Controls To Enhance the Cultivation of Marihuana for Research in the United States

Published date18 December 2020
Citation85 FR 82333
Record Number2020-27999
SectionRules and Regulations
CourtDrug Enforcement Administration
Federal Register, Volume 85 Issue 244 (Friday, December 18, 2020)
[Federal Register Volume 85, Number 244 (Friday, December 18, 2020)]
                [Rules and Regulations]
                [Pages 82333-82355]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2020-27999]
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                DEPARTMENT OF JUSTICE
                Drug Enforcement Administration
                21 CFR Parts 1301 and 1318
                [Docket No. DEA-506]
                RIN 1117-AB54
                Controls To Enhance the Cultivation of Marihuana for Research in
                the United States
                AGENCY: Drug Enforcement Administration, Department of Justice.
                ACTION: Final rule.
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                SUMMARY: The Drug Enforcement Administration (DEA) is amending its
                regulations to facilitate the cultivation of marihuana for research
                purposes and other licit purposes to enhance compliance with the
                Controlled Substances Act, including registering cultivators consistent
                with treaty obligations. This final rule adopts, with minor
                modifications, the notice of proposed rulemaking published on March 23,
                2020, including regulations that govern applications by persons seeking
                to become registered with DEA to grow marihuana as bulk manufacturers,
                and regulations related to the purchase and sale of this marihuana by
                DEA.
                DATES: This final rule is effective January 19, 2021.
                FOR FURTHER INFORMATION CONTACT: Scott A. Brinks, Regulatory Drafting
                and Policy Support Section (DPW), Diversion Control Division, Drug
                Enforcement Administration; Mailing Address: 8701 Morrissette Drive,
                Springfield, Virginia 22152-2639; Telephone: (571) 362-3261.
                SUPPLEMENTARY INFORMATION:
                Legal Authority and Background
                 The Controlled Substances Act (CSA) requires all persons who seek
                to manufacture a controlled substance to obtain a DEA registration.\1\
                21 U.S.C. 822(a)(1). The CSA defines ``manufacture'' to include the
                ``production'' of a controlled substance, which in turn includes, among
                other things, the planting, cultivation, growing, or harvesting of a
                controlled substance. 21 U.S.C. 802(15), (22). Thus, any person who
                seeks to plant, cultivate, grow, or harvest marihuana 2 3
                [[Page 82334]]
                to supply researchers or for other uses permissible under the CSA (such
                as product development) must obtain a DEA manufacturing registration.
                Because marihuana is a schedule I controlled substance, applications by
                persons seeking to become registered to manufacture marihuana are
                governed by 21 U.S.C. 823(a). See generally 76 FR 51403 (2011); 74 FR
                2101 (2009), pet. for rev. denied, Craker v. DEA, 714 F.3d 17 (1st Cir.
                2013). DEA's Administrator has the authority to grant a registration
                under section 823(a). To do so, the Administrator must determine that
                two conditions are satisfied: (1) The registration is consistent with
                the public interest (based on the enumerated factors in section
                823(a)), and (2) the registration is consistent with U.S. obligations
                under the Single Convention on Narcotic Drugs, 1961 (``Single
                Convention'' or ``Treaty''), 18 U.S.T. 1407.\4\
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                 \1\ All functions vested in the Attorney General by the CSA have
                been delegated to the Administrator of DEA. 28 CFR 0.100(b).
                 \2\ This document uses both the CSA spelling ``marihuana'' and
                the modern spelling ``marijuana'' interchangeably.
                 \3\ As defined in Section 802(16).
                 \4\ Section 823(a) provides that the registrations to
                manufacture controlled substances in schedule I or II must be
                ``consistent with the public interest and with United States
                obligations under international treaties, conventions, or protocols
                in effect on May 1, 1971.'' The Single Convention entered into force
                for the United States on June 24, 1967. See Single Convention, 18
                U.S.T. 1407.
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                 In 2016, DEA issued a policy statement aimed at expanding the
                number of manufacturers who could produce marihuana for research
                purposes. See Applications to Become Registered under the Controlled
                Substances Act to Manufacture Marijuana to Supply Researchers in the
                United States, 81 FR 53846 (Aug. 12, 2016). Subsequently, the
                Department of Justice (DOJ) undertook a review of the CSA, including
                the requirement of section 823(a) that a registration to bulk
                manufacture a schedule I or II controlled substance must be consistent
                with United States obligations under international treaties such as the
                Single Convention, and determined that certain changes to its 2016
                policy were needed. As part of this review, in June 2018, the DOJ
                Office of Legal Counsel (OLC) prepared an opinion (``OLC Opinion''),
                now publicly available, examining DEA's policies and practices for
                granting bulk manufacturing registrations to marihuana growers in light
                of the CSA's requirement that DEA register manufacturers of schedule I
                and II controlled substances in a manner consistent with the Single
                Convention.\5\
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                 \5\ That opinion is available at http://www.justice.gov/olc/opinion/licensing-marijuana-cultivation-compliance-single-convention-narcotic-drugs.
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                 This rule is being implemented pursuant to the Administrator's
                authority under the CSA ``to promulgate rules and regulations and to
                charge reasonable fees relating to the registration and control of the
                manufacture, distribution, and dispensing of controlled substances,''
                21 U.S.C. 821, and to ``promulgate and enforce any rules, regulations,
                and procedures which he may deem necessary and appropriate for the
                efficient execution of his functions under [the CSA],'' 21 U.S.C.
                871(b).
                Summary of the Notice of Proposed Rulemaking
                 On March 23, 2020, DEA published a notice of proposed rulemaking
                (NPRM) in the Federal Register to (1) facilitate the cultivation of
                marihuana for research and licit purposes in compliance with the CSA,
                including a provision requiring consistency with the Single Convention;
                (2) amend DEA regulations pertaining to applications by persons seeking
                to become registered with DEA to grow marihuana as bulk manufacturers;
                and (3) establish regulations related to the purchase and sale of this
                marihuana by DEA. 85 FR 16292. This final rule responds to comments
                received concerning the proposed rule, and DEA is adopting the proposed
                rule with minor modifications to the regulations to be codified at 21
                CFR 1318.04, as described below.
                Discussion of Public Comments
                 DEA received comments from the general public, DEA registrants,
                applicants for registration to manufacture marijuana, organizations,
                associations, and a United States Senator. Some commenters expressed
                general support of the proposed rule because it will increase the
                number of DEA-registered bulk manufacturers of marihuana for research.
                Some commenters expressed general concern about the impact of the
                proposed rule. Other commenters expressed specific concerns about,
                among other things, the application process and applicant criteria,
                quality of marihuana produced, DEA's ability and authority to lead the
                program, controls for the purchase and sale of marihuana, harvest time,
                quota, and costs. Other commenters submitted comments that are outside
                of the scope of this rule.
                Application Process and Criteria
                 Commenters expressed concerns about the application process and the
                criteria for applicants. The following issues raised by the commenters,
                and DEA's response to each, fall under this category.
                 Issue 1: Many commenters stated that the approval process for
                applications takes too long and needs to be streamlined, suggesting
                that a timeframe for the approval or denial of applications should be
                determined, specifically within 30 days, 90 days, or six months of
                receipt of the application.
                 Response 1: DEA has a process for receiving, reviewing, and acting
                on applications for a DEA registration or re-registration, as described
                in 21 CFR part 1301. The process involves applicants submitting
                applications online or on paper and DEA evaluating all applications and
                supporting documentation submitted in accordance with the factors
                specified in 21 U.S.C. 823. The length of this process varies due to
                the detailed review performed by DEA, and as explained in the NPRM, a
                review of pending applications to manufacture marihuana has been
                delayed due to the need to establish the additional policies reflected
                in this rule. After receiving an application, DEA will send a
                questionnaire to the applicant to be completed and returned to DEA
                within 10 business days. DEA uses the information from the
                questionnaire and the application to determine whether the application
                should be granted under the factors specified in 21 U.S.C. 823. After
                the completed questionnaire is processed, DEA publishes a notice of
                application in the Federal Register, and current registrants and
                applicants for bulk manufacture of the same class of substance have 60
                days to comment on, or object to, the application, as required by 21
                CFR 1301.33. During the application process, DEA investigators also
                complete site visits and submit the appropriate reports to aid in the
                determination of whether to grant a registration. Because the process
                of evaluating an application to manufacture a schedule I controlled
                substance includes a 60-day public comment period, DEA cannot act on
                the application in a shorter timeframe, such as 30 days. Likewise, DEA
                must balance limited resources to conduct pre-registration vetting of
                numerous applicants, which impacts the length of time needed to
                complete the application process. As a result, DEA declines to adopt a
                specific approval date applicable to all applications for registration
                to bulk manufacture marihuana.
                 However, in accordance with 21 U.S.C. 823(i), for applications to
                manufacture a schedule I or II controlled substance for use only in a
                clinical trial, DEA will issue a notice of application not later than
                90 days after the application is accepted for filing. Additionally, DEA
                will register the applicant, or serve an order to show cause upon the
                applicant in accordance with 21 U.S.C. 824(c), not later than 90 days
                after the date on which the period
                [[Page 82335]]
                for comment pursuant to such notice ends, unless DEA has granted a
                hearing on the application under 21 U.S.C. 958(i). An applicant that
                believes it qualifies for review under these procedures should identify
                itself as an 823(i) applicant in its initial application for
                registration submitted to DEA. DEA will then determine whether the
                applicant qualifies for the review timeline specified under section
                823(i).
                 Issue 2: Some commenters suggested that when there is a denial, DEA
                should provide notice and allow a hearing.
                 Response 2: Pursuant to 21 U.S.C. 824(c) and 21 CFR 1301.37, when
                DEA proposes to deny an application, DEA must serve the applicant with
                an order to show cause setting forth the factual and legal basis for
                the proposed denial. The applicant may file a request for a hearing, in
                accordance with 21 CFR 1301.43. If a hearing is requested, DEA will
                hold the hearing in accordance with the provisions for formal
                adjudications set forth in the Administrative Procedure Act and DEA
                regulation found at 21 CFR 1316 subpart D.
                 Issue 3: Another commenter stated that DEA used an internal
                memorandum to delay approval of applications to bulk manufacture
                marihuana.
                 Response 3: As mentioned in the NPRM, after the 2016 marihuana
                grower policy statement issued by DEA,\6\ DOJ reviewed DEA's policies
                and practices for issuing bulk marihuana manufacturing registrations in
                light of the CSA and determined that DEA needed to amend its
                policies.\7\ DEA has acted as expeditiously as possible to amend its
                policies to ensure consistency with the Single Convention as required
                by the CSA, while increasing the number of marihuana growers for
                research purposes. DOJ and DEA fully support research into the effects
                of marihuana and the potential medical utility of its chemical
                constituents, and DEA is working to expand the number of DEA-registered
                bulk manufacturers of marijuana, including through the finalization of
                this rule.
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                 \6\ Applications to Become Registered under the Controlled
                Substances Act to Manufacture Marijuana to Supply Researchers in the
                United States,'' 81 FR 53846 (Aug. 12, 2016).
                 \7\ The Attorney General determined that adjustments were
                necessary after receiving the aforementioned advisory OLC Opinion.
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                 Issue 4: One commenter requested that DEA make the revised Form 225
                and updated questionnaire available online for applicants.
                 Response 4: As required by the Paperwork Reduction Act (PRA), DEA
                must receive approval from the Office of Management and Budget (OMB)
                when a rule creates a new information collection or modifies an
                existing collection. This approval must be granted before an agency can
                use a revised form. In the NPRM, DEA discussed the modification of the
                existing information collection which would revise Form 225 and add
                questionnaires to the registration application process. Within the PRA
                section of the NPRM, DEA explained that an interested party could
                contact DEA for a copy of the form and questionnaires. The revision of
                the collection is awaiting approval; and, as such, DEA cannot yet post
                the proposed revisions to the form online for applicants. However,
                after the form has been approved, DEA will post the application to its
                website, and an applicant can complete and submit it online. DEA will
                then send the applicable questionnaires to the applicant after the
                application has been received.
                 Issue 5: Some commenters believe that DEA's consideration of an
                applicant's compliance with Federal marihuana law would exclude
                qualified applicants, specifically those who operate in compliance with
                State laws that are inconsistent with Federal law.
                 Response 5: Congress has established by statute the factors that
                DEA must consider when evaluating whether to grant an application for
                registration. For an applicant to manufacture a schedule I or II
                controlled substance, DEA must consider, among other factors, the
                applicant's ``compliance with applicable State and local law;'' ``prior
                conviction record . . . under Federal and State laws relating to the
                manufacture, distribution, or dispensing of such substances;'' ``past
                experience in the manufacture of controlled substances, and the
                existence in the establishment of effective control against
                diversion;'' and ``such other factors as may be relevant to and
                consistent with the public health and safety.'' 21 U.S.C. 823(a). An
                applicant that has manufactured marijuana without obtaining a DEA
                registration has violated Federal law, see 21 U.S.C. 841(a), regardless
                of whether that manufacturer has violated the laws of the State in
                which the applicant is located. Such activity is relevant to past
                experience in the manufacture of a schedule I controlled substance,
                past experience in preventing diversion of a controlled substance from
                other than DEA-authorized sources, and the promotion and protection of
                public health and safety. Moreover, prior conduct in violation of the
                CSA is relevant to determining whether the applicant can be entrusted
                with the responsibilities associated with being a DEA registrant.
                Indeed, DEA registration is a fundamental component of the CSA, and it
                is wholly appropriate to consider an applicant's past noncompliance
                with the CSA when deciding whether to grant a registration under the
                Act. DEA will consider all relevant factors for each individual
                applicant, on a case-by-case basis, when determining whether to grant
                registration, as provided for in 21 U.S.C. 823(a) and the regulatory
                text at 21 CFR 1318.05. While the DEA Administrator has discretion to
                weigh the statutory factors and any one factor need not be dispositive,
                an applicant's prior compliance with Federal law is a relevant
                consideration when determining whether to grant an application for
                registration.
                 Issue 6: A commenter suggested that a notice of exemption for a new
                drug application issued by the Food and Drug Administration (FDA) be an
                alternative to obtaining a DEA registration.
                 Response 6: The CSA requires anyone seeking to manufacture or
                distribute controlled substances to apply for and obtain a DEA
                registration. 21 U.S.C. 822(a)(1). Using FDA's authorization of a
                notice of exemption for a new drug application would not be in
                compliance with the CSA and therefore cannot be considered an
                alternative for obtaining a DEA registration.
                 Issue 7: A commenter opined that applicants should only be required
                to submit proof of State-issued marihuana licenses to DEA, after DEA
                approves the application.
                 Response 7: The CSA requires anyone seeking to manufacture or
                distribute controlled substances to apply for and obtain a DEA
                registration. 21 U.S.C. 822(a)(1). In assessing the application, DEA
                also weighs the applicant's compliance with applicable State law. 21
                U.S.C. 823(a)(2). DEA has always required applicants seeking to
                manufacture a controlled substance to obtain and submit a valid State
                pharmaceutical manufacturer's license to demonstrate compliance with
                State law. Likewise, an applicant seeking to manufacture marihuana must
                submit evidence that it possesses a valid State manufacturer's license
                as part of its application, or explain why no such license is required
                by the State to manufacture marihuana for use in research. This
                evidence must be submitted to DEA as part of the determination of
                whether to grant a registration.
                 Issue 8: Some commenters suggested that the registration
                requirement be waived for marihuana growers (manufacturers) who will be
                supplying
                [[Page 82336]]
                marihuana to researchers under 21 U.S.C. 822(d).
                 Response 8: DEA-registered researchers are not currently allowed to
                obtain marihuana from entities that are not registered with DEA. DEA is
                permitted to waive the registration requirement if it finds that doing
                so is ``consistent with the public health and safety,'' pursuant to 21
                U.S.C. 822(d), and acting under authority delegated by the Attorney
                General. However, DEA has never previously waived the registration
                requirement to allow controlled substances to be manufactured outside
                the closed system of distribution, and doing so would be incompatible
                with the framework of the CSA, which is predicated on registration,
                recordkeeping, and other measures of accountability throughout the
                distribution chain. In addition, waiving the requirement of
                registration for marihuana growers who supply researchers would be
                inconsistent with U.S. obligations under the Single Convention.\8\ It
                should also be noted that supplying marihuana to researchers does not
                demonstrate that the material being supplied has been produced in
                accordance with other Federal laws. As a result, DEA does not consider
                such a waiver of registration for a bulk manufacturer to be a legally
                viable option.
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                 \8\ See OLC Op., supra note 5, at 7.
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                 The scope of this rule addresses the registration of manufacturers
                of marihuana, not researchers of marihuana. To the degree that the
                commenters were seeking to exempt marihuana researchers, rather than
                manufacturers, from registration, in addition to the foregoing concerns
                about adherence to treaty obligations, DEA does not at this time
                conclude that there is a public health need to exempt schedule I
                researchers from DEA registration. DEA notes that over the last several
                years, there has been a 149 percent increase in the number of active
                researchers registered with DEA to perform bona fide research with
                marihuana, marihuana extracts, and marihuana derivatives (from 237 in
                November 2014 to 589 in June 2020). At present, more researchers are
                registered to conduct research in the United States on marihuana,
                marihuana extracts, and marihuana derivatives than on any other
                schedule I substance, and more than 72 percent of DEA's total schedule
                I research registrant population (589 of 808 as of June 2020) is
                registered to conduct research on these substances. As a result, DEA
                concludes that there is not currently a public health need to exempt
                researchers from the registration requirement.
                 Issue 9: Other commenters suggested that DEA-registered researchers
                should be exempt from applying for DEA manufacturer registrations if
                the researchers are growing marihuana for their own studies and not for
                distribution.
                 Response 9: As reflected in this rule, any person lawfully growing
                marihuana must be registered with DEA to allow DEA to fulfill its
                obligations under the CSA. For the reasons discussed above, DEA has
                concluded that this requirement cannot be waived for researchers. Thus,
                under this final rule, when an applicant, including a researcher
                growing for his or her own use, is approved to grow marihuana, the
                applicant is registered as a bulk manufacturer. After the applicant is
                approved as a bulk manufacturer, the registrant must apply for and be
                issued an individual manufacturing quota (IMQ) for the amount of
                marihuana it needs to manufacture to meet the legitimate research and
                scientific needs of its customers. If the manufacturer plans to use the
                marihuana grown in bulk for its own research, it will also need to
                apply for a procurement quota. Under this rule, the DEA registrant must
                sell their harvest to DEA and then purchase from DEA the amount that
                they are allowed to procure based on the procurement quota issued to
                them. As such, DEA cannot exempt a researcher from the requirement of a
                DEA manufacturing registration even if they plan to use the marihuana
                grown for their own studies.
                 Issue 10: A few commenters suggested applicants who applied to be
                registered to grow marihuana soon after DEA published its 2016
                marihuana growers policy should receive priority over more recent
                applicants. On the other hand, some commenters suggested that DEA
                should not delay consideration of new marihuana grower applications
                submitted after this rule is promulgated, as 21 CFR 1318.05(c)
                provides. In particular, some commenters expressed confusion about the
                ``limited exception'' to this delay noted in the NPRM and suggested
                that the limited exception should apply to all applicants.
                 Response 10: As previously stated in the NPRM, applications
                received after the date the final rule becomes effective will not be
                considered until all of the applications currently pending have been
                approved or denied, unless an application requires action under 21
                U.S.C. 823(i). Applications already submitted will receive priority,
                and as a result, DEA will not have to restart its consideration of the
                pool of pending applications whenever a new application is submitted.
                 As described in the NPRM, the ``limited exception'' refers to the
                review of applications claiming the benefit of the statutory timeline
                of 21 U.S.C. 823(i). Congress has set the timeline for review of such
                applications by statute. That timeline will apply in lieu of the
                provision at 21 CFR 1318.05(c) for applicants that clearly identify
                themselves as 823(i) applicants in their original application, and for
                which DEA determines that the applicant qualifies for review under
                823(i).
                 Issue 11: Another commenter suggested that the number of applicants
                selected to bulk manufacture marihuana should be unlimited and that DEA
                should consider the bulk manufacture of marihuana as a coincident
                activity to a researcher registration.
                 Response 11: The CSA mandates that DEA consider the maintenance of
                effective controls against diversion by limiting the bulk manufacture
                to a number of establishments which can produce an adequate and
                uninterrupted supply of marihuana under adequately competitive
                conditions for legitimate medical, scientific, research, and industrial
                purposes. 21 U.S.C. 823(a)(1). By statute, DEA is not allowed to
                register an unlimited amount of manufacturers, and DEA must perform an
                analysis of each application to determine whether the addition of the
                applicant is necessary to provide the adequate and uninterrupted supply
                of marihuana for research needs or whether the legitimate need will be
                met by the registration of others.
                 Currently, researchers are only permitted to manufacture as a
                coincident activity in limited quantities as set forth in a protocol
                approved by DEA in the researcher's registration application (or re-
                registration application), and to the extent that manufacture is not
                for the purposes of dosage form development. 21 CFR 1301.13(e)(1). A
                researcher's planting, cultivating, growing, or harvesting of marihuana
                does not constitute such a coincident activity to research. Rather, the
                planting, cultivating, growing, or harvesting of marihuana requires a
                manufacturer registration obtained under 21 U.S.C. 823(a), even when
                the researcher is growing the marihuana for his or her own research
                use. See 21 CFR 1301.33(d). As described in response to Issue 9, and in
                the section on quota that follows, international treaties require that
                DEA control manufacturing of marijuana and other schedule I and II
                controlled substances by means of quota. Although regulatory provisions
                allow for the approval of certain small-
                [[Page 82337]]
                scale manufacturing pursuant to a DEA-approved protocol, significant
                manufacturing, including for research purposes, must be performed
                pursuant to a quota to maintain effective controls against diversion.
                As a result, researchers must register with DEA as manufacturers to
                engage in significant manufacture of controlled substances, even if the
                manufactured substances will exclusively be used in the grower's own
                research.
                 In addition, the Single Convention obligates a single government
                agency of the United States to purchase and take possession of all
                marihuana manufactured, and DEA has concluded this includes marihuana
                manufactured for research even when manufactured for use in research by
                the grower. By requiring all planting, cultivating, growing, and
                harvesting of marihuana be performed by DEA registered manufacturers,
                DEA can ensure that the controls set forth in the Single Convention are
                properly applied to all registrations to manufacture marihuana for
                research.
                 Issue 12: Other commenters suggested that the criteria for
                applicants should include the applicant's ability to produce high
                quality marihuana while another commenter suggested that applicants
                should have prior experience producing quality cannabis or hemp.
                 Response 12: The CSA provides that two conditions must be satisfied
                for an applicant to become a registrant: (1) The registration must be
                consistent with the public interest, and (2) the registration must be
                consistent with U.S. obligations under the Single Convention on
                Narcotic Drugs. Congress defined the factors for DEA to evaluate
                whether granting a registration is consistent with the public interest
                in 21 U.S.C. 823(a), and the burden lies with the applicant to
                demonstrate that the application meets those factors. Under those
                factors, DEA will consider the applicant's ``past experience in the
                manufacture of controlled substances'' and its ``promotion of technical
                advances in the art of manufacturing these substances,'' including the
                applicant's ability to consistently produce and supply cannabis of a
                high quality and defined chemical composition. Sec. 1318.05(b)(2). DEA
                must also consider the applicant's overall past experience with
                controlled substances in relation to preventing diversion.
                 Issue 13: Some commenters suggested DEA establish application
                requirements or committees that ensure diversity and inclusion of
                minority applicants. Other commenters suggested DEA provide regulatory
                provisions that afford economic opportunities to communities that have
                been disproportionately impacted by substance abuse and illicit drug
                markets and make application selection inclusive to include rural
                farmers, racial minorities, and disabled persons.
                 Response 13: DEA gives all applicants equal treatment regardless of
                the gender, race, socioeconomic status, or disabled status of the
                applicant. The only criteria used to evaluate the application for
                registration are those factors defined by Congress at 21 U.S.C. 823(a).
                See 21 CFR 1318.05.
                 Issue 14: Another commenter inquired whether manufacturers would be
                permitted to develop contracts, partnerships, or cooperative agreements
                with international research and development firms.
                 Response 14: Registrants are permitted to import and export
                controlled substances, including marihuana, in accordance with the
                criteria defined at 21 U.S.C. 952(a) (import) and 21 U.S.C. 953(a)
                (export), and after obtaining registration in accordance with 21 U.S.C.
                958. After obtaining a registration to manufacture marihuana, the
                applicant may form agreements with international firms, but, if the
                importation or exportation of marihuana or another controlled substance
                will be involved as part of the agreement, it must ensure that any such
                importation or exportation complies with 21 U.S.C. 952, 953, and 958,
                and the relevant implementing regulations. Moreover, in addition to
                these general regulatory requirements, Sec. 1318.04(b) of this rule
                specifically requires prior written notice to DEA of each proposed
                importation or exportation of marihuana, and DEA's express written
                authorization for the importation or exportation.
                Quality of Marihuana
                 DEA received a number of comments that expressed concerns about the
                quality of marihuana that will be produced under this rule.
                 Issue 1: Some commenters stated that the current quality of
                marihuana produced for Federal research is of poor quality.
                 Response 1: The purpose of this rule is to increase the number and
                variety of marihuana growers in order to diversify the supply available
                to researchers. As proposed in the NPRM and finalized in this rule, one
                of the selection criteria for marijuana grower applicants is the
                ``applicant's ability to consistently produce and supply cannabis of a
                high quality and defined chemical composition.'' 21 CFR 1318.05(b)(2).
                 Issue 2: A few commenters suggested that samples of marihuana
                should be tested to determine the quality prior to sales transactions
                and that manufacturers should be allowed to send samples of crops
                before and after harvest to analytical labs for testing, prior to DEA
                taking possession.
                 Response 2: DEA has no objection to DEA-registered marihuana
                growers and buyers exchanging samples or sending such samples to
                analytical labs for testing so long as this exchange occurs in a manner
                consistent with the CSA, and is amending the rule to make this clear.
                DEA understands that it is necessary for registered growers to engage
                in sampling and testing prior to harvest or DEA taking possession of
                the crop for growers to demonstrate compliance with contractual
                specifications to their researcher customers. Prior to the agency
                taking possession of the marihuana harvest, a registered grower may
                collect samples and distribute those samples to a DEA-registered
                analytical laboratory for analysis. It is consistent with the Single
                Convention to permit growers to conduct sampling and exclude the
                samples from the total crop that DEA is required to purchase and
                possess because the Single Convention plainly contemplates that growers
                will be able to harvest and sell their marijuana crops, and without
                sampling, sales would be practically impossible because the final
                intended purchaser could not know whether the marijuana is acceptable
                for purchase.
                 DEA is thus modifying the regulations proposed in the NPRM to add a
                new section at 21 CFR 1318.04(d). This new section explicitly permits
                DEA-registered manufacturers of marihuana to collect samples and
                distribute them to DEA-registered analytical laboratories for chemical
                analysis prior to DEA taking possession of the marihuana grown.
                However, to limit the risk of diversion and keep the distribution
                within the legitimate purposes permitted by the CSA, the quantity of
                samples collected and distributed must be small.
                 Issue 3: Some commenters stated that the time it takes DEA to take
                possession of the marihuana could negatively impact the quality of
                marihuana.
                 Response 3: To minimize the risk of diversion and delays that may
                impact the quality of the crop, DEA intends to take physical possession
                of the crop after harvest and distribute marihuana to the purchaser as
                soon as practicable.
                 Issue 4: Many commenters expressed concerns that DEA is excluded
                from liability for any damage to crops that may occur while in DEA's
                possession, and that there are no regulations to ensure the quality of
                marihuana while
                [[Page 82338]]
                in DEA's possession. Other commenters stated that there is no process
                or remedy for the damage or loss of crops that could occur while in
                DEA's possession.
                 Response 4: DEA assesses the risk of marihuana crops being lost or
                damaged while in DEA's possession to be low. DEA does not anticipate
                retaining possession of marihuana crops for long periods of time; in
                most instances, they will be transferred quickly from the seller to the
                buyer, with DEA's possession being as brief as possible to effectuate
                its role in transferring the marihuana from buyer to seller. In
                addition, crops in DEA's possession are largely expected to be
                maintained at the manufacturer's registered location, in a secure
                location designated by DEA. Accordingly, crops are highly unlikely to
                be damaged or lost in DEA's possession. To avoid costly and unnecessary
                disputes related to any loss or damage of crops, Sec. 1318.07 makes
                clear that DEA has no liability with regard to the performance of any
                of the terms agreed to by a grower and buyer of marihuana, including
                but not limited to the quality of the marihuana. In effect, this rule
                makes clear that buyers and sellers should structure their marihuana
                transactions to minimize the risk of damage or disputes over quality,
                rather than expecting DEA to mediate or bear the costs of such
                disputes.
                 DEA recognizes that some growers and buyers may wish the DEA to
                assume a greater role in assuring the quality of marihuana supplied to
                researchers. Doing so, however, could significantly increase DEA's
                costs for operating the marihuana grower program, which would then be
                transferred to growers and buyers in the form of increased
                administrative fees. Thus, given the relatively low risk that crops
                will be lost or damaged in DEA's possession, DEA has concluded that the
                program will provide marihuana to researchers most efficiently if DEA
                does not assume any role in quality assurance and accordingly does not
                assume liability for such risks.
                 Issue 5: One commenter inquired how DEA will ensure availability of
                different strains of marihuana for research.
                 Response 5: DEA does not have the authority to dictate the strains
                of marihuana to be produced by growers. Rather, DEA believes that
                market forces will drive the strains of marihuana materials that
                growers will produce, and the purchasers will be able to choose which
                DEA-registered grower they believe will best produce the strains or
                quality of marihuana that will meet their needs. The factors that the
                Administrator will consider in granting a registration to grow
                marihuana will be consistent with the public interest factors set forth
                in section 21 U.S.C. 823(a), including the applicant's ability to
                consistently produce and supply high quality marihuana and defined
                chemical composition and other criteria as specified in 21 CFR 1318.05.
                 Issue 6: Some commenters suggested that DEA-registered researchers
                be allowed to obtain marihuana and marihuana products from State-
                authorized sources for the purpose of Federal research.
                 Response 6: The CSA requires anyone seeking to manufacture or
                distribute controlled substances to apply for and obtain a DEA
                registration. 21 U.S.C. 822(a)(1). State licenses to manufacture
                marijuana do not satisfy the requirements of Federal law. See id.; 21
                U.S.C. 841(a)(1). Therefore, possession of a license to manufacture
                marijuana issued by a State government or agency does not meet the
                requirements of the CSA and cannot be accepted in lieu of DEA
                registration to manufacture or distribute. Registrants, including
                researchers, are only authorized to possess, manufacture, distribute,
                or dispense controlled substances ``to the extent authorized by their
                registration and in conformity with the other provisions'' of the CSA.
                21 U.S.C. 822(b).
                 DEA does not view the receipt of a schedule I substance from a non-
                registrant, distributed in violation of Sec. 841(a), to be ``in
                conformity with the other provisions'' of CSA as required of
                registrants by Sec. 822(b). The receipt of controlled substances from
                outside the CSA's closed system of distribution is incompatible with
                the framework of the CSA, which is predicated on registration,
                recordkeeping, and other measures of accountability throughout the
                distribution chain. In addition, as discussed above, the CSA--including
                a provision that requires consistency with the Single Convention--
                requires DEA to, among other things, register marihuana growers and
                take possession of all marihuana crops. Thus, authorizing researchers
                to obtain marihuana from unregistered sources is inconsistent with the
                Single Convention, and with DEA's CSA enforcement duties. Authorizing
                such research using marihuana from unregistered sources may also be
                inconsistent with the requirements of other Federal laws, as well as
                DEA's broader obligation to authorize controlled substances research in
                a manner consistent with the public safety.
                 Moreover, such a change is unnecessary. By registering additional
                marihuana growers pursuant to this rule, DEA will expand researchers'
                access to marihuana in accordance with the CSA, and in a manner that
                supports the public health.
                 Issue 7: Some commenters suggested that growers should be allowed
                to perform marihuana-related activities that are State-sanctioned but
                violate Federal law, such as distributing marihuana to recreational
                users, in the same facilities as DEA-authorized marihuana-related
                activities to save costs.
                 Response 7: As previously explained, DEA cannot authorize marihuana
                growers to violate the CSA or other Federal laws. Endorsing the
                production of marihuana outside the CSA's closed system of distribution
                would be incompatible with the framework of the CSA, which is
                predicated on registration, recordkeeping, and other measures of
                accountability throughout the distribution chain. Authorizing such
                activities would also be inconsistent with the Single Convention, and
                with DEA's CSA enforcement duties, as well as contrary to other Federal
                laws.
                Federal Agency Obligations Pertaining to Cannabis Controls
                 DEA received several comments regarding the division of authority
                between agencies in regulating the growing of marijuana for scientific
                research.
                 Issue 1: DEA received comments asserting that scientific or public
                health-based agencies such as the Department of Health and Human
                Services (HHS), National Institutes of Health (NIH), FDA, or Department
                of Agriculture should oversee the marihuana grower program. Some of
                these commenters also suggested that the CSA be amended by Congress to
                allow a health-related agency to be in charge of this program.
                Similarly, a commenter suggested that DEA contract with a private third
                party and authorize that contractor to carry out the functions
                described in this rule.
                 Response 1: DEA agrees that HHS and other Federal agencies can
                offer valuable insights into how the Federal government can best
                oversee the provision of marihuana for legitimate scientific research.
                DEA is committed to collaborating with HHS and other Federal agencies
                to ensure marihuana is available to meet the research and scientific
                needs of the United States, and that this rule is implemented with
                minimal disruption of the National Institute on Drug Abuse (NIDA) Drug
                Supply Program (DSP). That said, as a matter of current law, any
                registration and coordination of legitimate marihuana growing in the
                United States will be overseen solely by DEA, not
                [[Page 82339]]
                other Federal agencies. In other words, even if DEA preferred other
                Federal agencies to carry out these functions, as DOJ has interpreted
                the CSA, including a provision requiring that registrations be
                consistent with U.S. obligations under the Single Convention, it would
                be unlawful for DEA to transfer these functions to another Federal
                agency. Commenters' suggestions that the law should be changed are
                beyond the scope of this rulemaking: This rulemaking must follow the
                law, as enacted by Congress.\9\
                ---------------------------------------------------------------------------
                 \9\ The relevant law is briefly summarized here but is discussed
                in greater depth in the aforementioned OLC Opinion.
                ---------------------------------------------------------------------------
                 As discussed above and in the NPRM, under the CSA, DEA may only
                grant a person a registration to grow marihuana if: (1) The
                registration is consistent with the public interest, and (2) the
                registration is consistent with U.S. obligations under the Single
                Convention. See 21 U.S.C. 823(a). Accordingly, DEA may only grant
                marihuana grower registrations which are consistent with U.S.
                obligations under the Single Convention. Article 23(2) of the Single
                Convention, which is applicable to the cultivation of marihuana through
                Article 28, describes five functions related to the distribution,
                supervision, and licensing of marihuana cultivation \10\ that the
                United States is obligated to fulfill as part of a regulatory scheme
                that authorizes the growing of marihuana.
                ---------------------------------------------------------------------------
                 \10\ The five functions of Article 23(2) of the Single
                Convention are as follows: (1) Designate the areas in which, and the
                plots of land on which, cultivation of the cannabis plant for the
                purpose of producing cannabis or cannabis resin shall be permitted;
                (2) ensure that only cultivators licensed by the agency shall be
                authorized to engage in such cultivation; (3) ensure that each
                license shall specify the extent of the land on which the
                cultivation is permitted; (4) require all cultivators of the
                cannabis plant to deliver their total crops of cannabis and cannabis
                resin to the agency and ensure that the agency purchases and takes
                physical possession of such crops as soon as possible, but not later
                than four months after the end of the harvest; and (5) have the
                exclusive right of importing, exporting, wholesale trading, and
                maintaining stocks of cannabis and cannabis resin, except that this
                exclusive right need not extend to medicinal cannabis, cannabis
                preparations, or the stocks of cannabis and cannabis resin held by
                manufacturers of such medicinal cannabis and cannabis preparations.
                ---------------------------------------------------------------------------
                 The Single Convention requires that these five functions ``be
                discharged by a single government agency if the constitution of the
                Party concerned permits it.'' Single Convention art. 23(3).\11\ Nothing
                in the U.S. Constitution precludes the United States from discharging
                all five of those controls through one government agency, so a single
                U.S. Federal agency must perform all five of the controls. Further, by
                requiring that the functions be discharged by a government agency, the
                Single Convention prohibits the United States from assigning them to a
                private government contractor.
                ---------------------------------------------------------------------------
                 \11\ The Commentary to the Single Convention notes that this is
                in order to facilitate national planning and coordinated management
                of the various tasks imposed upon a country by Article 23, and that
                in countries where more than one agency is needed to perform these
                tasks on constitutional grounds, administrative arrangements should
                be made to ensure the required coordination.
                ---------------------------------------------------------------------------
                 Through the CSA, Congress assigned the first three of the Single
                Convention functions to DEA by authorizing DEA--and, at least at the
                Federal level, DEA alone--to register and regulate marihuana growers:
                Under the CSA, DEA effectively designates the area in which the
                marihuana cultivation is permitted, limits marihuana growers to those
                it licenses, and specifies the extent of the land on which marihuana
                cultivation is permitted as required by the Single Convention. Thus, to
                fully comply with the CSA provision requiring consistency with the
                Single Convention, DEA also must perform the remaining two functions of
                Article 23: Taking possession of marihuana crops after harvest and
                maintaining the exclusive right of importing, exporting, wholesale
                trading, and maintaining stocks of marihuana and its resin. Congress
                granted DEA the power to enforce these provisions by directing DEA to
                grant registrations if the registrations are consistent with U.S.
                obligations under the Single Convention. 21 U.S.C. 823(a).\12\
                ---------------------------------------------------------------------------
                 \12\ These issues are discussed further in the OLC Opinion.
                ---------------------------------------------------------------------------
                 Therefore, Congress has assigned DEA the duty and authority to
                carry out the five functions the Federal government is required to
                perform under the Single Convention if it authorizes the production of
                marihuana. DEA has no authority to assign these functions to another
                agency or a private contractor outside the government. Rather, DEA must
                perform the functions itself, and this rule will enable DEA to do so
                more effectively.
                 Issue 2: Another commenter suggested that NIDA be completely
                removed from any role in supplying marihuana to researchers.
                 Response 2: Marihuana research can be enhanced by allowing other
                growers to supply marihuana to researchers. However, scientific and
                medical research is likely to benefit from the NIDA DSP's continued
                involvement in these efforts. As discussed in the NPRM and further
                discussed below, the NIDA DSP has long played a fundamental role in
                supplying marihuana to researchers. In doing so, the NIDA DSP has
                acquired valuable experience and expertise in the production of
                marihuana. Moreover, because researchers currently obtain their
                marihuana though the NIDA DSP, the continued operation of the NIDA DSP
                will allow researchers who wish to continue to receive such NIDA DSP
                marihuana to do so with minimal disruption. Ultimately, the purpose of
                this rule is to expand researchers' options for obtaining marihuana,
                not eliminate them, a result best achieved by allowing the NIDA DSP to
                continue to operate, while also registering additional marihuana
                growers.
                 Issue 3: Some commenters suggested that DEA and DOJ misinterpreted
                the Single Convention. Some commenters stated that DEA is
                inappropriately using the Single Convention requirements as a
                justification to maintain exclusive control over marihuana sales/
                purchases. Another commenter suggested that DEA's view of the Single
                Convention is too narrow and not aligned with other parties to the
                Single Convention with respect to Article 23. This same commenter
                suggested that the United States withdraw from the Single Convention
                and rejoin with a formal reservation opting out of the cannabis related
                provisions of the Single Convention. Some other commenters suggested
                DEA initiate the process to amend the treaty to accomplish its intent
                of allowing robust research to be performed.
                 Response 3: As a matter of law, the CSA requires that registrations
                to manufacture schedule I and II controlled substances be consistent
                with U.S. obligations under the Single Convention, which requires a
                single government agency to regulate the cultivation of and certain
                trading in marihuana, including taking possession of marihuana after
                harvest.\13\ The CSA assigns this function to the Attorney General, who
                has delegated this statutory authority to the DEA Administrator. The
                CSA therefore requires DEA to grant registrations that are consistent
                with U.S. obligations under the Single Convention, which includes
                regulating the cultivation of and certain trading in marihuana. DEA
                acknowledges some may disagree with these legal conclusions, but DEA is
                bound by the law as DOJ and DEA understand it. Whether the Single
                Convention's or the CSA's controls of marihuana should be amended and
                whether the United States should withdraw from the Single Convention
                [[Page 82340]]
                are beyond the scope of this rulemaking and DEA's authority. This
                rulemaking must be consistent with DEA's obligations under the CSA,
                including granting registrations which are consistent with the Single
                Convention as it currently stands.
                ---------------------------------------------------------------------------
                 \13\ As noted, the relevant legal considerations are explored in
                greater detail in the aforementioned OLC Opinion.
                ---------------------------------------------------------------------------
                 Issue 4: Some commenters believe that DEA's increased involvement
                in the provision of marihuana to researchers would have an adverse
                impact on clinical research, clinical trials, and the creation of
                cannabis preparations.
                 Response 4: As explained elsewhere in this rulemaking, DEA
                anticipates this rule will increase researchers' access to marihuana
                for medical and scientific research. At present, researchers must
                obtain marihuana for researchers through the NIDA DSP, and researchers
                who wish can continue to do so with minimal disruption. However, this
                rule will also allow researchers to legally obtain marihuana from other
                DEA-registered growers. DEA's involvement in that process will be
                limited, as set forth in these regulations, to those activities
                required by the CSA.
                 Issue 5: Another commenter suggested that DEA allow researchers to
                possess marihuana without restriction and that DEA's role in regulating
                the growing of marihuana be completely eliminated.
                 Response 5: As explained above, the CSA requires any person seeking
                to manufacture or distribute controlled substances to apply for and
                obtain a DEA registration. 21 U.S.C. 822(a)(1). More broadly, marihuana
                remains a schedule I controlled substance, and as such has a high
                potential for abuse and no currently accepted medical use in treatment
                in the United States. See, e.g., Denial of Petition to Initiate
                Proceedings to Reschedule Marijuana, 81 FR 53687 (Aug. 12, 2016).
                Allowing the cultivation of marihuana for research without a DEA
                registration or otherwise regulating this activity would be
                incompatible with the CSA and its requirement of consistency with the
                Single Convention; it would also fail to protect public health and
                safety from the danger of that marihuana being diverted and abused.
                 Issue 6: One commenter suggested that the NPRM is incompatible with
                the Administrative Procedure Act (APA) on the grounds that DEA did not
                sufficiently explain the reasoning underlying the proposed rule.
                 Response 6: The NPRM satisfied the requirements of the APA, as does
                this final rule. The NRPM and this rule both set out the legal and
                practical reasons why DEA is promulgating this rule to increase the
                availability of marihuana for research consistent with the legal
                requirements of the CSA, as well as with DEA's duty to protect the
                public interest by preventing its diversion and abuse.
                 Issue 7: Two commenters requested that DEA extend the comment
                period given the current coronavirus disease 2019 public health
                emergency.
                 Response 7: DEA recognizes the challenges applicants and
                registrants may be facing during the public health emergency. However,
                DEA has decided not to extend the comment period beyond the 60 days
                generally required under Executive Order 12866 to avoid any further
                delays in registering additional marihuana growers. DEA, therefore,
                decided that extending the comment period would have unnecessarily
                delayed the registering of additional marihuana growers without
                meaningfully enhancing the rulemaking process.
                The Meaning of ``Medicinal Cannabis''
                 Issue 1: Some commenters expressed concern about the definition of
                medicinal cannabis. Specifically, they argued that ``medicinal
                cannabis'' should include any cannabis that State law authorized for
                use as ``medical marijuana.'' One commenter requested DEA amend the
                definition of medicinal cannabis to include investigational marihuana
                for an investigational new drug.
                 Response 1: Under this rule, DEA will have the exclusive right of
                importing, exporting, wholesale trading and maintaining stocks of
                marihuana other than those held by registered manufacturers and
                distributors of medicinal cannabis or cannabis preparations.\14\ The
                term ``medicinal cannabis'' in this rule is limited to ``a drug product
                made from the cannabis plant, or derivatives thereof, that can be
                legally marketed under the Federal Food, Drug, and Cosmetic Act,'' and
                DEA continues to believe this is the most appropriate definition for
                the term.
                ---------------------------------------------------------------------------
                 \14\ The exception that allows DEA registered manufacturers of
                medicinal cannabis and cannabis preparations to maintain stocks of
                cannabis materials for the purpose of producing such drugs or
                preparations only applies where the raw cannabis material was
                previously delivered to DEA.
                ---------------------------------------------------------------------------
                 Through this rule, DEA is asserting an exclusive right of
                importing, exporting, wholesale trading and maintaining stocks of
                marihuana so as to ensure compliance with the CSA, including a
                provision requiring registrations to be consistent with the Single
                Convention. The exclusion of medicinal cannabis from this function is
                based on Single Convention Article 23's exclusion of medicinal opium
                from parties' obligation to maintain an exclusive right over opium
                trading (as applied to cannabis through Article 28). The Single
                Convention does not define medicinal cannabis, but its definition of
                ``medicinal opium'' is limited to opium that ``has undergone the
                processes necessary to adapt it for medicinal use.'' Single Convention
                art. 1(o).
                 Thus, DEA understands ``medicinal cannabis'' to mean drug products
                derived from cannabis in a form that the United States has approved for
                medical use, which is most effectively captured in this rule by
                requiring that the product be able to be legally marketed under the
                Food Drug and Cosmetic (FD&C Act). The United States, not State
                governments, is the relevant party to the Single Convention, and thus
                ``medicinal cannabis'' should only include cannabis-derived products
                that the United States has approved for medical use, not products
                States may have approved.
                 For similar reasons, this definition excludes an investigational
                new drug containing cannabis; such products may eventually become
                approved for full medical use in the United States (as opposed to
                research), but have not yet obtained such approval. The finished dosage
                form of such a substance may qualify as a ``cannabis preparation,''
                which is outside of DEA's exclusive right to engage in the wholesale
                trade in cannabis, but remains subject to control under the CSA. It
                should be emphasized, however, that the bulk material from which any
                cannabis preparation is manufactured must be obtained from DEA.
                Security Costs and Requirements Applicable to the Manufacture of
                Marihuana
                 Issue 1: Some commenters inquired about the packaging requirements
                necessary prior to the transport of purchased marihuana and once that
                marihuana is sent from a grower to a seller. Many commenters suggested
                DEA use tracking technology, similar to that used by some States, to
                monitor the movement of marihuana seeds, marihuana plants, and other
                marihuana products. Some commenters suggested that the use of such
                tracking technology would eliminate the need for the security measures
                proposed in the NPRM and required by DEA regulations more generally.
                 Response 1: DEA registrants are required to maintain effective
                controls against diversion. DEA registered manufacturers are
                responsible for providing proper security during the growing process.
                The crops must either be delivered and stored in a secure storage
                mechanism at the manufacturer's registered location, if one is
                designated by DEA, or delivered
                [[Page 82341]]
                to a location designated by DEA. In either case, the registrant must
                comply with security requirements specified in 21 CFR part 1301. A DEA
                registrant is also required to adhere to the recordkeeping and
                reporting requirements set forth in 21 U.S.C. 827 and 21 CFR part 1304,
                including the requirement to maintain records of all controlled
                substances which it manufactures, sells, and delivers. Although this
                regulation does not specify any special measures imposed on a grower
                for the packaging of a marihuana crop for purchase by DEA, DEA may
                develop packaging requirements as part of separate agreements between
                DEA and individual manufacturers; \15\ but in all cases, DEA's general
                security regulations shall apply.
                ---------------------------------------------------------------------------
                 \15\ DEA routinely enters into memoranda of agreement with
                certain registrants.
                ---------------------------------------------------------------------------
                 With regard to tracking technology, DEA recognizes that security
                technology is always evolving, and that in some circumstances tracking
                technology may present a useful means of protecting against diversion.
                In addition to security measures specifically required by DEA
                regulations, registrants should take the appropriate measures to guard
                against diversion of their crops, which may include the use of new
                technologies. At this time, however, DEA has concluded that it is not
                necessary to update its security regulations in this regard, and has
                not yet seen evidence that tracking technology can adequately replace
                security measures required by current regulations.
                 Issue 2: Other commenters suggested that the procedures for
                inspection of crops and harvests, and physical security requirements
                are expensive and would discourage applicants.
                 Response 2: As noted, DEA requires all applicants and registrants
                to maintain effective controls against the diversion of controlled
                substances as set forth in 21 CFR part 1301. The proposed rule and this
                final rule do not impose new or amended regulations for the security
                requirements set forth in 21 CFR part 1301. Furthermore, DEA
                registrants are subject to routine scheduled investigations conducted
                by DEA diversion investigators and other administrative requirements
                such as those specified in 21 CFR part 1304. DEA understands there will
                be costs incurred in meeting these administrative requirements;
                however, these requirements and costs are comparable to those
                applicable to bulk manufacturers of other controlled substances.
                Requiring such security controls is a critical part of DEA's efforts to
                fulfill its duties under the CSA to reduce the diversion and abuse of
                controlled substances, including marihuana.
                Harvest
                 Issue: One commenter suggested that DEA expand the amount of time
                to deliver a harvest to DEA. This commenter also suggested DEA change
                the time period for providing notice of a harvest to five days, instead
                of 15 days beforehand, and suggested that the amount of harvests per
                year should be changed from three to five. Other commenters suggested
                manufacturers provide DEA with notice more than 15 days prior to
                harvest. Another commenter agreed that DEA should take possession of
                the crop no later than four months after harvest to maintain chemical
                composition of the crop.
                 Response: DEA understands the importance of taking possession of
                harvested crops in a timely manner to expedite the re-distribution of
                those crops to researchers and to reduce any potential for changes in
                the crops' chemical composition. As stated in the NPRM, and to comply
                with a CSA provision requiring consistency with the Single Convention,
                DEA must take physical possession of the crops within four months after
                the end of harvest. The requirement that a grower notify DEA at least
                15 days prior to the commencement of a harvest is intended to provide
                DEA with sufficient time to make the necessary arrangements for
                traveling to the grower's registered location and to take possession of
                the crops. DEA has concluded that a five-day notice period will not
                provide sufficient time to make the arrangements needed to travel to a
                grower and attend a harvest.
                 With respect to this commenter's statement that DEA should change
                the number of harvests per year from three to five, DEA is not
                regulating the number of growing cycles that a registered grower may
                conduct. A grower may conduct as many growing cycles as is necessary to
                meet customer demand, so long as it does not exceed its IMQ for the
                year. The NPRM used three harvests per year as the estimated average
                number of harvests only for the purpose of conducting its regulatory
                analysis.
                Quotas
                 Issue 1: A commenter stated there is a significant lag time from
                when quota is issued to harvest time. This same commenter inquired as
                to whether the cultivation of marihuana can begin prior to the issuance
                of quota. Another commenter suggested that DEA provide a deadline by
                which DEA must review or approve bona fide supply agreements and make
                quota determinations based upon them. A commenter also suggested that
                each manufacturer should be issued IMQ. One commenter suggested that
                DEA issue a multi-year license for new bulk manufacturers to meet quota
                needs.
                 Response 1: Pursuant to 21 U.S.C. 826, DEA is required to
                ``determine the total quantity and establish production quotas for each
                basic class of controlled substance in schedules I and II . . . to be
                manufactured each calendar year to provide for the estimated medical,
                scientific, research, and industrial needs of the United States [and]
                for lawful export requirements.'' This figure, which is known as the
                aggregate production quota (APQ), is then allocated to individual
                registered manufacturers based on each manufacturer's application for
                an IMQ as set forth in 21 U.S.C. 826(c). Pursuant to section 826(c),
                DEA is required to issue IMQ ``[o]n or before December 1 of each year''
                for the following year.
                 While there may be significant lead time between the date on which
                an IMQ is issued and the date of harvest, a grower's lead time is
                dependent upon the growing techniques it uses. It should also be noted
                that non-botanical manufacturers of controlled substances frequently
                deal with significant lead times and have been able to manage them. In
                any event, Federal law prohibits the manufacturing of a controlled
                substance by a registrant which ``is not expressly authorized . . . by
                a quota assigned to him pursuant to'' 21 U.S.C. 826. 21 U.S.C. 842(b).
                 Thus, a registered manufacturer cannot commence growing marihuana
                until it has been granted its IMQ. Furthermore, because the CSA
                expressly requires that both the APQ and an IMQ be determined on a
                calendar year basis; DEA is not authorized to issue an IMQ other than
                on a single year basis.
                 As stated above, the CSA requires that DEA issue IMQ ``[o]n or
                before December 1 of each year'' for the following year. Thus, the CSA
                already sets the deadline by which DEA must review a bona fide supply
                agreement and make a quota determination. Each registered manufacturer
                of marijuana who produces evidence that it has entered into a bona fide
                supply agreement with a researcher will be issued an IMQ. In the event
                a registered manufacturer enters into additional bona fide supply
                agreements after receiving its IMQ, which would result in an increase
                in its estimated net disposal for the calendar year, it may apply for
                an increase in its IMQ for that calendar year. 21 CFR 1303.25.
                [[Page 82342]]
                 Issue 2: A commenter suggested that the price and quantity of
                extracts is not based on dried flower weight and that different strains
                of marihuana will yield different extract weights from the same weight
                of marihuana. Thus, this commenter argued, DEA should set marihuana
                quotas based on the amount of marihuana extract produced from a
                harvested marihuana crop, not the weight of the harvested marihuana
                itself.
                 Response 2: Under the CSA, IMQ limits the quantity of controlled
                substances a manufacturer may produce. See, e.g., 21 U.S.C. 826(c).
                Marihuana itself, not just its extract, is a schedule I controlled
                substance. Accordingly, when a marihuana grower cultivates a marihuana
                crop, that grower has produced a schedule I controlled substance. Thus,
                under the CSA, marihuana growers require an IMQ for the entire
                marihuana crop, regardless of the value or quantities of other
                controlled substances produced from that crop. Setting marihuana quota
                based solely on the amount of extract eventually produced would also
                inhibit quota enforcement, as DEA may not be able to determine if a
                marihuana grower was complying with its IMQ until the grower processed
                the marihuana into an extract. Finally, not all marihuana grown will
                necessarily be used to produce extracts--some marihuana research makes
                use of the plant material itself. Thus, not all marihuana production
                quotas could be tied to the quantity of extract produced from it,
                because not all marihuana grown for research is converted into an
                extract.
                Costs, Pricing, and Fees of Marihuana for DEA Registrants
                 Issue 1: A commenter inquired how the purchase price is established
                when DEA purchases cannabis from a registrant that the registrant
                intends to use for his/her own research.
                 Response 1: This scenario was addressed in the NPRM by proposed 21
                CFR 1318.06(b)(4), which this rule promulgates without change.
                Normally, under the rule, the seller and buyer may negotiate their own
                purchase price, to which DEA will add its administrative fee. When a
                registrant grows marihuana for its own use, the purchase price is
                irrelevant, given that the grower is effectively negotiating the price
                with itself. Thus, the rule will allow the grower to set any ``nominal
                price'' it chooses, given that the grower will purchase the marihuana
                back from DEA at the same price at which it is sold to DEA. In this
                scenario, the only net cost of the transaction is the per-kilogram
                administrative fee that grower must pay to DEA.
                 Issue 2: Several commenters suggested the purchase price of
                cannabis should be the registrant's average purchase price of the last
                six months or the average U.S. price for high grade commercial
                cannabis, plus 20 percent due to its research grade. Another commenter
                suggested a cap on the wholesale value of cannabis.
                 Response 2: DEA recognizes that supply and demand for the
                cultivation of marihuana for research and other licit purposes may
                fluctuate based on the lawful needs of the U.S. market. As such, DEA
                believes that allowing the buyer and seller to negotiate the purchase
                price of the marihuana provides more flexibility in determining
                appropriate prices driven by market forces. Attempting to set a
                universal price--or schedule of prices--for cannabis, or limiting a
                registrants' ability to change its prices in response to new
                circumstances, would unduly restrict the varieties of marihuana grown
                and may unduly limit growers' ability to produce marihuana to satisfy
                new research needs. Similarly, setting a price cap may prevent growers
                from meeting researchers' need for cannabis that is unusually expensive
                given its strain or the conditions in which it must be grown.
                 Issue 3: A commenter inquired whether the administrative fees are
                paid by the purchasing researchers or the selling growers.
                 Response 3: Under the rule, the administrative fee is considered
                part of the price of the cannabis DEA sells to the purchasing
                researcher. That said, the rule requires the ``parties'' to pay the fee
                to DEA upon entering into a contract for the provision of cannabis, but
                before the cannabis is actually delivered to the researcher. In other
                words, DEA is not charging the administrative fee to either party in
                particular, but to the parties jointly as part of the transaction. The
                parties are free to apportion the fee among themselves in any way they
                choose.
                 Issue 4: Some commenters suggested that the administrative fee be
                waived for DEA-registered manufacturers who cultivate and research
                their own marihuana, and do not sell their marihuana. Similarly, some
                commenters suggested that the administrative fee would discourage
                research and thus suggested that the administrative fee be waived for
                researchers in general.
                 Response 4: As explained in the NPRM, the purpose of the
                administrative fee is to allow DEA to recover the operational costs of
                administering the program, as required under 21 U.S.C. 886a(1)(C).
                Because DEA anticipates the vast majority of marihuana will be sold to
                researchers, a waiver of the administrative fee in transactions
                involving researchers would not allow DEA to properly recover its costs
                of administering the marihuana growers program under 21 U.S.C.
                886a(1)(C).
                 DEA nonetheless continues to encourage lawful cultivation of
                marihuana for research and other licit purposes through the
                administration of this program. As discussed in the NPRM and below, DEA
                does not expect this administrative fee to be a barrier to research.
                Nothing in this rule prohibits NIH--or any other third-party funder of
                research grants--from funding marihuana research by covering the cost
                of marihuana materials used in research, including these administrative
                fees, via grants to researchers.
                 DEA also cannot waive the administrative fee for researchers
                growing marihuana for their own use because that too would prevent DEA
                from recovering its operational costs. The provisions of this rule--and
                the CSA and DEA regulations more broadly--apply not only when a grower
                is selling to a third party, but also when a grower is producing
                marihuana for its own use. DEA must still register the grower, and
                purchase and take possession of the marihuana, even if the marihuana is
                being used for the grower's own research. Thus, DEA does not anticipate
                its operational costs to be significantly less when it is regulating a
                grower's cultivation of marihuana for its own research or for another
                party's use. Accordingly, DEA will charge the same fees in both
                situations.
                 Issue 5: One commenter requested that DEA clarify administrative
                fees.
                 Response 5: The nature and purpose of the administrative fee, as
                well as how it is set, are explained both in the rule itself and
                throughout the NPRM. In sum, an administrative fee for each transaction
                will be added to the sales price of the marihuana. The administrative
                fee is a variable fee based on the quantities, in kilogram (not
                quality, grade, potency, etc.) of bulk marihuana distributed. The
                parties to the transaction will pay DEA the administrative fee upon
                entering into a contract for the provision of the marihuana and prior
                to the delivery of the marihuana. DEA will set the administrative fee
                rate at least annually at a level adequate to allow DEA to recover the
                costs of administrating the marihuana growers program under 21 U.S.C.
                886a(1)(C).
                 Issue 6: One commenter suggested that DEA waive the administrative
                fee
                [[Page 82343]]
                for any crops that are damaged or lost while in DEA's possession.
                 Response 6: Such a fee waiver is unnecessary and inconsistent with
                DEA's obligations under the CSA and this rule. As explained elsewhere,
                DEA generally does not anticipate retaining possession of crops for
                significant periods of time; in most instances, they should be
                transferred quickly to the buyer. Accordingly, crops are unlikely to be
                damaged or lost in DEA's possession. Moreover, as explained above, the
                administrative fee must be set at a rate that allows DEA to recover the
                costs of operating the marihuana growers program under 21 U.S.C.
                886a(1)(C). Every marihuana transaction under this rule will impose
                costs on DEA. Thus, if DEA waived fees for some marihuana buyers and
                sellers, it would have to increase fees on other buyers and sellers to
                compensate for the amounts lost due to the waiver. DEA has concluded
                that it is most equitable to base the administrative fee on the weight
                of marihuana produced, and not other factors.
                Out of Scope
                 Issue: DEA received comments that are outside the scope of this
                final rule. Some comments raised general concerns regarding the
                treatment of marihuana under Federal law. Others raised specific issues
                regarding, among other things, medical illnesses, medical treatments,
                the scheduled class of marihuana, marihuana-related activities
                permitted and prohibited in specific States, and the status of previous
                congressional inquiries.
                 DEA Response: DEA acknowledges receipt of these comments; however,
                such comments are outside the scope of the NPRM and the final rule.
                These comments ultimately have no bearing on the rule under
                consideration, or on the regulatory decisions DEA is making as part of
                this rulemaking.
                Section-by-Section Summary of the Final Rule
                 The purposes and functions of this rule were discussed in the NPRM.
                Aside from a minor amendment to 21 CFR 1318.04, this rule adopts the
                proposed rule without change. DEA's reasoning was fully explained in
                the NPRM. However, in addition to describing the amendment--in
                particular, the added section at Sec. 1318.04(d)--DEA will summarize
                this rule's various changes to DEA regulations and the reasoning behind
                these changes for the sake of clarity and convenience.
                Sec. 1301.33: Applying the Marihuana Grower Regulations to All
                Marihuana Growers
                 This rule makes two technical changes to 21 CFR 1301.33 to account
                for the addition of part 1318, which in turn provides regulations
                specific to the growing of marihuana in accordance with the CSA.
                 As discussed above, part 1301 of DEA's regulations governs the
                registration of manufacturers, distributors, and dispensers of
                controlled substances. It also includes various sections governing how
                entities are to apply to become registered with DEA. See, e.g., 21 CFR
                1301.13-17. These sections include Sec. 1301.33, which contains
                certain provisions unique to applications to become registered to
                manufacture schedule I and II substances in bulk. For example, Sec.
                1301.33(a) requires that DEA publish a notice of application after
                receiving a schedule I and II bulk manufacturer application.
                Previously, Sec. 1301.33(c) provided that the other provisions of
                Sec. 1301.33 do not apply when the manufacturing at issue is ``as an
                incident to research or chemical analysis as authorized in Sec.
                1301.13(e)(1),'' i.e., when the bulk manufacture is a coincident
                activity of a DEA-registered researcher or chemical analyst.
                 This rule amends Sec. 1301.33(c) to modify this exception in the
                case of marihuana growing. Specifically, under this rule, Sec.
                1301.33(c)'s exclusion applies to manufacturing as an incident to
                research and chemical analysis, except as provided in the newly added
                Sec. 1301.33(d). And the new Sec. 1301.33(d) provides that an
                application to manufacture marihuana ``that involves the planting,
                cultivating, growing, or harvesting of marihuana'' (as opposed to, for
                example, marihuana manufacturing that merely involves processing
                marihuana grown by another party into a new marihuana product) shall be
                subject both to the general requirements of Sec. 1301.33 as well to
                the newly added requirements of part 1318.
                 This change serves two purposes. First, by cross-referencing part
                1318 in part 1301, this change ensures that marihuana grower applicants
                reviewing the general registration and application requirements in part
                1301 are made aware of the regulations specific to marihuana growers in
                part 1318. Second, the Single Convention does not distinguish marihuana
                grown by a researcher or chemical analyst from that grown by other
                manufacturers; under the Single Convention, a government agency is
                required to purchase and take possession of that marihuana and then
                oversee its distribution. Thus, both to ensure that DEA complies with
                the CSA, including a provision requiring consistency with obligations
                under international treaties such as the Single Convention, and to
                ensure that these applications are treated as equitably as possible,
                DEA is amending its regulations to ensure that all marihuana growers
                are subject to the requirements of both Sec. 1301.33 and part 1318.
                Sec. 1318.01: The Scope of the New Marihuana Grower Regulations
                 New 21 CFR part 1318 adds a series of new provisions to ensure that
                DEA can register additional marihuana growers in a way consistent with
                its obligations under the CSA, including a provision requiring
                consistency with the Single Convention. New Sec. 1318.01 clarifies the
                scope of these new provisions, stating that they govern ``the
                registration of manufacturers seeking to plant, grow, cultivate, or
                harvest marihuana.''
                 Among other things, this serves to make clear that part 1318 only
                applies to those manufacturers involved in activities related to the
                cultivation of marihuana, not all forms of marihuana manufacturing. The
                CSA defines ``manufacturing'' broadly as ``the production, preparation,
                propagation, compounding, or processing of a drug or other substance,''
                including extraction from plant products and certain forms of
                packaging. 21 U.S.C. 802(15). Thus, under the CSA, entities involved in
                a variety of marihuana-related activities, not just marihuana growers,
                are required to register with DEA as marihuana manufacturers.
                 Section 1318.01 emphasizes that part 1318 does not apply to all
                marihuana manufactures, but only to those involved in the planting,
                growing, cultivating, or harvesting of marihuana.\16\ Part 1318 limits
                itself to marihuana growers, rather than all manufacturers, given the
                unique obligations the Single Convention places on the United States
                with regard to the growing of marihuana and the unique diversion risks
                growing presents.
                ---------------------------------------------------------------------------
                 \16\ The rule refers to those ``seeking to plant, grow,
                cultivate, or harvest marihuana'' rather than just to ``grow'' or
                ``cultivate,'' to ensure that all activities related to growth and
                cultivation are included.
                ---------------------------------------------------------------------------
                Sec. 1318.02: Definitions
                 Part 1318 contains a number of terms that are not used elsewhere in
                DEA regulations or have a unique meaning when used in the context of
                part 1318. Thus, to avoid any ambiguity about the meaning of those
                terms and the regulations in which they are used,
                [[Page 82344]]
                Sec. 1318.02 specifically defines those terms for the purposes of part
                1318.
                 Most of the definitions in Sec. 1318.02 are self-explanatory. For
                example, ``cannabis'' means any plant of the genus Cannabis (unless
                otherwise excepted, as discussed below), and ``cannabis resin'' (with
                one exception discussed below) means the separated resin, whether crude
                or purified, obtained from the cannabis plant. Similarly, the
                definition of ``Single Convention'' includes a citation to eliminate
                any possible confusion about the Single Convention at issue, and the
                definition of ``bona fide purchase agreement'' specifies the broad type
                of agreements DEA is seeking to encompass by this term.
                 Several provisions of Sec. 1318.02, however, warrant further
                discussion. First, as discussed in the NPRM and above, the Single
                Convention exempts ``medicinal cannabis'' and ``cannabis preparations''
                from certain of its requirements. Following suit, part 1318 likewise
                exempts these substances from certain of its provisions, and, to
                facilitate this exemption, Sec. 1318.02 defines ``medicinal cannabis''
                and ``cannabis preparations.'' Under Sec. 1318.02, ``medicinal
                cannabis'' means a drug product made from the cannabis plant, or
                derivatives thereof that can be legally marketed under the FD&C Act.
                ``Cannabis preparation'' means cannabis that was delivered to DEA and
                subsequently converted by a registered manufacturer into a mixture
                (solid or liquid) containing cannabis or cannabis resin. These
                definitions track those of the Single Convention, as adapted to account
                for Federal law.\17\
                ---------------------------------------------------------------------------
                 \17\ Article 1 of the Single Convention defines ``medicinal
                opium'' and ``opium preparations.'' These definitions apply to
                cannabis through Article 28, which, with limited exception, subjects
                the cultivation of cannabis to the system of controls set forth in
                Article 23 with regard to the cultivation of opium. DEA adapted the
                Single Convention's definitions to reflect governing Federal law,
                including the FD&C Act and the CSA.
                ---------------------------------------------------------------------------
                 Finally, Sec. 1301.02(e) clarifies that, when used in part 1318,
                none of these cannabis-related terms--cannabis, cannabis preparation,
                cannabis resin, or medicinal cannabis--include substances that fall
                outside the CSA's definition of marihuana. Among other things, Sec.
                1301.02(e) is intended to reflect the CSA amendments made by the
                Agriculture Improvement Act of 2018 (AIA), Public Law 115-334. The AIA
                amended the definition of marihuana to exclude ``hemp,'' defined as the
                plant 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. 7 U.S.C. 1639o(1). Thus, under the AIA, anything
                that meets this definition of hemp is no longer a controlled substance,
                and the CSA's requirements no longer apply to it. This rule is designed
                to regulate marihuana growers, not hemp growers; and thus Sec.
                1301.02(e) ensures that part 1318 does not apply to the cultivation of
                substances do not meet the definition of marihuana under the CSA, such
                as hemp.
                Sec. 1318.03: Implementation of the CSA's Requirements
                 This section reiterates the requirements of certain other
                provisions of the CSA and DEA regulations, both to make clear that
                these requirements apply to marihuana grower applications and as
                background for other provisions of part 1318. Specifically, Sec.
                1318.03(a) reiterates the requirement of 21 U.S.C. 823(a) that the DEA
                Administrator may only grant an application to cultivate marihuana if
                he determines that such registration is both consistent with the public
                interest and with U.S. obligations under the Single Convention. Section
                1318.03(b) states that, in accordance with both 21 U.S.C. 823(a) and 21
                CFR 1301.44, the applicant has the burden of demonstrating that these
                requirements are satisfied.
                Sec. 1318.04: Specific Control Measures Applicable to the Cultivation
                of Marihuana
                 This section adds a series of control measures designed to ensure
                that, once DEA registers additional marihuana growers, their marihuana
                cultivation occurs in accordance with the CSA, including the provision
                that requires registrations be granted consistent with the Single
                Convention. In particular, this section adds regulations that will
                ensure that DEA is able to purchase and take possession of marihuana
                crops within four months of harvest, and also that DEA has the
                exclusive right of importing, exporting, wholesale trading, and
                maintaining stocks of marihuana (other than medicinal cannabis or
                cannabis preparations)--both functions that the Single Convention
                expressly requires a single agency of the Federal government to
                perform. This section also contains provisions describing how DEA will
                perform these functions, provisions that are designed both to guide
                DEA's performance of these duties (and growers' expectations) as well
                as to ensure that these functions are performed in a way that protects
                against diversion of marihuana without placing an undue burden on
                growers. These provisions--and how they apply to particular scenarios--
                are discussed in greater depth both above and in the NPRM.
                 Finally, this section adds a provision that explicitly provides an
                allowance for registered bulk manufacturers of marihuana to distribute
                samples to registered analytical laboratories. Because these samples
                are small, distributed to the laboratory solely for the purpose of
                analysis, and consumed in the course of the analysis or destroyed upon
                completion of the testing, DEA has determined that DEA is not required
                to take possession of these samples to satisfy U.S. obligations under
                the Single Convention. This allowance permits registered bulk
                manufacturers to monitor the cannabinoid content of their crop in order
                to properly time their harvest and demonstrate compliance with contract
                specifications to their customers.
                Sec. 1318.05: Applying the CSA's Public Interest Factors to Marihuana
                Grower Applicants
                 As indicated above, in addition to ensuring registration is
                consistent with its Single Convention obligations, DEA may grant a
                registration to manufacture a schedule I or II controlled substance
                only where the Administrator determines that the registration is
                consistent with the public interest, based on the factors listed in 21
                U.S.C. 823(a).
                 This section both reiterates these public interest factors and
                explains how DEA will evaluate whether a particular marihuana grower
                application is consistent with them. For example, under 21 U.S.C.
                823(a)(1), DEA must weigh, as one of the registration factors, the need
                to maintain effective controls against diversion by limiting the number
                of registered bulk marihuana growers to that which can produce an
                adequate and uninterrupted supply of marihuana under adequately
                competitive conditions. Section 1318.05 states that, for the purpose of
                assessing this factor, a bona fide supply agreement between a marihuana
                grower and a duly registered schedule I researcher or manufacturer
                provides evidence that an applicant's registration is necessary to
                produce an adequate and uninterrupted supply of marihuana under
                adequately competitive conditions. An applicant proposing to grow
                marihuana to supply its own research may also be deemed to have
                satisfied this aspect of public interest factor 823(a)(1) upon the
                presentation of evidence that it possesses a registration to conduct
                [[Page 82345]]
                research with marihuana under 21 CFR 1301.32.
                 The rule also provides that, when selecting marihuana grower
                registrants, the DEA Administrator will place particular emphasis on an
                applicant's ability to consistently produce and supply marihuana of a
                high quality and defined chemical composition, and whether the
                applicant has demonstrated prior compliance with the CSA and DEA
                regulations. These factors are designed to result in registration of
                those manufacturers of marihuana that can most efficiently supply the
                lawful needs of the U.S. market in terms of quantity and quality. These
                factors are further aimed at selecting applicants that can be entrusted
                with the responsibility of a DEA registration and complying with the
                corresponding obligations under the CSA and DEA regulations.
                 Section 1318.05(c) provides that, aside from any applications
                governed by 21 U.S.C. 823(i), applications DEA accepts for filing after
                the date this rule becomes effective will not be considered pending
                until all applications accepted for filing on or before this effective
                date have been granted or denied by the Administrator. This is because,
                as explained above, the CSA requires DEA to consider the need to
                maintain effective controls against diversion by limiting the total
                number of registered marihuana growers to that necessary to produce an
                adequate and uninterrupted supply of marihuana under adequately
                competitive conditions. Thus, DEA must consider all pending applicants
                together when deciding which applications to grant. Given this
                requirement, DEA is including this provision to avoid a situation in
                which the agency is in the midst of evaluating these applications and
                has to begin its evaluation anew each time it accepts a new marihuana
                grower application for filing.
                Sec. 1318.06: Factors Affecting Marihuana Prices
                 As discussed in the NPRM and above, to ensure compliance with the
                CSA, including a provision requiring consistency with the Single
                Convention (and as specified in Sec. 1301.04 of this rule), DEA will
                purchase all lawfully grown marihuana crops within four months of
                harvest and then sell the marihuana to DEA registrants who seek to
                acquire it for research, product development, or other lawful purposes
                under the CSA. To do so, DEA will establish purchasing and selling
                prices: Sec. 1318.06 describes how DEA will do this--and more broadly
                explains how certain aspects of these transactions will work, as well
                as how DEA will fund its expenses from carrying out these duties.
                 As explained elsewhere in the NPRM and this rule, in purchasing
                such marihuana, DEA will use the Diversion Control Fee Account
                established in 21 U.S.C. 886a. Thus, DEA must take into account its
                obligation under 21 U.S.C. 886a(1)(C) to charge fees under its
                diversion control program ``at a level that ensures the recovery of the
                full costs of operating the various aspects of that program.'' There
                are two potential categories of fees that could be used to recover the
                costs of carrying out the new aspects of the diversion control program
                relating to marihuana: (1) Fees charged to persons who apply for, and
                seek to renew, a DEA registration to manufacture marihuana, and (2)
                fees charged for the sale of marihuana by DEA. Under this rule, DEA
                intends to recover its basic operating costs primarily through the
                latter means, by recovering these costs through an administrative fee
                set based on these costs. Section 1318.06 describes how this will
                occur.
                 Under Sec. 1318.06, DEA will allow market forces to direct prices
                for marihuana grown by the manufacturer and purchased by DEA, allowing
                the marihuana grower and ultimate purchaser to negotiate a sales price.
                Where the grower and the buyer are the same entity (or related
                entities), Sec. 1318.06 allows the entity to set a nominal price.
                 In addition to that negotiated price, Sec. 1318.06 provides that
                DEA will add an administrative fee (per kilogram (kg)) to the sales
                price of the marihuana it sells to end users. As provided in Sec.
                1318.06(a), DEA will calculate this administrative fee no less than
                annually by taking the preceding fiscal year's cost to operate the
                program and dividing it by the quantity in kg of the total of the IMQs
                for marihuana issued during the current quota year. Section 1318.06(c)
                requires DEA to make the updated administrative fee available on DEA's
                website.
                 As discussed elsewhere, DEA does not intend for this rule to
                interfere with HHS's funding of marihuana for use in research. Thus, to
                avoid any possibility of confusion, Sec. 1318.06(d) notes that this
                section does not prohibit HHS from funding the purchase cost or
                associated administrative fees for marihuana purchased for research.
                Sec. 1318.07: DEA's Disclaimer of Liability
                 As explained above, DEA generally does not anticipate retaining
                possession of marihuana crops for significant periods of time: In most
                instances, they should be transferred quickly from the seller to the
                buyer, with DEA's possession being as brief as possible to effectuate
                its role in transferring the marihuana from buyer to seller.
                Accordingly, crops are highly unlikely to be damaged or lost in DEA's
                possession. That said, if a buyer concludes that a crop is
                unacceptable, it is conceivable that a grower could claim that the
                damage is attributable to DEA, leading to costly and unnecessary
                disputes. To avoid disputes, Sec. 1318.07 makes clear that DEA has no
                liability with regard to the performance of any of the terms agreed to
                by a grower and buyer of marihuana, including but not limited to the
                quality of the marihuana. In effect, this puts buyers and sellers on
                notice that it is their obligation to structure their marihuana
                transactions in such a way as to minimize the risk of damage or
                disputes over quality, rather than looking to DEA to mediate or bear
                the costs of such disputes.
                Regulatory Analyses
                Executive Orders 12866 (Regulatory Planning and Review), 13563
                (Improving Regulation and Regulatory Review), and 13771 (Reducing
                Regulation and Controlling Regulatory Costs)
                 This rule was developed in accordance with the principles of
                Executive Orders 12866, 13563, and 13771. Executive Order 12866 directs
                agencies to assess all costs and benefits of available regulatory
                alternatives and, if regulation is necessary, to select regulatory
                approaches that maximize net benefits (including potential economic,
                environmental, public health, and safety, and other advantages;
                distributive impacts; and equity). Executive Order 13563 is
                supplemental to and reaffirms the principles, structures, and
                definitions governing regulatory review established in Executive Order
                12866. Section 3(f) of Executive Order 12866 classifies a ``significant
                regulatory action,'' requiring review by the Office of Management and
                Budget (OMB), as any regulatory action that is likely to result in a
                rule that may: (1) Have an annual effect on the economy of $100 million
                or more or adversely affect in a material way the economy, a sector of
                the economy, productivity, competition, jobs, the environment, public
                health or safety, or State, local, or tribal governments or
                communities; (2) create a serious inconsistency or otherwise interfere
                with an action taken or planned by another agency; (3) materially alter
                the budgetary impact of entitlements, grants, user fees, or loan
                programs or the rights and obligations of
                [[Page 82346]]
                recipients thereof; or (4) raise novel legal or policy issues arising
                out of legal mandates, the President's priorities, or the principles
                set forth in the Executive Order.
                 OMB's Office of Information and Regulatory Affairs (OIRA) has
                determined that, although this rule is not economically significant, it
                is a significant regulatory action under section 3(f) of Executive
                Order 12866, and it therefore has been reviewed by OMB.
                I. Need for the Rule
                 This rule is needed to ensure that DEA complies with the CSA and
                grants registrations that are consistent with relevant treaty
                provisions as DEA seeks to increase the number of registered growers of
                marihuana. Specifically, this rule amends the provisions of the
                regulations governing applications by persons seeking to become
                registered with DEA to grow marihuana as bulk manufacturers and adds
                provisions related to the purchase and sale of this marihuana by DEA.
                These amendments will ensure that DEA carries out all five functions
                under Article 23 and Article 28 of the Single Convention pertaining to
                marihuana, thus facilitating the planning and coordinated management of
                marihuana production necessary as the number of registered marihuana
                manufacturers increases.
                II. Alternative Approaches
                 This rule amends DEA regulations only to the extent necessary to
                comply with the CSA and to ensure DEA grants registrations that are
                consistent with the Single Convention as it pertains to marihuana. In
                areas where DEA has discretion, such as in setting a fee structure to
                recover the cost of this rule, alternative approaches normally would be
                discussed. However, because DEA does not have sufficient information at
                this time to discuss alternatives for either the future registration
                fees or the fees for the sale of marihuana, the alternative approaches
                for such provisions are not included in this rule. Consistent with past
                agency practice, any changes to registration fees will be the subject
                of a separate rulemaking proceeding, including a discussion of
                alternative approaches.
                III. Analysis of Benefits and Costs
                 There are two key benefits associated with this rule. First, DEA
                believes it is possible that the approval of new growers may increase
                the variety (quality, potency, etc.) of bulk marihuana for research,
                leading to more effective research and potentially resulting in the
                development of FDA-approved drug products. Second, this rule ensures
                that DEA's regulations comply with the requirements of the CSA by
                granting registrations that are consistent with the Single Convention
                relating to marihuana. DEA is unable to quantify these benefits at this
                time.
                 DEA analyzed the costs of this rule and estimates an annual cost of
                $651,318.\18\ The details of the analysis are below.
                ---------------------------------------------------------------------------
                 \18\ This is an increase from the estimated cost of $607,644 in
                the NPRM. The increase is due to change in estimated personnel
                requirements as described below.
                ---------------------------------------------------------------------------
                 This rule amends the provisions of the regulations governing
                applications by persons seeking to become registered with DEA to grow
                marihuana as bulk manufacturers and adds provisions related to the
                purchase and sale of this marihuana by DEA. Upon promulgation of this
                rule, the following key changes are anticipated: More persons will be
                authorized to grow marihuana, DEA will purchase and take title to the
                crops of marihuana, and DEA will, with respect to marihuana, have the
                exclusive right of importing, exporting, wholesale trading, and
                maintaining stocks. These changes mean that authorized purchasers of
                bulk marihuana to be used for research, product development, and other
                purposes permitted by the CSA may only purchase from DEA, except that
                DEA's exclusive rights do not extend to medicinal cannabis or cannabis
                preparations. The changes described above affect three primary groups
                of entities: Growers and prospective growers, the authorizing
                agencies,\19\ and purchasers (generally medical and scientific
                researchers). To examine the impact of the rule, DEA first reviewed the
                current system for growing and distributing bulk marihuana, then
                examined the impact on each of the three affected groups.
                ---------------------------------------------------------------------------
                 \19\ The ``authorizing agency'' refers to federal government
                agencies, including NIDA and DEA.
                ---------------------------------------------------------------------------
                Current System
                 To date, DEA has authorized one grower, the National Center for
                Natural Products Research (National Center), to cultivate marihuana for
                research. NIDA contracts with the National Center to grow marihuana
                from seeds supplied initially by NIDA for use in research studies.\20\
                The National Center has designated a secure plot of land or indoor grow
                facility where marihuana crops are grown every few years, based on
                current and expected demand. The marihuana is grown, harvested, stored,
                and made available as bulk marihuana or other purified elements of
                marihuana to use for research.\21\ NIDA obligated approximately $1.5
                million in Fiscal Year 2015 under this contract.\22\ This amount
                included costs unrelated to growing and cultivating marihuana, such as
                extracting chemical components and producing marihuana cigarettes and
                other marihuana-related material. However, based on recent discussion
                with NIDA,\23\ DEA estimates NIDA's expenses under the contract with
                the National Center (and any related subcontracts) for the bulk
                marihuana for 2019 were approximately $2.9 million.\24\ The $2.9
                million includes compensation for the cultivating and the 2019
                manufacturing quota (MQ) of 2,000 kgs for NIDA (National Center) as
                well as all other duties required in the contract.\25\
                ---------------------------------------------------------------------------
                 \20\ Production, Analysis, and Distribution of Cannabis and
                Related Materials, Federal Business Opportunities (Apr. 12, 2015),
                https://www.fbo.gov/spg/HHS/NIH/NIDA-01/N01DA-15-7793/listing.html.
                 \21\ NIDA's Role in Providing Marijuana for Research, National
                Institute on Drug Abuse, https://www.drugabuse.gov/drugs-abuse/marijuana/nidas-role-in-providing-marijuana-research.
                 \22\ Information on Marijuana Farm Contract, National Institute
                on Drug Abuse, https://www.drugabuse.gov/drugs-abuse/marijuana/nidas-role-in-providing-marijuana-research/information-marijuana-farm-contract.
                 \23\ Conference call between DEA Regulatory Drafting and Policy
                Support section and members of NIDA's Marijuana Drug Supply Program,
                July 30, 2019.
                 \24\ Estimated spending for the marihuana DSP for 2019 was $3.3
                million to $3.4 million, of which 10%-15% meet the definition of
                ``hemp'' under the provisions of the AIA. Using the midpoint of
                these ranges, the estimated spending is $2.9 million for marihuana,
                excluding hemp. The figures are based on a general discussion, and
                actual figures may differ.
                 \25\ The 2019 APQ for all marihuana is 2,450 kgs. 2,000 of the
                2,450 kgs are for the NIDA (National Center) cultivating and
                manufacturing quota of bulk marihuana. See 83 FR 67348.
                ---------------------------------------------------------------------------
                 Researchers may obtain marihuana for use in research through NIDA's
                DSP. Bulk marihuana plant material produced under the NIDA DSP is
                currently available at no cost to research investigators supported by a
                NIH grant. Marihuana is also available to research investigators who
                are funded through non-Federal sources. Although NIDA considered
                charging for marihuana on a ``cost-reimbursement basis,'' \26\ the
                current policy is to provide the marihuana at no charge.\27\
                ---------------------------------------------------------------------------
                 \26\ Marijuana Plant Material Available from the NIDA Drug
                Supply Program, National Institute on Drug Abuse, https://www.drugabuse.gov/research/research-data-measures-resources/nida-drug-supply-program/marijuana-plant-material-available-nida-drug-supply-program.
                 \27\ Conference call between DEA Regulatory Drafting and Policy
                Support section and members of NIDA's Marijuana Drug Supply Program,
                July 30, 2019.
                ---------------------------------------------------------------------------
                Changes to Growers
                 Upon promulgation of this rule, DEA anticipates approving more than
                one
                [[Page 82347]]
                entity to cultivate and harvest bulk marihuana. As explained earlier in
                this document, the CSA imposes limitations on the number of
                registrations that DEA may issue to bulk manufacturers of a given
                schedule I or II controlled substance. In addition, in deciding whether
                to grant an application for any such registration, the CSA requires DEA
                to consider the other public interest factors of 21 U.S.C. 823(a),
                which must be evaluated on an applicant-by-applicant basis. Further,
                DEA cannot accurately predict in advance which particular applications
                will be granted, or how many. Accordingly, DEA is unable to accurately
                estimate the number of registered bulk marihuana growers. As a result,
                to allow for this analysis, DEA estimated the economic impact of this
                rule under two different hypothetical scenarios, the first in which the
                number of growers expands to three growers, and the second in which the
                number of growers expands to 15 growers. It should be understood that
                this range of potential registrants is not necessarily reflective of
                the actual number of applications that DEA will grant.
                 In 2016, DEA issued a policy statement regarding applications to
                become registered to manufacture marihuana to supply research.\28\
                Since the publication of the 2016 policy statement, DEA has received
                approximately 38 pending applications for registration as bulk
                manufacturer of marihuana for research. As indicated above, the CSA
                requires DEA to limit the total number of registered bulk manufacturers
                of a given schedule I or II controlled substance to that necessary to
                produce an adequate and uninterrupted supply under adequately
                competitive conditions. Therefore, DEA believes a range of three to 15
                growers is a reasonable estimate for purposes of this economic
                analysis, with the understanding that the actual number could vary
                considerably.
                ---------------------------------------------------------------------------
                 \28\ Applications to Become Registered Under the Controlled
                Substances Act to Manufacture Marijuana to Supply Researchers in the
                United States, 81 FR 53846 (Aug. 12, 2016). This rule supersedes the
                2016 policy statement.
                ---------------------------------------------------------------------------
                 The APQ, which includes the MQ, represents the annual quantity of
                marihuana that is necessary for the estimated medical, scientific,
                research and industrial needs of the United States, for lawful export
                requirements, and for the establishment and maintenance of reserve
                stocks.\29\ Therefore, given a constant MQ, if more growers are
                approved to produce bulk marihuana, the quantities of bulk marihuana
                produced and the cost of production (and the reimbursement of
                production cost through sales) is transferred from the single incumbent
                grower to new growers. This means that there is only a transfer of
                economic activity rather than any new cost. The estimated economic
                activity of $2.9 million is transferred from the existing single grower
                to multiple growers.\30\
                ---------------------------------------------------------------------------
                 \29\ 21 CFR 1303.11(a).
                 \30\ The phrase ``multiple growers'' includes the possibility
                that the current grower is one of ``multiple growers.''
                ---------------------------------------------------------------------------
                 Transitioning from one large grower to multiple growers may
                introduce inefficiencies, driving up production or facility costs. Some
                growers may introduce more costly growing techniques to produce certain
                traits. Alternatively, some growers may introduce more efficient
                growing methods, driving down costs. Additionally, having more growers
                may spur more demand in bulk marihuana for research, pushing up the MQ.
                In particular, one of the goals of this new rule is to enhance
                marijuana availability for product development, which may have the
                effect of increasing the MQ. However, DEA does not have a basis to
                estimate the impact of these possibilities. Therefore, for the purposes
                of this analysis, DEA estimates that an increase in the number of
                approved growers does not impact the MQ. In summary, there is no new
                cost to growers.
                Changes to Authorizing Agencies--Cost to DEA
                 DEA anticipates that there will be a transfer of economic activity
                from NIDA to DEA as well as several new costs as a result of this rule.
                This analysis should not be construed as a proposal to modify agency
                funding or funding sources.
                 As discussed above, assuming a constant MQ for bulk marihuana of
                2,000 kgs, DEA estimates the cost of all the activities the National
                Center performs under its contract with NIDA and the purchase of the
                entire aggregate crop, regardless of the number of growers, is $2.9
                million. This $2.9 million is not a new cost; it is a transfer. Rather
                than NIDA paying the current single grower, DEA will pay the multiple
                new growers. In practice, DEA anticipates crops from multiple growers
                will be purchased at different times of the year, allowing funds from
                sales of earlier purchases to pay for subsequent purchases. Therefore,
                to purchase and distribute $2.9 million in bulk marihuana, a working
                capital of a lesser amount is likely needed. However, due to many
                unknowns and to be conservative, for the purposes of this analysis, the
                estimated transfer and working capital requirement is assumed to be
                $2.9 million.
                 DEA anticipates incurring new costs associated with the following
                activities: Taking title to the crops and employing personnel to
                administer the program. The growers, purchasers, and DEA will already
                understand, prior to growing and harvesting, the quantities of
                marihuana to be distributed and to whom the distribution will be made,
                because the bona fide supply agreements presented during the
                registration application process will provide such information. In most
                instances, DEA is expected to purchase and take title to the crop, then
                sell and distribute the crop to the purchaser on the same day at the
                grower's registered location. For the purposes of this analysis, DEA
                assumes the following process:
                 1. After marihuana is harvested and prepared for delivery to DEA,
                the registered manufacturer will contact DEA to inform it that the
                marihuana is ready for collection.
                 2. Within a reasonable timeframe, but in no event later than four
                months after the harvest, DEA will purchase and take title to the
                marihuana. Two DEA Special Agents from the nearest local DEA field
                office will drive an estimated 100 miles (200 miles roundtrip) to the
                registered manufacturer to take title. Any marihuana that is not
                immediately distributed is stored in a designated secure storage
                mechanism at the grower's registered location for later distribution.
                The number of trips by the two DEA Special Agents equals the number of
                harvests.
                 3. For marihuana distributed from storage at the grower's
                registered location, the grower distributes marihuana on DEA's behalf.
                If DEA deems it necessary to be present at such distribution, the
                distribution is scheduled to coincide with DEA's visit to take title to
                the next crop, requiring no additional trips by DEA to the grower.
                 4. Each grower has three harvests, requiring DEA to collect three
                times per year per grower.
                 For each collection, DEA estimates $2,071 of labor cost \31\ and
                $116 of vehicle cost \32\ for a total of $2,187 per
                [[Page 82348]]
                collection. DEA understands that some growers, employing certain
                growing methods, may have more harvests per year. However, DEA does not
                have a basis to estimate these growers' methods or the number of
                harvests per year. Therefore, DEA believes three harvests per year is a
                reasonable estimate. Assuming three collections per year per grower,
                there would be nine collections with three approved growers and 45
                collections with 15 approved growers. Applying the estimated cost of
                $2,187 per collection, DEA estimates a transport cost of $19,683 and
                $98,415 for scenarios with three and 15 growers, respectively.
                ---------------------------------------------------------------------------
                 \31\ DEA's loaded hourly rate of a Special Agent is $103.54.
                Assuming 10 hours each (full work-day) for two agents, the total
                labor cost associated with collection from a registered manufacturer
                is $2,071. ``Loaded hourly rate'' includes wages, benefits, and
                ``loading'' of ``non-productive'' hours, i.e., leave, training,
                travel, etc.
                 \32\ $116 is based on Internal Revenue Service standard mileage
                rates for 2019 of $0.58 per mile multiplied by the estimated 200
                miles driven, roundtrip.
                ---------------------------------------------------------------------------
                 Additionally, DEA anticipates it will need additional personnel
                resources to operate this program. There are many unknowns and no
                decisions have been made on hiring. However, for the purposes of this
                analysis, DEA estimates three full-time-equivalent (FTE) professional
                staff in the Diversion Control Division will be needed, consisting of
                two FTE diversion investigator (DI), and one FTE professional/
                administrative (PA) resources.
                 Applying the fully loaded annual cost of $211,981 per DI and
                $168,307 per PA, the estimated total cost of the three FTE employees is
                $592,269. For the purposes of this analysis, this cost does not vary
                with the number of growers. Table 1 below summarizes the costs
                associated with increased staffing.
                 Table 1--Cost of Personnel Resources
                ----------------------------------------------------------------------------------------------------------------
                 Modular cost/unit
                 Position Job category cost ($) Number of FTEs Cost ($)
                ----------------------------------------------------------------------------------------------------------------
                Staff Coordinator................. DI................... 211,981.............. 2 423,962
                Program Analyst................... PA................... 168,307.............. 1 168,307
                 -----------------------------------------------------------------------------
                 Total......................... N/A.................. N/A.................. 3 592,269
                ----------------------------------------------------------------------------------------------------------------
                 In summary the estimated cost to DEA is:
                 $19,683 or $98,415 per year to purchase and take title to
                the bulk marihuana for scenarios with 3 or 15 authorized growers,
                respectively;
                 $592,269 per year for three DEA FTE employees;
                 The estimated total annual cost is $611,952 with three
                growers and $690,684 with 15 growers and no offsetting cost savings at
                NIDA. Using the average of the two values, the estimated cost to DEA is
                $651,318. Table 2 summarizes the costs.
                 Table 2--DEA Cost Summary
                ----------------------------------------------------------------------------------------------------------------
                 Low ($) High ($) Average ($)
                ----------------------------------------------------------------------------------------------------------------
                Transport Cost.................................................. 19,683 98,415 N/A
                Personnel Cost.................................................. 592,269 592,269 N/A
                 -----------------------------------------------
                 Total Cost.................................................. 611,952 690,684 651,318
                ----------------------------------------------------------------------------------------------------------------
                Changes Affecting Researchers
                 DEA anticipates minimal procedural change for authorized
                researchers who plan to acquire bulk marihuana for research. The only
                anticipated procedural change is that some researchers will acquire the
                bulk marihuana from DEA, rather than from NIDA. As discussed earlier,
                the only new cost associated with this regulation is the cost to DEA of
                $651,318, an average of high and low scenarios, which will be recovered
                by adding an administrative fee of $326 per kg. The administrative fee
                was updated from $304 per kg in the NPRM to $326 per kg in this final
                rule because there is a change in the personnel required to administer
                the program.\33\ As discussed earlier, the administrative fee will be
                adjusted annually.
                ---------------------------------------------------------------------------
                 \33\ In the NPRM, DEA estimated personnel requirements to
                administer the program was one DEA Diversion Investigator and two
                Professional/Administrative personnel. After further review, DEA has
                estimated in this final rule that two DEA Diversion Investigators
                and one Professional/Administrative personnel are needed to
                administer the program. The two Diversion Investigators are needed
                to provide adequate oversight of reporting and recordkeeping
                requirements associated with distribution.
                ---------------------------------------------------------------------------
                 While the purchaser will purchase marihuana from DEA, this rule
                does not in any way affect the purchaser's source of funds to purchase
                from DEA. If marihuana for research is funded by a third party, the
                researcher may not experience any cost increase. In particular, NIH has
                long served as a third-party funder for research through grants,
                including grants to researchers studying marihuana. Nothing in this
                rule prohibits NIH from continuing to fund such research by continuing
                to cover the cost of marihuana materials used in research, via grants
                to researchers.
                Cost Summary
                 DEA estimates the cost of producing the 2019 MQ for bulk marihuana
                of 2,000 kgs and operating NIDA's marihuana DSP is $2.9 million per
                year. Under the rule, DEA anticipates more bulk marihuana producers
                will be approved. DEA estimates the $2.9 million in economic activity
                will be transferred across multiple growers, without introducing new
                costs.
                 DEA's purchase of bulk marihuana is not a new cost (to the
                economy); it is a transfer from NIDA to DEA. However, $611,952 to
                $690,684 in operating costs will be incurred by DEA. DEA will recover
                the costs of carrying out the new aspects of the diversion control
                program relating to marihuana by selling the marihuana to the buyer at
                the negotiated
                [[Page 82349]]
                sale price, between the grower and the buyer, plus the administrative
                fee assessed on a per kg basis.
                 The net present values (NPV) of the low cost estimate of $611,952
                per year over 10 years are $5.2 million and $4.3 million at a three
                percent discount rate and seven percent discount rate, respectively.
                The NPVs of the high cost estimate of $690,684 over 10 years are $5.9
                million and $4.9 million at a three percent discount rate and seven
                percent discount rate, respectively. The average of the estimated low
                and high costs is $651,318. The NPVs of the average of $651,318 over 10
                years are $5.6 million and $4.6 million at three percent and seven
                percent discount rates, respectively. Table 3 summarizes the estimated
                annual effect and NPVs calculation for each of the transfers and the
                three scenarios.
                 Table 3--Summary of Annual Effect and NPVs
                ----------------------------------------------------------------------------------------------------------------
                 Annual effect NPVs at 3% NPVs at 7%
                 ($) ($M) ($M)
                ----------------------------------------------------------------------------------------------------------------
                Cost (Low)...................................................... 611,952 5.2 4.3
                Cost (Average).................................................. 651,318 5.6 4.6
                Cost (High)..................................................... 690,684 5.9 4.9
                ----------------------------------------------------------------------------------------------------------------
                Executive Order 13771 (Reducing Regulation and Controlling Regulatory
                Costs)
                 This rule is a deregulatory action for the purposes of Executive
                Order 13771. The rule is an enabling rule which, coincidentally with
                other provisions, expands the number of authorized bulk marihuana
                growers.
                Executive Order 12988 (Civil Justice Reform)
                 This rule meets the applicable standards set forth in sections 3(a)
                and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to
                eliminate ambiguity, minimize litigation, establish clear legal
                standards, and reduce burdens on regulated parties and the court
                system.
                Executive Order 13132 (Federalism)
                 This rule does not have federalism implications warranting the
                application of Executive Order 13132. The rule does not have
                substantial direct effects on the States, on the relationship between
                the national government and the States, or on the distribution of power
                and responsibilities among the various levels of government.
                Executive Order 13175 (Consultation and Coordination With Indian Tribal
                Governments)
                 This rule does not have tribal implications warranting the
                application of Executive Order 13175. It does not have substantial
                direct effects on one or more Indian tribes, on the relationship
                between the Federal government and Indian tribes, or on the
                distribution of power and responsibilities between the Federal
                government and Indian tribes.
                Regulatory Flexibility Act
                 In accordance with the Regulatory Flexibility Act (RFA), DEA
                evaluated the impact of this rule on small entities. DEA's evaluation
                of economic impact by size category indicates that the rule will not,
                if promulgated, have a significant economic impact on a substantial
                number of these small entities.
                 The RFA requires agencies to analyze options for regulatory relief
                of small entities unless the agency can certify that the rule will not
                have a significant impact on a substantial number of small entities.
                For purposes of the RFA, small entities include small businesses,
                nonprofit organizations, and small governmental jurisdictions. DEA
                evaluated the impact of this rule on small entities and a discussion of
                its findings is below.
                 As discussed in the section of this rulemaking relating to
                Executive Orders 12866, 13565, and 13771, this rule amends the
                provisions of the regulations governing applications by persons seeking
                to become registered with DEA to grow marihuana as bulk manufacturers,
                and adds provisions related to the purchase and sale of this marihuana
                by DEA. Upon promulgation of this rule, the following key changes are
                anticipated: More persons will be authorized to grow marihuana; DEA
                will purchase and take physical possession of crops; and DEA will, with
                respect to marihuana, have the exclusive right of importing, exporting,
                wholesale trading, and maintaining stocks. These changes, as explained
                above, mean that authorized purchasers of bulk marihuana may only
                purchase from DEA, except that DEA's exclusive right will not extend to
                medicinal cannabis or cannabis preparations as these terms are defined
                in paragraphs (b) and (c), respectively, of Sec. 1318.02 of this rule.
                 The changes described above affect three primary groups of
                entities: Growers and prospective growers, the authorizing agencies
                (including NIDA and DEA), and purchasers (generally researchers).
                Because any economic impact on Federal agencies is outside the scope of
                the RFA, the transfer of economic activity between the agencies is
                excluded from this discussion. To examine the impact of the rule, DEA
                first reviewed the current system for growing and distributing bulk
                marihuana, then examined the impact on each of the two affected non-
                Federal groups: Growers (bulk manufacturers of marihuana) and
                researchers.
                Current System
                 To date, DEA has authorized one grower, the National Center, to
                cultivate marihuana for research. NIDA contracts with the National
                Center to grow marihuana for use in research studies.\34\ The National
                Center designates a secure plot of land where marihuana crops are grown
                every few years, based on current and expected demand. The marihuana is
                grown, harvested, stored, and made available as bulk marihuana or other
                purified elements of marihuana to use for research.\35\ As explained
                previously, DEA estimates NIDA's expenses under the contract with the
                National Center (and any related subcontracts) for the bulk marihuana
                for 2019 were approximately $2.9 million.\36\ The $2.9 million includes
                compensation for the cultivating and the 2019 MQ of 2,000 kgs for NIDA
                as well as all other duties required in the contract.\37\
                ---------------------------------------------------------------------------
                 \34\ Production, Analysis, and Distribution of Cannabis and
                Related Materials, Federal Business Opportunities (Apr. 12, 2015),
                https://www.fbo.gov/spg/HHS/NIH/NIDA-01/N01DA-15-7793/listing.html.
                 \35\ NIDA's Role in Providing Marijuana for Research, National
                Institute on Drug Abuse, https://www.drugabuse.gov/drugs-abuse/marijuana/nidas-role-in-providing-marijuana-research.
                 \36\ Estimated spending for the marihuana DSP for 2019 was $3.3
                million to $3.4 million, of which 10 percent to 15 percent meet the
                definition of ``hemp'' under the provisions of the AIA. Using the
                midpoint of these ranges, the estimated spending is $2.9 million.
                The figures are based on a general discussion, and actual figures
                may differ.
                 \37\ The 2019 APQ for all manufacturers of marihuana is 2,450
                kgs. 2,000 kgs are for cultivating and manufacturing of bulk
                marihuana. See 83 FR 67348.
                ---------------------------------------------------------------------------
                [[Page 82350]]
                 Researchers may obtain marihuana for use in research through NIDA's
                DSP. Bulk marihuana plant material produced under the NIDA DSP is
                available at no cost to research investigators who are supported by an
                NIH grant. Marihuana is also available to research investigators who
                are funded through non-Federal sources. Although NIDA considered
                charging for marihuana on a ``cost-reimbursement basis,'' \38\ the
                current policy is to provide the marihuana at no charge.\39\
                ---------------------------------------------------------------------------
                 \38\ Marijuana Plant Material Available from the NIDA Drug
                Supply Program, National Institute on Drug Abuse, https://www.drugabuse.gov/research/research-data-measures-resources/nida-drug-supply-program/marijuana-plant-material-available-nida-drug-supply-program.
                 \39\ See note 23.
                ---------------------------------------------------------------------------
                Impact on Growers
                 Upon promulgation of this rule, DEA anticipates approving more than
                one person to cultivate and harvest bulk marihuana. In 2016, DEA issued
                a policy statement regarding applications to become registered to
                manufacture marihuana to supply research.\40\ Since the publication of
                the 2016 policy statement, there are approximately 38 pending
                applications for registration as bulk manufacturer of marihuana for
                research. Additionally, some applicants may not meet the statutory and
                regulatory criteria for holding a registration as a bulk manufacture
                and will be denied. Therefore, for the purposes of this analysis, DEA
                will estimate the economic impact of this rule at three and 15 growers
                with the understanding that the actual number could vary considerably.
                ---------------------------------------------------------------------------
                 \40\ Applications to Become Registered under the Controlled
                Substances Act to Manufacture Marijuana to Supply Researchers in the
                United States, 81 FR 53846 (2016). This rule supersedes the 2016
                policy statement.
                ---------------------------------------------------------------------------
                 The APQ, which includes the MQ, represents the annual quantity of
                marihuana that is necessary for the estimated medical, scientific,
                research and industrial needs of the United States, for lawful export
                requirements, and for the establishment and maintenance of reserve
                stocks.\41\ Therefore, given a constant MQ, if more growers are
                approved to produce bulk marihuana, the quantities of bulk marihuana
                produced and the cost of production (and reimbursement of their
                production cost through sales) is transferred from the incumbent grower
                to new growers. This means that there is no new cost; instead, there is
                only a transfer of economic activity. The estimated economic activity
                of $2.9 million is transferred from the existing single grower to
                multiple growers.\42\
                ---------------------------------------------------------------------------
                 \41\ 21 U.S.C. 826(a).
                 \42\ The phrase ``multiple growers'' includes the possibility
                that the current grower is one of the ``multiple growers.''
                ---------------------------------------------------------------------------
                 Transitioning from one large grower to multiple smaller growers may
                reduce production efficiency, driving up cost. Some growers may
                introduce more costly growing techniques in order to produce certain
                traits. Alternatively, some growers may introduce more efficient
                growing methods, driving down cost. Additionally, having more growers
                may spur more demand in bulk marihuana for research, pushing up the MQ.
                However, DEA does not have a basis to estimate the impact of these
                possibilities.
                Impact on Researchers
                 DEA anticipates minimal procedural change for authorized
                researchers who plan to acquire bulk marihuana for research. The only
                anticipated procedural change is that the researcher will acquire the
                bulk marihuana from DEA, rather than from NIDA or the National Center.
                As discussed earlier, the only new cost associated with this regulation
                is the cost to DEA of $651,318, which will be recovered by adding an
                administrative fee of $326 per kg. As discussed earlier, the
                administrative fee will be adjusted annually. While purchasers will
                purchase marihuana from DEA, this rule does not in any way affect the
                purchasers' source of funds to purchase from DEA. If marihuana for
                research is funded by a third party, the researcher may not experience
                any cost increase.
                Affected Number of Small Entities
                 This rule affects the current and prospective bulk manufacturers of
                marihuana for research and researchers. Based on the discussion above,
                DEA anticipates up to 15 bulk manufacturers are affected by this rule.
                Additionally, based on a discussion with NIDA,\43\ DEA estimates 40
                researchers are affected by this rule. The 40 researchers represent the
                approximate number of researchers that receive marihuana from NIDA's
                marihuana DSP.
                ---------------------------------------------------------------------------
                 \43\ Conference call between DEA Regulatory Drafting and Policy
                Support section and members of NIDA's Marijuana Drug Supply Program,
                July 30, 2019.
                ---------------------------------------------------------------------------
                 Based on a review of representative North American Industry
                Classification System (NAICS) codes for bulk manufacturers and
                researchers, the following number of firms may be affected: \44\
                ---------------------------------------------------------------------------
                 \44\ For the purposes of this analysis, the term ``firms'' is
                synonymous with ``entities.''
                 421 firms related to `Medicinal and Botanical
                Manufacturing' (325411) \45\
                ---------------------------------------------------------------------------
                 \45\ 2015 SUSB Annual Datasets by Establishment Industry, U.S. &
                States, NAICS, Detailed Employment Sizes (U.S., 6-digit and States,
                NAICS Sectors), United States Census Bureau, https://www.census.gov/data/datasets/2015/econ/susb/2015-susb.html.
                ---------------------------------------------------------------------------
                 9,634 firms related to `Research and Development in the
                Physical, Engineering, and Life Sciences (except Biotechnology)'
                (541712) \46\
                ---------------------------------------------------------------------------
                 \46\ Ibid.
                 The United States Small Business Administration (SBA) sets size
                standards that determine how large an entity can be and still qualify
                as a small business for Federal government programs. For the most part,
                size standards are based on the average annual receipts or the average
                number of employees of a firm. The SBA size standard for both
                industries identified by the NAICS codes above is 1,000 employees.\47\
                ---------------------------------------------------------------------------
                 \47\ Table of Small Business Size Standards Matched to North
                American Industry Classification System Codes, United States Small
                Business Association (Oct. 1, 2017). The NAICS code was updated for
                `Research and Development in the Physical, Engineering, and Life
                Sciences (except Biotechnology)' from 541712 to 541715. The 2015
                SUSB data uses 541712 and the 2017 SBA size standard uses 541715 for
                the same industry.
                ---------------------------------------------------------------------------
                 Comparing the SBA size standards to the U.S. Census Bureau,
                Statistics of U.S. Businesses (SUSB) detailed data on establishment
                size by NAICS code for each affected industry, DEA estimates the
                following number of small entities and percent of firms that are small
                entities by industry:
                 392 (93.1 percent of total) firms in the area of
                `Medicinal and Botanical Manufacturing' (325411)
                 9,090 (94.4 percent of total) firms in the area of
                `Research and Development in the Physical, Engineering, and Life
                Sciences (except Biotechnology)' (541712)
                 Table 4 details the calculation for the number of small entities by
                industry.
                [[Page 82351]]
                 Table 4--Number of Small Entities by Industry
                ----------------------------------------------------------------------------------------------------------------
                 Firm size by average SBA size Small % small
                 NAICS description employees Firms standard entities entities
                ----------------------------------------------------------------------------------------------------------------
                325411--Medicinal and Botanical https://www.reginfo.gov/.
                A. Collections of Information Associated With the Rule
                 Title: Application for Registration (DEA Form 225); Renewal
                Application for Registration (DEA Form 225A); Affidavit for Chain
                Renewal (DEA Form 225B).
                 OMB control number: 1117-0012.
                 Form numbers: DEA-225, DEA-225A, DEA-225B.
                 Type of information collection: Revision of a currently approved
                collection.
                 Applicable component of the department sponsoring the collection:
                Department of Justice/Drug Enforcement Administration, Diversion
                Control Division.
                 Affected public who will be asked or required to respond: Business
                or other for-profit.
                 Abstract: The Controlled Substances Act requires all businesses and
                individuals who manufacture, distribute, import, export, or conduct
                research and laboratory analysis with controlled substances to register
                with DEA. 21 U.S.C. 822; 21 CFR 1301.11, 1301.13. Registration is a
                necessary control measure that helps to detect and prevent diversion by
                ensuring that the closed system of distribution of controlled
                substances can be monitored by DEA, and that the businesses and
                individuals handling controlled substances are accountable.
                 This rule amends the regulations governing applications by persons
                seeking to become registered with DEA to grow marihuana as bulk
                manufacturers and adds provisions related to the purchase and sale of
                this marihuana by DEA. Persons seeking to become registered with DEA to
                grow marihuana as bulk manufacturers will still apply for registration
                using the same DEA Form 225 as other bulk manufacturers, but there will
                be a new supplemental questionnaire unique to marihuana manufacturers
                in order to gather additional information about applicants. There will
                also be new questionnaires used for importer applicants and non-
                marihuana bulk manufacturer applicants. Forms 225, 225A, and 225B will
                all receive minor revisions to improve clarity and usability for
                registrants.
                 DEA estimates the following number of respondents and burden
                associated with this collection of information:
                 Number of respondents: 15,919.
                 Frequency of response: 1 per respondent per year.
                 Number of responses: 15,919.
                 Burden per response: 0.1304 hours.
                 Total annual burden in hours: 2,076.
                 If you need a copy of the proposed information collection
                instruments with instructions or additional information, please contact
                the Regulatory Drafting and Policy Support Section (DPW), Diversion
                Control Division, Drug Enforcement Administration; Mailing Address:
                8701 Morrissette Drive, Springfield, Virginia 22152-2639; Telephone:
                (571) 362-3261.
                 At this point, any comments related to this collection of
                information may be sent in writing to the Office of Information and
                Regulatory Affairs, OMB, Attention: Desk Officer for DOJ, Washington,
                DC 20503. Please state that your comment refers to RIN 1117-AB54/Docket
                No. DEA-506.
                Congressional Review Act
                 This final rule is not a major rule as defined by the Congressional
                Review Act (CRA), 5 U.S.C. 804. This final rule will not result in an
                annual effect on the economy of $100,000,000 or more; a major increase
                in costs or prices; or significant adverse effects on competition,
                employment, investment, productivity, innovation, or on the ability of
                United States-based companies to compete with foreign-based companies
                in domestic and export markets. DEA submitted a copy of the final rule
                to both Houses of Congress and to the Comptroller General.
                National Environmental Policy Act
                 DEA has analyzed the impacts of this Final Rule on the human
                environment pursuant to the National Environmental Policy Act (NEPA),
                42 U.S.C. 4321 et seq., and has determined that it is categorically
                excluded under 28 CFR part 61, Appendix B. Categorical exclusions are
                actions identified in an agency's NEPA implementing procedures that
                normally do not have a significant impact on the environment and
                therefore do not require either an environmental assessment (EA) or
                environmental impact statement (EIS). See 40 CFR 1508.4. In analyzing
                the applicability of a categorical exclusion, the agency must also
                consider whether extraordinary circumstances are present that would
                warrant preparation of an EA or EIS. This action is covered by the
                categorical exclusion for registration of persons authorized to handle
                controlled substances listed in 28 CFR part 61, Appendix B.
                List of Subjects
                21 CFR Part 1301
                 Administrative practice and procedure, Drug traffic control,
                Security measures.
                21 CFR Part 1318
                 Administrative practice and procedure, Drug traffic control.
                 For the reasons stated in the preamble, DEA amends 21 CFR chapter
                II as follows:
                PART 1301--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS, AND
                DISPENSERS OF CONTROLLED SUBSTANCES
                0
                1. The authority citation for part 1301 continues to read as follows:
                 Authority: 21 U.S.C. 821, 822, 823, 824, 831, 871(b), 875, 877,
                886a, 951, 952, 956, 957, 958, 965 unless otherwise noted.
                0
                2. In Sec. 1301.33, revise paragraph (c) and add paragraph (d) to read
                as follows:
                Sec. 1301.33 Application for bulk manufacture of Schedule I and II
                substances.
                * * * * *
                 (c) Except as provided in paragraph (d) of this section, this
                section shall not apply to the manufacture of basic classes of
                controlled substances listed in Schedule I or II as an incident to
                research or chemical analysis as authorized in Sec. 1301.13(e)(1).
                 (d) An application for registration to manufacture marihuana that
                involves the planting, cultivating, growing, or harvesting of marihuana
                shall be subject to the requirements of this section and the additional
                requirements set forth in part 1318 of this chapter.
                0
                3. Add part 1318 to read as follows:
                PART 1318--CONTROLS TO SATISFY THE REQUIREMENTS OF THE ACT
                APPLICABLE TO THE MANUFACTURING OF MARIHUANA
                Sec.
                1318.01 Scope of this part.
                1318.02 Definitions.
                1318.03 Implementation of statutory requirements.
                1318.04 Specific control measures applicable to the bulk manufacture
                of marihuana.
                [[Page 82353]]
                1318.05 Application of the public interest factors.
                1318.06 Factors affecting prices for the purchase and sale by the
                Administration of cannabis.
                1318.07 Non-liability of the Drug Enforcement Administration.
                 Authority: 21 U.S.C. 801(7), 821, 822(a)(1), (b), 823(a),
                871(b), 886a.
                Sec. 1318.01 Scope of this part.
                 Procedures governing the registration of manufacturers seeking to
                plant, grow, cultivate, or harvest marihuana are set forth by this
                part.
                Sec. 1318.02 Definitions.
                 (a) Except as provided in paragraph (e) of this section, the term
                cannabis means any plant of the genus Cannabis.
                 (b) Except as provided in paragraph (e) of this section, the term
                medicinal cannabis means a drug product made from the cannabis plant,
                or derivatives thereof, that can be legally marketed under the Federal
                Food, Drug, and Cosmetic Act.
                 (c) Except as provided in paragraph (e) of this section, the term
                cannabis preparation means cannabis that was delivered to the
                Administration and subsequently converted by a registered manufacturer
                into a mixture (solid or liquid) containing cannabis, cannabis resin,
                or extracts of cannabis.
                 (d) Except as provided in paragraph (e) of this section, the term
                cannabis resin means the separated resin, whether crude or purified,
                obtained from the cannabis plant.
                 (e) As used in this part, the terms cannabis, medicinal cannabis,
                and cannabis preparation do not include any material, compound,
                mixture, or preparation that falls outside the definition of marihuana
                in section 102(16) of the Controlled Substances Act (the Act) (21
                U.S.C. 802(16)).
                 (f) The term Single Convention means the Single Convention on
                Narcotic Drugs, 1961 (18 U.S.T. 1407).
                 (g) The term bona fide supply agreement means a letter of intent,
                purchase order or contract between an applicant and a researcher or
                manufacturer registered under the Act.
                 (h) The term registered researcher or manufacturer means a person
                registered under the Act to perform research or manufacture of
                marihuana in Schedule I.
                Sec. 1318.03 Implementation of statutory requirements.
                 (a) As provided in section 303(a) of the Act (21 U.S.C. 823(a)),
                the Administrator may grant an application for a registration to
                manufacture marihuana, including the cultivation of cannabis, only if
                he determines that such registration is consistent with the public
                interest and with United States obligations under the Single
                Convention.
                 (b) In accordance with section 303(a) of the Act and Sec.
                1301.44(a) of this chapter, the burden shall be on the applicant to
                demonstrate that the requirements for such registration have been
                satisfied.
                Sec. 1318.04 Specific control measures applicable to the bulk
                manufacture of marihuana.
                 For a registration to manufacture marihuana that involves the
                cultivation of cannabis, the following provisions must be satisfied:
                 (a) All registered manufacturers who cultivate cannabis shall
                deliver their total crops of cannabis to the Administration, except as
                provided in paragraph (d). The Administration shall purchase and take
                physical possession of such crops as soon as possible, but not later
                than four months after the end of the harvest. The Administration may
                accept delivery and maintain possession of such crops at the registered
                location of the registered manufacturer authorized to cultivate
                cannabis consistent with the maintenance of effective controls against
                diversion. In such cases, the Administration shall designate a secure
                storage mechanism at the registered location in which the
                Administration may maintain possession of the cannabis, and the
                Administration will control access to the stored cannabis. If the
                Administration determines that no suitable location exists at the
                registered location of the registered manufacturer authorized to
                cultivate cannabis, then the Administration shall designate a location
                for the authorized grower to deliver the crop as soon as possible, but
                not later than four months after the end of the harvest. However, in
                all cases the registrant must comply with the security requirements
                specified in part 1301 of this chapter.
                 (b) The Administration shall, with respect to cannabis, have the
                exclusive right of importing, exporting, wholesale trading, and
                maintaining stocks other than those held by registered manufacturers
                and distributors of medicinal cannabis or cannabis preparations. Such
                exclusive right shall not extend to medicinal cannabis or cannabis
                preparations. The Administration may exercise its exclusive right by
                authorizing the performance of such activities by appropriately
                registered persons. The Administration shall require prior written
                notice of each proposed importation, exportation, or distribution of
                cannabis that specifies the quantity of cannabis to be imported,
                exported, or distributed and the name, address, and registration number
                of the registered manufacturer or researcher to receive the cannabis
                before authorizing the importation, exportation, or distribution. All
                importation and exportation shall be performed in compliance with part
                1312 of this chapter, as applicable. Under no circumstance shall a
                registered manufacturer authorized to grow cannabis import, export, or
                distribute cannabis without the express written authorization of the
                Administration.
                 (c) A registered manufacturer authorized to grow cannabis shall
                notify in writing the Administration of its proposed date of harvest at
                least 15 days before the commencement of the harvest.
                 (d) A registered manufacturer authorized to grow cannabis may
                distribute small quantities of cannabis to a registered analytical lab
                for chemical analysis by such analytical lab prior to the
                Administration purchasing and taking physical possession of the crop.
                The cannabis delivered to the analytical lab under such circumstances
                need not be delivered to the Administration pursuant to paragraph (a),
                provided such cannabis is destroyed by the analytical lab upon
                completion of the testing. Any such distribution of cannabis by a
                registered manufacturer to a registered analytical lab must comply with
                all applicable requirements of the Act and this subchapter, including
                but not limited to security and recordkeeping requirements.
                Sec. 1318.05 Application of the public interest factors.
                 (a) In accordance with section 303(a) of the Act (21 U.S.C.
                823(a)), the Administrator shall consider the public interest factors
                set forth in paragraphs (a)(1) through (6) of this section:
                 (1) Maintenance of effective controls against diversion of
                particular controlled substances and any controlled substance in
                schedule I or II compounded therefrom into other than legitimate
                medical, scientific, research, or industrial channels, by limiting the
                importation and bulk manufacture of such controlled substances to a
                number of establishments which can produce an adequate and
                uninterrupted supply of these substances under adequately competitive
                conditions for legitimate medical, scientific, research, and industrial
                purposes;
                 (2) Compliance with applicable State and local law;
                 (3) Promotion of technical advances in the art of manufacturing
                these
                [[Page 82354]]
                substances and the development of new substances;
                 (4) Prior conviction record of applicant under Federal and State
                laws relating to the manufacture, distribution, or dispensing of such
                substances;
                 (5) Past experience in the manufacture of controlled substances,
                and the existence in the establishment of effective control against
                diversion; and
                 (6) Such other factors as may be relevant to and consistent with
                the public health and safety.
                 (b) The Administrator's determination of which applicants to select
                will be consistent with the public interest factors set forth in
                section 303(a), with particular emphasis on the following criteria:
                 (1) Whether the applicant has demonstrated prior compliance with
                the Act and this chapter;
                 (2) The applicant's ability to consistently produce and supply
                cannabis of a high quality and defined chemical composition; and
                 (3)(i) In determining under section 303(a)(1) of the Act (21 U.S.C.
                823(a)(1)) the number of qualified applicants necessary to produce an
                adequate and uninterrupted supply of cannabis under adequately
                competitive conditions, the Administrator shall place particular
                emphasis on the extent to which any applicant is able to supply
                cannabis or its derivatives in quantities and varieties that will
                satisfy the anticipated demand of researchers and other registrants in
                the United States who wish to obtain cannabis to conduct activities
                permissible under the Act, as demonstrated through a bona fide supply
                agreement with a registered researcher or manufacturer as defined in
                this subpart.
                 (ii) If an applicant seeks registration to grow cannabis for its
                own research or product development, the applicant must possess
                registration as a schedule I researcher with respect to marihuana under
                Sec. 1301.32 of this chapter. As specified in Sec. 1301.13 of this
                chapter, chemical analysis and preclinical research (including quality
                control analysis) are not coincident activities of a manufacturing
                registration for schedule I substances, including cannabis. In
                determining under section 303(a)(1) of the Act (21 U.S.C. 823(a)(1))
                the number of qualified applicants necessary to produce an adequate and
                uninterrupted supply of cannabis under adequately competitive
                conditions, the Administrator shall consider the holding of an approved
                marihuana research protocol by a registered schedule I researcher
                seeking to grow cannabis for its own research or product development as
                evidence of the necessity of the applicant's registration under this
                factor.
                 (c) Applications accepted for filing after January 19, 2021 will
                not be considered pending for purposes of paragraph (a) of this section
                until all applications accepted for filing on or before January 19,
                2021 have been granted or denied by the Administrator. Where an
                application is subject to section 303(i) of the Act (21 U.S.C. 823(i)),
                that section shall apply in lieu of this paragraph (c).
                 (d) In determining the legitimate demand for cannabis and its
                derivatives in the United States, the Administrator shall consult with
                the U.S. Department of Health and Human Services, including its
                components.
                Sec. 1318.06 Factors affecting prices for the purchase and sale by
                the Administration of cannabis.
                 (a) In accordance with section 111(b)(3) of Public Law 102-395 (21
                U.S.C. 886a(1)(C)), seeking to recover the full costs of operating the
                aspects of the diversion control program that are related to issuing
                registrations that comply with the Controlled Substances Act, the
                Administration shall assess an administrative fee. To set the
                administrative fee, the Administration shall annually determine the
                preceding fiscal year's cost of operating the program to cultivate
                cannabis and shall divide the prior fiscal year's cost by the number of
                kgs of cannabis authorized to be manufactured in the current year's
                quota to arrive at the administrative fee per kg. The administrative
                fee per kg shall be added to the sale price of cannabis purchased from
                the Administration. The administrative fee shall be paid to the
                Diversion Control Fee Account.
                 (b) As set forth in Sec. 1318.04, the Administration shall have
                the exclusive right of, among other things, wholesale trading in
                cannabis that it purchases from registered manufacturers. The
                Administration will, therefore, buy from such manufacturer, sell
                cannabis to registered researchers and manufacturers, and establish
                prices for such purchase and sale. The Administration will set such
                prices in the following manner:
                 (1) Bulk growers of cannabis shall negotiate directly with
                registered researchers and manufacturers authorized to handle cannabis
                to determine a sale price for their cannabis. Upon entering into a
                contract for the provision of bulk cannabis and prior to the exchange
                of cannabis, the parties shall pay to the Administration an
                administrative fee assessed based on the number of kgs to be supplied.
                The administrative fee shall not be recoverable in the event that
                delivery is rejected by the buyer.
                 (2) The Administration shall sell the cannabis to the buyer at the
                negotiated sale price plus the administrative fee assessed on a per kg
                basis. Prior to the purchase of the cannabis by the Administration, the
                buyer shall pay the negotiated purchase price and administrative fee to
                the Administration. The Administration shall hold funds equal to the
                purchase price in escrow until the delivery of the cannabis by the
                grower to the Administration. The administrative fee shall not be
                recoverable in the event that delivery is rejected by the buyer.
                 (3) After receiving the purchase price and administrative fee from
                the buyer, the Administration shall purchase the cannabis from the
                grower, on behalf of the buyer, at the negotiated sale price. The
                Administration shall retain the administrative fee. In the event the
                buyer fails to pay the purchase price and the administrative fee, the
                Administration shall have no obligation to purchase the crop and may
                order the grower to destroy the crop if the grower cannot find an
                alternative buyer within four months of harvest.
                 (4) In instances where the grower of the cannabis is the same
                entity as the buyer of the cannabis, or a related or subsidiary entity,
                the entity may establish a nominal price for the purchase of the
                cannabis. The Administration shall then purchase the entity's cannabis
                at that price and sell the cannabis back to the entity, or a related or
                subsidiary entity, at the same price with the addition of the
                administrative fee.
                 (c) Administrative fees set in accordance with this part will be
                made available, on an updated basis, on the Administration's website,
                no later than December 15th of the year preceding the year in which the
                administrative fee will be collected.
                 (d) Nothing in this section shall prohibit the U.S. Department of
                Health and Human Services from continuing to fund the acquisition of
                cannabis for use in research by paying, directly or indirectly, the
                purchase cost and administrative fee to the Administration.
                Sec. 1318.07 Non-liability of Drug Enforcement Administration.
                 The Administration shall have no liability with respect to the
                performance of any contractual terms agreed to by a grower and buyer of
                bulk cannabis, including but not limited to the quality of any cannabis
                delivered to a buyer. In
                [[Page 82355]]
                the event that a buyer deems the delivered cannabis to be defective,
                the buyer's sole remedy for damages shall be against the grower and not
                the Administration.
                Timothy J. Shea,
                Acting Administrator.
                [FR Doc. 2020-27999 Filed 12-17-20; 8:45 am]
                BILLING CODE 4410-09-P
                

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