation.
§ 990.28

Compliance.

(a) Audits. Producers may be audited
by the USDA. The audit may include a
review of records and documentation,
and may include site visits to farms,
fields, greenhouses, storage facilities, or
other locations affiliated with the
producer’s hemp operation. The
inspection may include the current crop
year, as well as any previous crop
year(s). The audit may be performed
remotely or in person.
(b) Frequency of audit verifications.
Audit verifications may be performed
once every three (3) years unless
otherwise determined by USDA. If the
results of the audit find negligent
violations, a corrective action plan may
be established.
(c) Assessment of producer’s hemp
operations for conformance. The
producer’s operational procedures,
documentation, and recordkeeping, and
other practices may be verified during
the onsite audit verification. The auditor
may also visit the production,
cultivation, or storage areas for hemp
listed on the producer’s license.
(1) Records and documentation. The
auditor shall assess whether required
reports, records, and documentation are
properly maintained for accuracy and
completeness.
(2) [Reserved]
(d) Audit reports. Audit reports will
be issued to the licensee within 60 days
after the audit is concluded. If USDA
determines under an audit that the
producer is not compliant with this
part, USDA shall require a corrective
action plan. The producer’s
implementation of a corrective action
plan may be reviewed by USDA during
a future site visit or audit.

khammond on DSKJM1Z7X2PROD with RULES3

§ 990.29

Violations.

Violations of this part shall be subject
to enforcement in accordance with the
terms of this section.
(a) Negligent violations. A hemp
producer shall be subject to enforcement
for negligently:
(1) Failing to provide an accurate legal
description of land where hemp is
produced;
(2) Producing hemp without a license;
and
(3) Producing cannabis (marijuana)
exceeding the acceptable hemp THC

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

level. Hemp producers do not commit a
negligent violation under this paragraph
(a) if they make reasonable efforts to
grow hemp and the cannabis
(marijuana) does not have a delta-9
tetrahydrocannabinol concentration of
more than 0.5 percent on a dry weight
basis.
(b) Corrective action for negligent
violations. For each negligent violation,
USDA will issue a Notice of Violation
and require a corrective action plan for
the producer. The producer shall
comply with the corrective action plan
to cure the negligent violation.
Corrective action plans will be in place
for a minimum of two (2) years from the
date of their approval. Corrective action
plans will, at a minimum, include:
(1) The date by which the producer
shall correct each negligent violation;
(2) Steps to correct each negligent
violation; and
(3) A description of the procedures to
demonstrate compliance must be
submitted to USDA.
(c) Negligent violations and criminal
enforcement. A producer that
negligently violates this part shall not,
as a result of that violation be subject to
any criminal enforcement action by any
Federal, State, Tribal, or local
government.
(d) Subsequent negligent violations. If
a subsequent violation occurs while a
corrective action plan is in place, a new
corrective action plan must be
submitted with a heightened level of
quality control, staff training, and
quantifiable action measures.
(e) Negligent violations and license
revocation. A producer that negligently
violates the license 3 times in a 5-year
period shall have their license revoked
and be ineligible to produce hemp for a
period of 5 years beginning on the date
of the third violation.
(f) Culpable mental state greater than
negligence. If USDA determines that a
licensee has violated the terms of the
license or of this part with a culpable
mental state greater than negligence:
(1) USDA shall immediately report
the licensee to:
(i) The U.S. Attorney General; and
(ii) The chief law enforcement officer
of the State or Indian territory, as
applicable, where the production is
located; and
(2) Paragraphs (a) and (b) of this
section shall not apply to culpable
violations.
§ 990.30 USDA producers; License
suspension.

(a) USDA may issue a notice of
suspension to a producer if USDA or its
representative receives some credible
evidence establishing that a producer
has:

PO 00000

Frm 00041

Fmt 4701

Sfmt 4700

58561

(1) Engaged in conduct violating a
provision of this part; or
(2) Failed to comply with a written
order from the USDA–AMS
Administrator related to negligence as
defined in this part.
(b) Any producer whose license has
been suspended shall not handle or
remove hemp or cannabis from the
location where hemp or cannabis was
located at the time when USDA issued
its notice of suspension, without prior
written authorization from USDA.
(c) Any person whose license has
been suspended shall not produce hemp
during the period of suspension.
(d) A producer whose license has
been suspended may appeal that
decision in accordance with subpart D
of this part.
(e) A producer whose license has been
suspended and not restored on appeal
may have their license restored after a
waiting period of one year from the date
of the suspension.
(f) A producer whose license has been
suspended may be required to complete
a corrective action plan to fully restore
the license.
§ 990.31

USDA licensees; Revocation.

USDA shall immediately revoke the
license of a USDA producer if such
producer:
(a) Pleads guilty to, or is convicted of,
any felony related to a controlled
substance; or
(b) Made any materially false
statement with regard to this part to
USDA or its representatives with a
culpable mental state greater than
negligence; or
(c) Is found to be growing cannabis
exceeding the acceptable hemp THC
level with a culpable mental state
greater than negligence or negligently
violated this part three times in five
years.
§ 990.32

Recordkeeping requirements.

(a) USDA producers shall maintain
records of all hemp plants acquired,
produced, handled, or disposed of as
will substantiate the required reports.
(b) All records and reports shall be
maintained for at least three years.
(c) All records shall be made available
for inspection by USDA inspectors,
auditors, or their representatives during
reasonable business hours. The
following records must be made
available:
(1) Records regarding acquisition of
hemp plants;
(2) Records regarding production and
handling of hemp plants;
(3) Records regarding storage of hemp
plants; and

E:\FR\FM\31OCR3.SGM

31OCR3

58562

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

(4) Records regarding disposal of all
cannabis plants that do not meet the
definition of hemp.
(d) USDA inspectors, auditors, or
their representatives shall have access to
any premises where hemp plants may
be held during reasonable business
hours.
(e) All reports and records required to
be submitted to USDA as part of
participation in the program in this part
which include confidential data or
business information, including but not
limited to information constituting a
trade secret or disclosing a trade
position, financial condition, or
business operations of the particular
licensee or their customers, shall be
received by, and at all times kept in the
custody and control of, one or more
employees of USDA or their
representatives. Confidential data or
business information may be shared
with applicable Federal, State, Tribal, or
local law enforcement or their designee
in compliance with the Act.
Subpart D—Appeals
§ 990.40 General adverse action appeal
process.

(a) Persons who believe they are
adversely affected by the denial of a
license application under the USDA
hemp production program may appeal
such decision to the AMS
Administrator.
(b) Persons who believe they are
adversely affected by the denial of a
license renewal under the USDA hemp
production program may appeal such
decision to the AMS Administrator.
(c) Persons who believe they are
adversely affected by the termination or
suspension of a USDA hemp production
license may appeal such decision to the
AMS Administrator.
(d) States and territories of Indian
Tribes that believe they are adversely
affected by the denial of a proposed
State or Tribal hemp plan may appeal
such decision to the AMS
Administrator.

khammond on DSKJM1Z7X2PROD with RULES3

§ 990.41 Appeals under the USDA hemp
production plan.

(a) Appealing a denied USDA-plan
license application. A license applicant
may appeal the denial of a license
application.
(1) If the AMS Administrator sustains
an applicant’s appeal of a licensing
denial, the applicant will be issued a
USDA hemp production license.
(2) If the AMS Administrator denies
an appeal, the applicant’s license
application will be denied. The
applicant may request a formal
adjudicatory proceeding within 30 days

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

to review the decision. Such proceeding
shall be conducted pursuant to the U.S.
Department of Agriculture’s Rules of
Practice Governing Adjudicatory
Proceedings, 7 CFR part 1, subpart H.
(b) Appealing a denied USDA-plan
license renewal. A producer may appeal
the denial of a license renewal.
(1) If the AMS Administrator sustains
a producer’s appeal of a licensing
renewal decision, the applicant’s USDA
hemp production license will be
renewed.
(2) If the AMS Administrator denies
the appeal, the applicant’s license will
not be renewed. The denied producer
may request a formal adjudicatory
proceeding within 30 days to review the
decision. Such proceeding shall be
conducted pursuant to the U.S.
Department of Agriculture’s Rules of
Practice Governing Formal Adjudicatory
Proceedings, 7 CFR part 1, subpart H.
(c) Appealing a USDA-plan license
termination or suspension. A USDA
hemp plan producer may appeal the
termination or suspension of a license.
(1) If the AMS Administrator sustains
the appeal of a license termination or
suspension, the producer will retain
their license.
(2) If the AMS Administrator denies
the appeal, the producer’s license will
be terminated or suspended. The
producer may request a formal
adjudicatory proceeding within 30 days
to review the decision. Such proceeding
shall be conducted pursuant to the U.S.
Department of Agriculture’s Rules of
Practice Governing Formal Adjudicatory
Proceedings, 7 CFR part 1, subpart H.
(d) Filing period. The appeal of a
denied license application, denied
license renewal, suspension, or
termination must be filed within the
time-period provided in the letter of
notification or within 30 business days
from receipt of the notification,
whichever occurs later. The appeal will
be considered ‘‘filed’’ on the date
received by the AMS Administrator.
The decision to deny a license
application or renewal, or suspend or
terminate a license, is final unless a
formal adjudicatory proceeding is
requested within 30 days to review the
decision. Such proceeding shall be
conducted pursuant to the U.S.
Department of Agriculture’s Rules of
Practice Governing Adjudicatory
Proceedings, 7 CFR part 1, subpart H.
(e) Where to file. Appeals to the
Administrator must be filed in the
manner as determined by AMS.
(f) What to include. All appeals must
include a copy of the adverse decision
and a statement of the appellant’s
reasons for believing that the decision
was not proper or made in accordance

PO 00000

Frm 00042

Fmt 4701

Sfmt 4700

with applicable program regulations in
this part, policies, or procedures.
§ 990.42 Appeals under a State or Tribal
hemp production plan.

(a) Appealing a State or Tribal hemp
production plan application. A State or
Tribe may appeal the denial of a
proposed State or Tribal hemp
production plan by the USDA.
(1) If the AMS Administrator sustains
a State or Tribe’s appeal of a denied
hemp plan application, the proposed
State or Tribal hemp production plan
shall be established as proposed.
(2) If the AMS Administrator denies
an appeal, the proposed State or Tribal
hemp production plan shall not be
approved. Prospective producers
located in the State or territory of the
Indian Tribe may apply for hemp
licenses under the terms of the USDA
plan. The State or Tribe may request a
formal adjudicatory proceeding be
initiated within 30 days to review the
decision. Such proceeding shall be
conducted pursuant to the U.S.
Department of Agriculture’s Rules of
Practice Governing Adjudicatory
Proceedings, 7 CFR part 1, subpart H.
(b) Appealing the suspension or
termination of a State or Tribal hemp
production plan. A State or Tribe may
appeal the revocation by USDA of an
existing State or Tribal hemp
production plan.
(1) If the AMS Administrator sustains
a State or Tribe’s appeal of a State or
Tribal hemp production plan
suspension or revocation, the associated
hemp production plan may continue.
(2) If the AMS Administrator denies
an appeal, the State or Tribal hemp
production plan will be suspended or
revoked as applicable. Producers
located in that State or territory of the
Indian Tribe may continue to produce
hemp under their State or Tribal license
until the end the calendar year in which
the State or Tribal plan’s disapproval
was effective or when the State or Tribal
license expires, whichever is earlier.
Producers may apply for a USDA
license under subpart C of this part
unless hemp production is otherwise
prohibited by the State or Indian Tribe.
The State or Indian Tribe may request
a formal adjudicatory proceeding be
initiated to review the decision. Such
proceeding shall be conducted pursuant
to the U.S. Department of Agriculture’s
Rules of Practice Governing Formal
Adjudicatory Proceedings, 7 CFR part 1,
subpart H.
(c) Filing period. The appeal of a State
or Tribal hemp production plan
suspension or revocation must be filed
within the time-period provided in the
letter of notification or within 30

E:\FR\FM\31OCR3.SGM

31OCR3

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations
business days from receipt of the
notification, whichever occurs later. The
appeal will be considered ‘‘filed’’ on the
date received by the AMS
Administrator. The decision to deny a
State or Tribal plan application or
suspend or revoke approval of a plan, is
final unless the decision is appealed in
a timely manner.
(d) Where to file. Appeals to the
Administrator must be filed in the
manner as determined by AMS.
(e) What to include in appeal. All
appeals must include a copy of the
adverse decision and a statement of the
appellant’s reasons for believing that the
decision was not proper or made in
accordance with applicable program
regulations in this part, policies, or
procedures.
Subpart E—Administrative Provisions
§ 990.60

Agents.

As provided under 7 CFR part 2, the
Secretary may name any officer or
employee of the United States or name
any agency or division in the United
States Department of Agriculture, to act
as their agent or representative in
connection with any of the provisions of
this part.
§ 990.61

Severability.

If any provision of this part is
declared invalid or the applicability
thereof to any person or circumstances
is held invalid, the validity of the
remainder of this part or the
applicability thereof to other persons or
circumstances shall not be affected
thereby.
§ 990.62

Expiration of this part.

This part expires on November 1,
2021 unless extended by notification in
the Federal Register. State and Tribal
plans approved under subpart B of this
part remain in effect after November 1,
2021 unless USDA disapproves the
plan. USDA hemp producer licenses
issued under subpart C of this part
remain in effect until they expire unless
USDA revokes or suspends the license.

khammond on DSKJM1Z7X2PROD with RULES3

§ 990.63

Interstate transportation of hemp.

No State or Indian Tribe may prohibit
the transportation or shipment of hemp
or hemp products lawfully produced
under a State or Tribal plan approved
under subpart B of this part, under a
license issued under subpart C of this
part, or under 7 U.S.C. 5940 through the
State or territory of the Indian Tribe, as
applicable.

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

Subpart F—Reporting Requirements
§ 990.70 State and Tribal hemp reporting
requirements.

(a) State and Tribal hemp producer
report. Each State and Tribes with a
plan approved under this part shall
submit to USDA, by the first of each
month, a report providing the contact
information and the status of the license
or other authorization issued for each
producer covered under the individual
State and Tribal plans. If the first of the
month falls on a weekend or holiday,
the report is due by the first business
day following the due date. The report
shall be submitted using a digital format
compatible with USDA’s information
sharing systems, whenever possible.
The report shall contain the information
described in this paragraph (a).
(1)(i) For each new producer who is
an individual and is licensed or
authorized under the State or Tribal
plan, the report shall include full name
of the individual, license or
authorization identifier, business
address, telephone number, and email
address (if available).
(ii) For each new producer that is an
entity and is licensed or authorized
under the State or Tribal plan, the report
shall include full name of the entity, the
principal business location address,
license or authorization identifier, and
the full name, title, and email address
(if available) of each employee for
whom the entity is required to submit
a criminal history record report.
(iii) For each producer that was
included in a previous report and whose
reported information has changed, the
report shall include the previously
reported information and the new
information.
(2) The status of each producer’s
license or authorization.
(3) The period covered by the report.
(4) Indication that there were no
changes during the current reporting
cycle, if applicable.
(b) State and Tribal hemp disposal
report. If a producer has produced
cannabis exceeding the acceptable hemp
THC level, the cannabis must be
disposed of in accordance with the
Controlled Substances Act and DEA
regulations found at 21 CFR 1317.15.
States and Tribes with plans approved
under this part shall submit to USDA,
by the first of each month, a report
notifying USDA of any occurrence of
non-conforming plants or plant material
and providing a disposal record of those
plants and materials. This report would
include information regarding name and
contact information for each producer
subject to a disposal during the
reporting period, and date disposal was

PO 00000

Frm 00043

Fmt 4701

Sfmt 4700

58563

completed. If the first of the month fall
on a weekend or holiday, reports are
due by the first business day following
the due date. The report shall contain
the information described in this
paragraph (b).
(1) Name and address of the producer.
(2) Producer license or authorization
identifier.
(3) Location information, such as lot
number, location type, and geospatial
location or other location descriptor for
the production area subject to disposal.
(4) Information on the agent handling
the disposal.
(5) Disposal completion date.
(6) Total acreage.
(c) Annual report. Each State or Tribe
with a plan approved under this part
shall submit an annual report to USDA.
The report form shall be submitted by
December 15 of each year and contain
the information described in this
paragraph (c).
(1) Total planted acreage.
(2) Total harvested acreage.
(3) Total acreage disposed.
(d) Test results report. Each producer
must ensure that the DEA-registered
laboratory that conducts the test of the
sample(s) from its lots reports the test
results for all samples tested to USDA.
The test results report shall contain the
information described in this paragraph
(d) for each sample tested.
(1) Producer’s license or authorization
identifier.
(2) Name of producer.
(3) Business address of producer.
(4) Lot identification number for the
sample.
(5) Name and DEA registration
number of laboratory.
(6) Date of test and report.
(7) Identification of a retest.
(8) Test result.
§ 990.71 USDA plan reporting
requirements.

(a) USDA hemp plan producer
licensing application. USDA will accept
applications from December 2, 2019
through November 2, 2020. Thereafter
applicants, may submit a USDA Hemp
Licensing Application to USDA from
August 1 through October 31 of each
year. Licenses will be valid until
December 31 of the year three years after
the license is issued. The license
application will be used for both new
applicants and for producers seeking
renewal of their license. The application
shall include the information described
in this paragraph (a).
(1) Contact information. (i) For an
applicant who is an individual, the
application shall include full name of
the individual, business address,
telephone number, and email address (if
available).

E:\FR\FM\31OCR3.SGM

31OCR3

58564

Federal Register / Vol. 84, No. 211 / Thursday, October 31, 2019 / Rules and Regulations

khammond on DSKJM1Z7X2PROD with RULES3

(ii) For an applicant that is an entity,
the application shall include full name
of the entity, the principal business
location address, and the full name,
title, and email address (if available) of
each key participant of the entity.
(2) Criminal history report. As part of
a complete application, each applicant
shall provide a current Federal Bureau
of Investigation’s Identity History
Summary. If the applicant is a business
entity, a criminal history report shall be
provided for each key participant.
(i) The applicant shall ensure the
criminal history report accompanies the
application.
(ii) The criminal history report must
be dated within 60 days of submission
of the application submittal.
(3) Consent to comply with program
requirements. All applicants submitting
a completed license application, in
doing so, consent to comply with the
requirements of this part.
(b) USDA hemp plan producer
disposal form. If a producer has
produced cannabis exceeding the
acceptable hemp THC level, the
cannabis must be disposed of in

VerDate Sep<11>2014

17:04 Oct 30, 2019

Jkt 250001

accordance with the Controlled
Substances Act and DEA regulations
found at 21 CFR 1317.15. Forms shall be
submitted to USDA no later than 30
days after the date of completion of
disposal. The report shall contain the
information described in this paragraph
(b).
(1) Name and address of the producer.
(2) Producer’s license number.
(3) Geospatial location, or other valid
land descriptor, for the production area
subject to disposal.
(4) Information on the agent handling
the disposal.
(5) Date of completion of disposal.
(6) Signature of the producer.
(7) Disposal agent certification of the
completion of the disposal.
(c) USDA hemp plan producer annual
report. Each producer shall submit an
annual report to USDA. The report form
shall be submitted by December 15 of
each year and contain the information
described in this paragraph (c).
(1) Producer’s license number.
(2) Producer’s name.
(3) Producer’s address.

PO 00000

Frm 00044

Fmt 4701

Sfmt 9990

(4) Lot, location type, geospatial
location, total planted acreage, total
acreage disposed, and total harvested
acreage.
(d) Test results report. Each producer
must ensure that the DEA-registered
laboratory that conducts the test of the
sample(s) from its lots reports the test
results for all samples tested to USDA.
The test results report shall contain the
information described in this paragraph
(d) for each sample tested.
(1) Producer’s license number.
(2) Name of producer.
(3) Business address of producer.
(4) Lot identification number for the
sample.
(5) Name and DEA registration
number of laboratory.
(6) Date of test and report.
(7) Identification of a retest.
(8) Test result.
Dated: October 28, 2019.
Bruce Summers,
Administrator, Agricultural Marketing
Service.
[FR Doc. 2019–23749 Filed 10–30–19; 8:45 am]
BILLING CODE 3410–02–P

E:\FR\FM\31OCR3.SGM

31OCR3