Establishment of a Domestic Hemp Production Program

 
CONTENT
Federal Register, Volume 84 Issue 211 (Thursday, October 31, 2019)
[Federal Register Volume 84, Number 211 (Thursday, October 31, 2019)]
[Rules and Regulations]
[Pages 58522-58564]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23749]
[[Page 58521]]
Vol. 84
Thursday,
No. 211
October 31, 2019
Part IV
 Department of Agriculture
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 Agricultural Marketing Service
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7 CFR Part 990
Establishment of a Domestic Hemp Production Program; Interim Rule
Federal Register / Vol. 84 , No. 211 / Thursday, October 31, 2019 /
Rules and Regulations
[[Page 58522]]
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DEPARTMENT OF AGRICULTURE
 Agricultural Marketing Service
7 CFR Part 990
[Doc. No. AMS-SC-19-0042; SC19-990-2 IR]
Establishment of a Domestic Hemp Production Program
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Interim final rule with request for comments.
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SUMMARY: This rule establishes a new part specifying the rules and
regulations to produce hemp. This action is mandated by the Agriculture
Improvement Act of 2018, which amended the Agricultural Marketing Act
of 1946. This rule outlines provisions for the Department of
Agriculture (USDA) to approve plans submitted by States and Indian
Tribes for the domestic production of hemp. It also establishes a
Federal plan for producers in States or territories of Indian Tribes
that do not have their own USDA-approved plan. The program includes
provisions for maintaining information on the land where hemp is
produced, testing the levels of delta-9 tetrahydrocannabinol, disposing
of plants not meeting necessary requirements, licensing requirements,
and ensuring compliance with the requirements of the new part.
DATES:
    Effective date: This rule is effective October 31, 2019 through
November 1, 2021.
    Comment due dates: Comments received by December 30, 2019 will be
considered prior to issuance of a final rule. Pursuant to the Paperwork
Reduction Act (PRA), comments on the information collection burden must
be received by December 30, 2019.
ADDRESSES: Interested persons are invited to submit written comments
concerning this rule and the proposed information collection. Comments
should be submitted via the Federal eRulemaking portal at
www.regulations.gov. Comments may also be filed with Docket Clerk,
Marketing Order and Agreement Division, Specialty Crops Program, AMS,
USDA, 1400 Independence Avenue SW, STOP 0237, Washington, DC 20250-
0237; or Fax: (202) 720-8938. All comments should reference the
document number and the date and page number of this issue of the
Federal Register and will be made available for public inspection in
the Office of the Docket Clerk during regular business hours or can be
viewed at: www.regulations.gov. All comments submitted in response to
this rule will be included in the record and will be made available to
the public.
FOR FURTHER INFORMATION CONTACT: Bill Richmond, Chief, U.S. Domestic
Hemp Production Program, Specialty Crops Program, AMS, USDA; 1400
Independence Avenue SW, Stop 0237, Washington, DC 20250-0237;
Telephone: (202) 720-2491, Fax: (202) 720-8938, or Email:
[email protected] or Patty Bennett, Director, Marketing Order
and Agreement Division, Specialty Crops Program, AMS, USDA at the same
address and phone number above or Email: [email protected].
    Small businesses may request information on complying with this
regulation by contacting Richard Lower, Marketing Order and Agreement
Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue
SW, STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-2491,
Fax: (202) 720-8938, or Email: [email protected].
SUPPLEMENTARY INFORMATION: This rule is issued under Section 10113 of
Public Law 115-334, the Agriculture Improvement Act of 2018 (2018 Farm
Bill). Section 10113 amended the Agricultural Marketing Act of 1946
(AMA) by adding Subtitle G (sections 297A through 297D of the AMA).
Section 297B of the AMA requires the Secretary of Agriculture
(Secretary) to evaluate and approve or disapprove State or Tribal plans
regulating the production of hemp. Section 297C of the AMA requires the
Secretary to establish a Federal plan for producers in States and
territories of Indian Tribes not covered by plans approved under
section 297B. Lastly, section 297D of the AMA requires the Secretary to
promulgate regulations and guidelines relating to the production of
hemp, including sections 297B and 297C, in consultation with the U.S.
Attorney General. USDA is committed to issuing the final rule
expeditiously after reviewing public comments and obtaining additional
information during the initial implementation. This interim final rule
will be effective for two years and then be replaced with a final rule.
I. Introduction
    Hemp is a commodity that can be used for numerous industrial and
horticultural purposes including fabric, paper, construction materials,
food products, cosmetics, production of cannabinoids (such as
cannabidiol or CBD), and other products.\1\ While hemp was produced
previously in the U.S. for hundreds of years, its usage diminished in
favor of alternatives. Hemp fiber, for instance, which had been used to
make rope and clothing, was replaced by less expensive jute and abaca
imported from Asia. Ropes made from these materials were lighter and
more buoyant, and more resistant to salt water than hemp rope, which
required tarring. Improvements in technology further contributed to the
decline in hemp usage. The cotton gin, for example, eased the
harvesting of cotton, which replaced hemp in the manufacture of
textiles.
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    \1\ The 2018 Farm Bill explicitly preserved the authority of the
U.S. Food and Drug Administration (FDA) to regulate hemp products
under the Federal Food, Drug, and Cosmetic Act (FD&C Act) and
section 351 of the Public Health Service Act (PHS Act). See section
297D(c)(1) (``Nothing in this subchapter shall affect or modify . .
. the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 301 et seq.);
section 351 of the Public Health Service Act (42 U.S.C. 262); or the
authority of the Commissioner of Food and Drugs and the Secretary of
Health and Human Services . . .'' under those Acts). Accordingly,
products containing cannabis and cannabis-derived compounds are
subject to the same authorities and requirements as FDA-regulated
products containing any other substance.
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    Hemp production in the U.S. has seen a resurgence in the last five
years; however, it remains unclear whether consumer demand will meet
the supply. High prices for hemp, driven primarily by demand for use in
producing CBD, relative to other crops, have driven increases in
planting. Producer interest in hemp production is largely driven by the
potential for high returns from sales of hemp flowers to be processed
into CBD oil.
    USDA regulates the importation of all seeds for planting to ensure
safe agricultural trade. Hemp seeds can be imported into the United
States from Canada if accompanied by either: (1) A phytosanitary
certification from Canada's national plant protection organization to
verify the origin of the seed and confirm that no plant pests are
detected; or (2) a Federal Seed Analysis Certificate (SAC, PPQ Form
925) for hemp seeds grown in Canada. Hemp seeds imported into the
United States from countries other than Canada may be accompanied by a
phytosanitary certificate from the exporting country's national plant
protection organization to verify the origin of the seed and confirm
that no plant pests are detected. Accordingly, since importation of
seed is covered under USDA Animal and Plant Health Inspection Service
(APHIS) regulations, this rule does not further address hemp seed
imports or exports. For imports of hemp plant material,
[[Page 58523]]
APHIS will have jurisdiction for any pest related issues if they arise.
    The 2018 Farm Bill allows for the interstate transportation and
shipment of hemp in the United States. This rule does not affect the
exportation of hemp. Should there be sufficient interest in exporting
hemp in the future, USDA will work with industry and other Federal
agencies to help facilitate this process.
    Prior to the 2018 Farm Bill, Cannabis sativa L. with delta-9
tetrahydrocannabinol (THC) levels greater than 0.3% fell within the
definition of ``marihuana'' under the Controlled Substances Act (CSA),
21 U.S.C. 801 et seq., and was therefore a Schedule I controlled
substance unless it fell under a narrow range of exceptions (e.g., the
``mature stalks'' of the plant).\2\ As a result, many aspects of
domestic production of what is now defined as hemp was limited to
persons registered under the CSA to do so. Under the Agricultural Act
of 2014 (2014 Farm Bill), Public Law 113-79, State departments of
agriculture and institutions of higher education were permitted to
produce hemp as part of a pilot program for research purposes. The
authority for hemp production provided in the 2014 Farm Bill was
extended by the 2018 Farm Bill, which was signed into law on December
20, 2018.
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    \2\ Although the statutory spelling is ``marihuana'' in the
Controlled Substances Act, this rule uses the more commonly used
spelling of marijuana.
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    The 2018 Farm Bill requires USDA to promulgate regulations and
guidelines to establish and administer a program for the production of
hemp in the United States. Under this new authority, a State or Indian
Tribe that wants to have primary regulatory authority over the
production of hemp in that State or territory of that Indian Tribe may
submit, for the approval of the Secretary, a plan concerning the
monitoring and regulation of such hemp production. For States or Indian
Tribes that do not have approved plans, the Secretary is directed to
establish a Departmental plan to monitor and regulate hemp production
in those areas.
    There are similar requirements that all hemp producers must meet.
These include: Licensing requirements; maintaining information on the
land on which hemp is produced; procedures for testing the THC
concentration levels for hemp; procedures for disposing of non-
compliant plants; compliance provisions; and procedures for handling
violations.
    After extensive consultation with the Attorney General, USDA is
issuing this interim final rule to establish the domestic hemp
production program and to facilitate the production of hemp, as set
forth in the 2018 Farm Bill. This interim rule will help expand
production and sales of domestic hemp, benefiting both U.S. producers
and consumers. With the publication of the interim rule, USDA will
begin to implement the hemp program including reviewing State and
Tribal plans and issuing licenses under the USDA hemp plan. There is
also a 60-day comment period during which interested persons may submit
comments on this interim rule. The comment period will close on
December 30, 2019. After reviewing and evaluating the comments, USDA
will draft and publish a final rule within two years of the date of
publication. USDA will evaluate all information collected during this
period to adjust, if necessary, this rule before finalizing.
    For the purposes of this new part, and as defined in the 2018 Farm
Bill, the term ``hemp'' means the plant species Cannabis sativa L. and
any part of that plant, including the seeds thereof and all
derivatives, extracts, cannabinoids, isomers, acids, salts, and salts
of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol
concentration of not more than 0.3 percent on a dry weight basis.
Delta-9 tetrahydrocannabinol, or THC, is the primary intoxicating
component of cannabis. Cannabis with a THC level exceeding 0.3 percent
is considered marijuana, which remains classified as a schedule I
controlled substance regulated by the Drug Enforcement Administration
(DEA) under the CSA.
    The term ``State'' means any of one of the fifty States of the
United States of America, the District of Columbia, the Commonwealth of
Puerto Rico, and any other territory or possession of the United
States. The term ``Indian Tribe'' or ``Tribe'' is the same definition
as in section 4 of the Indian Self-Determination and Education
Assistance Act (25 U.S.C. 5304). The interim rule also includes the
definition of ``territory of an Indian Tribe'' to provide clarity to
the term because the Act does not define it. The definition adopts the
definition ``Indian Country'' in 18 U.S.C. 1151 because it is a
commonly acceptable approach to determine a tribal government's
jurisdiction. Under an approved Tribal plan, the Indian Tribe will have
regulatory authority over Indian Country under its jurisdiction.\3\ A
full list of terms and definitions relating to this part can be found
under ``Definitions'' in section IV.
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    \3\ We note that if an Alaskan Native Corporation wants to
produce hemp on land it owns in fee simple, it would need to have a
State or USDA license, whichever is applicable, because that land
does not qualify as Indian Country and it does not have jurisdiction
over that land.
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II. State and Tribal Plans
    If a State or Indian Tribes wants to have primary regulatory
authority over the production of hemp in that State or territory of
that Indian Tribe they may submit, for the approval of the Secretary, a
plan concerning the monitoring and regulation of such hemp production.
State or Tribal plans must be submitted to USDA and approved prior to
their implementation. Nothing preempts or limits any law of a State or
Tribe that regulates the production of hemp and is more stringent than
the provisions in the 2018 Farm Bill. State and Tribal plans developed
to regulate the production of hemp must include certain requirements
when submitted for USDA approval. These requirements are outlined in
the following sections.
A. Land Used for Production
    Plans will need to contain a process by which relevant information
regarding the land used for hemp production in their jurisdiction is
collected and maintained. All information on hemp production sites must
be collected for each producer covered by the State or Tribal plan. The
information required to be collected includes a legal description of
the land and geospatial location, which the USDA Farm Service Agency
(FSA) can help provide, for each field, greenhouse, or other site where
hemp is produced. Geospatial location is required because many rural
locations do not have specific addresses and these coordinates will
assist with the proper identification of hemp production locations. Per
statute, States and Tribes will need to retain these records for three
years.
    In addition to the land information required to be submitted to the
appropriate State or Tribe, licensed producers must also report their
hemp crop acreage to the FSA. When reporting to FSA, producers must
provide their State or Tribe-issued license or authorization number.
The requirement that producers report hemp crop acreage to FSA
establishes an identification system for hemp production nationwide and
complies with the information sharing requirements of the 2018 Farm
Bill. A link to FSA information on how to report hemp crop acreage to
FSA is available at https://www.fsa.usda.gov/Assets/USDA-FSA-Public/
usdafiles/FactSheets/2019/crop-acreage-
[[Page 58524]]
reporting-19.pdf and will be provided on the USDA hemp production
program web site. USDA believes that most producers who will plant hemp
already report land use data to FSA for other crops and to apply for
various FSA programs, including those for hemp. FSA offices are located
in various counties within each State and are designed to be a single
location where customers can access services from USDA agencies
including FSA, AMS, Natural Resources Conservation Service (NRCS) and
Rural Development (RD). These offices currently serve the agricultural
industry within their communities and provide producers access to an
office for establishing farm and producer records, a place for
producers to record their licensing information, and a place to report
crop acreage. The producer may, with supporting documentation, also
update its FSA farm records for leases, sub-leases, or ownership of
land.
    Under the hemp pilot program authorized under the terms of the 2014
Farm Bill, various States developed seed certification programs to help
producers identify hemp seed that would work well in their specific
geographical areas. USDA will not include a seed certification program
in this rule because the same seeds grown in different geographical
locations and growing conditions can react differently. For example,
the same seed used in one State to produce hemp plants with THC
concentrations less than 0.3%, can produce hemp plants with THC
concentrations of more than 0.3% when planted in a different State. We
have also found that the technology necessary to determine seed
planting results in different locations is not advanced enough at this
time to make a seed-certification scheme feasible. Additionally, we do
not have accurate data at this time on the origin of most hemp seed
planted in the U.S.
B. Sampling and Testing for Delta-9 Tetrahydrocannabinol
    State and Tribal plans must incorporate procedures for sampling and
testing hemp to ensure the cannabis grown and harvested does not exceed
the acceptable hemp THC level. Sampling procedures, among other
requirements, must ensure that a representative sample of the hemp
production is physically collected and delivered to a DEA-registered
laboratory for testing. Within 15 days prior to the anticipated harvest
of cannabis plants, a Federal, State, local, or Tribal law enforcement
agency or other Federal, State or Tribal designated person shall
collect samples from the flower material from such cannabis plants for
delta-9 tetrahydrocannabinol concentration level testing. If producers
delay harvest beyond 15 days, the plant will likely have a higher THC
level at harvest than the sample that is being tested. This requirement
will yield the truest measurement of the THC level at the point of
harvest. Accepting that a pre-harvest inspection is best to identify
suspicious plants and activities, and that the sample should be taken
as close to harvest as possible, the time was selected based on what
would be a reasonable time for a farmer to harvest an entire field.
This 15-day post-sample harvest window was also designed to allow for
variables such as rain and equipment delays. We are requesting comments
and information regarding the 15-day sampling and harvest timeline.
    Testing procedures must ensure the testing is completed by a DEA-
registered laboratory using a reliable methodology for testing the THC
level. The THC concentration of all hemp must meet the acceptable hemp
THC level. Samples must be tested using post-decarboxylation or other
similarly reliable analytical methods where the total THC concentration
level reported accounts for the conversion of delta-9-
tetrahydrocannabinolic acid (THCA) into THC. Testing methodologies
currently meeting these requirements include those using gas or liquid
chromatography with detection. The total THC, derived from the sum of
the THC and THCA content, shall be determined and reported on a dry
weight basis. In order to provide flexibility to States and Tribes in
administering their own hemp production programs, alternative sampling
and testing protocols will be considered if they are comparable and
similarly reliable to the baseline mandated by section 297B(a)(2)(ii)
of the AMA and established under the USDA plan and procedures. USDA
procedures for sampling and testing will be issued concurrently with
this rule and will be provided on the USDA website.
    Sections 297B(a)(2)(A)(iii) and 297C(a)(2)(C) require that cannabis
plants that have a THC concentration level of greater than 0.3% on a
dry weight basis be disposed of in accordance with the applicable
State, Tribal, or USDA plan. Because of this requirement, producers
whose cannabis crop is not hemp will likely lose most of the economic
value of their investment. Thus, USDA believes that there must be a
high degree of certainty that the THC concentration level is accurately
measured and is in fact above 0.3% on a dry weight basis before
requiring disposal of the crop.
    The National Institute of Standards and Technology (NIST) Reference
on Constants, Units, and Uncertainty states that ``measurement result
is complete only when accompanied by a quantitative statement of its
uncertainty. The uncertainty is required in order to decide if the
result is adequate for its intended purpose and to ascertain if it is
consistent with other similar results.'' \4\ Simply stated, knowing the
measurement of uncertainty is necessary to evaluate the accuracy of
test results.
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    \4\ https://physics.nist.gov/cuu/Uncertainty/international1.html.
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    This interim rule requires that laboratories calculate and include
the measurement of uncertainty (MU) when they report THC test results.
Hemp producers must utilize laboratories that use appropriate,
validated methods and procedures for all testing activities and who
also evaluate measurement of uncertainty. Laboratories should meet the
AOAC International \5\ standard method performance requirements for
selecting an appropriate method.
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    \5\ USDA established the Association of Official Agricultural
Chemists in 1884. In 1965, it changed its name to the Association of
Official Analytical Chemists and became an independent organization
in 1979. In 1991, it adopted its current, legal name as AOAC
International.
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    This interim rule defines ``measurement of uncertainty'' as ``the
parameter, associated with the result of a measurement, that
characterizes the dispersion of the values that could reasonably be
attributed to the particular quantity subject to measurement.'' This
definition is based on the definition of ``uncertainty (of
measurement)'' in section 2.2.3 of the Joint Committee for Guides in
Metrology \6\ 100:800, Evaluation of measurement data--Guide to the
expression of uncertainty in measurement (JCGM Guide). NIST Technical
Note 1297, Guidelines for Evaluating and Expressing the Uncertainty of
NIST Measurement Results (TN 1297), is based on the JCGM Guide. USDA
also relied on the Eurachem/Co-Operation on International Traceability
in Analytical Chemistry's ``Guide on Use of Uncertainty Information in
Compliance
[[Page 58525]]
Assessment, First Edition 2007''. Colloquially, the measurement of
uncertainty is similar to a margin of error. When the measurement of
uncertainty, normally expressed as a +/- with a number, (e.g., +/-
0.05) is combined with the reported measurement, it produces a range
and the actual measurement has a known probability of falling within
that range (typically 95%).
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    \6\ The Joint Committee for Guides in Metrology is composed of
international organizations working in the field of metrology. Its
membership includes the Bureau International des Poids et Mesures,
the Organisation Internationale de M[eacute]trologie L[eacute]gale,
the International Organization for Standardization, the
International Electrotechnical Commission, the International Union
of Pure and Applied Chemistry, the International Union of Pure and
Applied Physics, the International Federation of Clinical Chemistry
and Laboratory Medicine, and the International Laboratory
Accreditation Cooperation.
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    This interim rule requires that laboratories report the measurement
of uncertainty as part of any hemp test results. The rule also includes
a definition of ``acceptable hemp THC level'' to account for the
uncertainty in the test results. The reported THC concentration level
of a sample may not be the actual concentration level in the sample.
The actual THC concentration level is within the distribution or range
when the reported THC concentration level is combined with the
measurement of uncertainty.
    It bears emphasis that this rule does not alter Federal law with
regard to the definition of hemp or marihuana. As stated above, the
2018 Farm Bill defines hemp as the plant species Cannabis sativa L. and
any part of that plant, including the seeds thereof and all
derivatives, extracts, cannabinoids, isomers, acids, salts, and salts
of isomers, whether growing or not, with a delta-9 THC of not more than
0.3 percent on a dry weight basis. Likewise, the Federal (CSA)
definition of marihuana continues to include those parts of the
cannabis plant as specified in 21 U.S.C. 802(16) (and derivatives
thereof) that contain more than 0.3 percent delta-9 THC on a dry weight
basis. The foregoing provisions of Federal law remain in effect for
purposes of Federal criminal prosecutions as well as Federal civil and
administrative proceedings arising under the CSA. However, for purposes
of this rule (i.e., for purposes of determining the obligations of
licensed hemp growers under the applicable provisions of the 2018 Farm
Bill), the term ``acceptable hemp THC level'' is used to account for
the uncertainty in the test results.
    The definition of ``acceptable hemp THC level'' explains how to
interpret test results with the measurement of uncertainty with an
example. The application of the measurement of uncertainty to the
reported delta-9 tetrahydrocannabinol content concentration level on a
dry weight basis produces a distribution, or range. If 0.3% or less is
within the distribution or range, then the sample will be considered to
be hemp for the purpose of compliance with the requirements of State,
Tribal, or USDA hemp plans. For example, if a laboratory reports a
result as 0.35% with a measurement of uncertainty of +/-0.06, the
distribution or range is 0.29% to 0.41%. Because 0.3% is within that
distribution or range, the sample, and the lot it represents, is
considered hemp for the purpose of compliance with the requirements of
State, Tribal, or USDA hemp plans. However, if the measurement of
uncertainty for that sample was 0.02%, the distribution or range is
0.33% to 0.37%. Because 0.3% or less is not within that distribution or
range, the sample is not considered hemp for the purpose of plan
compliance, and the lot it represents will be subject to disposal. Thus
the ``acceptable hemp THC level'' is the application of the measurement
of uncertainty to the reported delta-9 tetrahydrocannabinol content
concentration level on a dry weight basis producing a distribution or
range that includes 0.3% or less. As such, the regulatory definition of
``acceptable hemp THC level'' describes how State, Tribal, and USDA
plans must account for uncertainty in test results in their treatment
of cannabis. Again, this definition affects neither the statutory
definition of hemp, 7 U.S.C. 1639o(1), in the 2018 Farm Bill nor the
definition of ``marihuana,'' 21 U.S.C. 802(16), in the CSA.
    The laboratories conducting hemp testing must be registered by the
DEA to conduct chemical analysis of controlled substances (in
accordance with 21 CFR 1301.13). Registration is necessary because
laboratories could potentially handle cannabis that tests above the
0.3% concentration of THC on a dry weight basis, which is, by
definition, marijuana and a Schedule 1 controlled substance.
Instructions for laboratories to obtain DEA registration, along with a
list of approved laboratories, will be posted on the USDA Domestic Hemp
Production Program website.
    USDA is considering establishing a fee-for-service hemp laboratory
approval process for labs that wish to offer THC testing services. USDA
approved laboratories would be approved by the USDA, AMS, Laboratory
Approval Service, which administers the Laboratory Approval Program
(LAP). USDA-approved laboratories would need to comply with the LAP
requirements, as established under ``Laboratory Approval Program--
General Policies & Procedures'' (www.ams.usda.gov/services/lab-testing/lab-approval), which describes the general policies and procedures for
a laboratory to apply for and maintain status in a LAP. Under the LAP,
an individual program for hemp would be developed, with a set of
documented requirements to capture specific regulatory, legal, quality
assurance and quality control, and analytical testing elements. A
requirement for a testing laboratory to be approved by USDA would be in
addition to the requirement in the final rule that the laboratory be
registered with DEA.
    In addition to requiring ISO 17025 accreditation, which assesses
general competence of testing laboratories, the LAP would provide a way
for USDA to accredit that laboratories perform to a standard level of
quality. When DEA registers a lab to handle narcotics, they do not
require the lab to be accredited. This is an important factor, as the
issue of providing assurance as to proper testing was raised on
numerous occasions during the USDA outreach process that was conducted
prior to developing this rule. The LAP would give USDA the proper
oversight of the laboratories doing the testing, providing quality
assurance and control procedures that ensure a validated and qualified
analysis, and defensible data. Should USDA establish a lab approval
process, a list of USDA approved laboratories that are also registered
with the DEA would be posted on the USDA Domestic Hemp Production
Program website. Although this proposal is not reflected in the
regulatory text of this interim final rule, USDA is seeking comment on
it to determine whether to incorporate it in the subsequent final rule.
    Alternatively, USDA is considering requiring all laboratories
testing hemp to have ISO 17025 accreditation. We are requesting comment
on this requirement as well and are interested to learn about the
number of labs that already have this accreditation, the associated
burden, and the potential benefits of such a requirement.
C. Disposal of Non-Compliant Plants
    State and Tribal plans are also required to include procedures for
ensuring effective disposal of plants produced in violation of this
part. If a producer has produced cannabis exceeding the acceptable hemp
THC level, the material must be disposed of in accordance with the CSA
and DEA regulations because such material constitutes marijuana, a
schedule I controlled substance under the CSA. Consequently, the
material must be collected for destruction by a person authorized under
the CSA to handle marijuana, such as a DEA-registered reverse
distributor, or a duly authorized Federal, State, or local law
enforcement officer.
[[Page 58526]]
D. Compliance With Enforcement Procedures Including Annual Inspection
of Hemp Producers
    State and Tribal plans must include compliance procedures to ensure
hemp is being produced in accordance with the requirements of this
part. This includes requirements to conduct annual inspections of, at a
minimum, a random sample of hemp producers to verify hemp is not being
produced in violation of this part. These plans also must include a
procedure for handling violations. In accordance with the 2018 Farm
Bill, States and Tribes with their own hemp production plans have
certain flexibilities in determining whether hemp producers have
violated their approved plans. However, there are certain compliance
requirements that all State and Tribal plans must contain. This
includes procedures to identify and attempt to correct certain
negligent acts, such as failing to provide a legal description of the
land on which the hemp is produced, not obtaining a license or other
required authorizations from the State or tribal government or
producing plants exceeding the acceptable hemp THC level. States and
Tribes may require additional information in their plans. In the
context of this part, negligence is defined as a failure to exercise
the level of care that a reasonably prudent person would exercise in
complying with the regulations set forth under this part. This
definition employed in this rule is derived from the definition of
negligence in Black's Law Dictionary. See BLACK'S LAW DICTIONARY (10th
ed. 2014) (defining negligence as ``[t]he failure to exercise the
standard of care that a reasonably prudent person would have exercised
in a similar situation'').
    This rule specifies that hemp producers do not commit a negligent
violation if they produce plants that exceed the acceptable hemp THC
level and use reasonable efforts to grow hemp and the plant does not
have a THC concentration of more than 0.5 percent on a dry weight
basis. USDA recognizes that hemp producers may take the necessary steps
and precautions to produce hemp, such as using certified seed, using
other seed that has reliably grown compliant plants in other parts of
the country, or engaging in other best practices, yet still produce
plants that exceed the acceptable hemp THC level. USDA seeks comments
whether there are other reasonable efforts to be considered. We believe
that a hemp producer in that scenario has exercised a level of care
that a reasonably prudent person would exercise if the plant does not
have a THC concentration of more than 0.5 percent on a dry weight
basis. USDA arrived at that percentage by examining the test results of
samples taken from several States that have a hemp research program
under the 2014 Farm Bill and by reviewing results from plants grown
from certified seed as well as uncertified seed and tested using
different testing protocols. Under this scenario, although a producer
would not be considered ``negligent,'' they would still need to dispose
of the plants if the THC concentration exceeded the acceptable hemp THC
level.
    In developing the compliance requirements of State and Tribal
plans, USDA recognizes that there may be significant differences across
States and Tribes in how they will administer their respective hemp
programs. Accordingly, as long as, at a minimum, the requirements of
the 2018 Farm Bill are met, States and Tribes are free to determine
whether or not a licensee under their applicable plan has taken
reasonable steps to comply with plan requirements.
    In cases where a State or Tribe determines a negligent violation
has occurred, a corrective action plan shall be established. The
corrective action plan must include a reasonable date by which the
producer will correct the negligent violation. Producers operating
under a corrective action plan must also periodically report to the
State or Tribal government, as applicable, on their compliance with the
plan for a period of not less than two calendar years following the
violation. A producer who negligently violates a State or Tribal plan
three times in a five-year period will be ineligible to produce hemp
for a period of five years from the date of the third violation.
Negligent violations are not subject to criminal enforcement action by
local, Tribal, State, or Federal government authorities.
    State and Tribal plans also must contain provisions relating to
producer violations made with a culpable mental state greater than
negligence, meaning, acts made intentionally, knowingly, or with
recklessness. This definition is derived from the definition of
negligence in Black's Law Dictionary. See BLACK'S LAW DICTIONARY (10th
ed. 2014) (giving as a definition of negligence ``[t]he failure to
exercise the standard of care that a reasonably prudent person would
have exercised in a similar situation''). If it is determined a
violation was committed with a culpable mental state greater than
negligence, the State department of agriculture or tribal government,
as applicable, shall immediately report the producer to the Attorney
General, USDA, and the chief law enforcement officer of the State or
Tribe. State and Tribal plans also must prohibit any person convicted
of a felony related to a controlled substance under State or Federal
law before, on, or after the enactment of the 2018 Farm Bill from
participating in the State or Tribal plan and from producing hemp for
10-years following the date of conviction. An exception applies to a
person who was lawfully growing hemp under the 2014 Farm Bill before
December 20, 2018, and whose conviction also occurred before that date.
    To meet this requirement, the State or Indian Tribe will need to
review criminal history reports for each applicant. When an applicant
is a business entity, the State or Indian Tribe must review the
criminal history report for each key participant in the business. The
State and Tribe may determine the appropriate method for obtaining the
criminal history report for their licensees in their plan. Finally, any
person found by the USDA, State, or Tribal government to have
materially falsified any information submitted to this program will be
ineligible to participate.
E. Information Sharing
    State and Tribal plans also must contain procedures for reporting
specific information to USDA. This is separate from the requirement to
report hemp crop acreage with FSA as discussed above. The information
required here includes contact information for each hemp producer
covered under the plan including name, address, telephone number, and
email address (if available). If the producer is a business entity, the
information must include the full name of the business, address of the
principal business location, full name and title of the key
participants, an email address if available, and EIN number of the
business entity. Producers must report the legal description and
geospatial location for each hemp production area, including each
field, greenhouse, or other site, used by them, as stated in section A
of this preamble. The report also shall include the status of the
license or other required authorization from the State or Tribal
government, as applicable, for each producer under a hemp production
plan. States and Tribes will submit this information to USDA not later
than 30 days after the date it is received using the appropriate
reporting requirements as determined by USDA. These reporting
requirements are found at Sec.  990.70 in this rule. Further
explanation of the specific information to be submitted, the
appropriate format, and the specific due
[[Page 58527]]
dates for the information is discussed below. This information
submitted from each State and Tribal plan, along with the equivalent
information collected from individuals participating under the USDA
plan, will be assembled and maintained by USDA and made available in
real time to Federal, State, and local law enforcement as required by
the 2018 Farm Bill. All information supporting, verifying, or
documenting the information submitted to USDA must be maintained by the
States and Tribes for at least three years.
F. Certification of Resources
    All State and Tribal plans submitted for USDA approval must also
have a certification stating the State or Tribe has the resources and
personnel necessary to carry out the practices and procedures described
in their plan. Section 297B of the AMA requires this certification and
the information is important to USDA's approval of State and Tribal
plans in that all such plans must be supported by adequate resources to
effectively administer them.
G. Plan Approval, Technical Assistance and USDA Oversight
    During the plan development process, States and Tribes are
encouraged to contact USDA so we may provide technical assistance in
developing plan specifics. USDA will not review, approve or disapprove
plans until after the effective date of this interim rule. Once USDA
formally receives a plan, USDA will have 60 days to review the
submitted plan. USDA may approve plans which comply with the 2018 Farm
Bill and with the provisions of this rule. If a plan does not comply
with all requirements of the Act and this part it will be rejected.
USDA will consult with the Attorney General throughout this process.
    When plans are rejected, USDA will provide a letter of notification
outlining the deficiencies identified. The State or tribal government
may then submit an amended plan for review. If the State or Tribe
disagrees with the determination made by USDA regarding the plan, a
request for reconsideration can be submitted to USDA using the appeal
process as outlined in section V. of this rule. Plans submitted by
States and Tribes must be approved by USDA before they can be
implemented.
    USDA will use the information outlined here and as directed in the
2018 Farm Bill when evaluating State and Tribal plans for approval.
States and Tribes can submit their plans to USDA through electronic
mail at [email protected] or by postal carrier to USDA. The
specific address is provided on the USDA Domestic Hemp Production
Program website.
    If the State or Tribal plan application is complete and meets the
criteria of this part, USDA shall issue an approval letter. Approved
State and Tribal plans, including their respective rules, regulations
and procedures, shall be posted on USDA's hemp program website.
    Once a plan has received approval from USDA, it will remain in
effect unless revoked by USDA pursuant to the revocation procedures
discussed below, or unless the State or Tribe makes substantive
revisions to their plan or their laws that alter the way the plan meets
the requirements of this regulation. Additionally, changes to the
provisions or procedures under this rule or to the language in the 2018
Farm Bill may require plan revision and resubmission to USDA for
approval. Should States or Tribes have questions regarding the need to
resubmit their plans, they should contact USDA for guidance. Statutory
amendments could result in revocation of some or all plans.
    A State or tribal government may submit an amended plan to USDA for
approval if: (1) The Secretary disapproves a State or Tribal plan; or
(2) The State or Tribe makes substantive revisions to their plan or to
their laws that alter the way the plan meets the requirements of this
regulation, or as necessary to bring the plan into compliance with
changes in other applicable law or regulations.
    If the plan, previously approved by USDA, needs to be amended
because of changes to the State or Tribe's laws or regulations, such
resubmissions should be provided to USDA within a calendar year from
when the new State or tribal law or regulations are effective.
Producers will be held to the requirements of the previous plan until
such modifications are approved by USDA. If State or tribal government
regulations in effect under the USDA-approved plan change but the State
or tribal government does not resubmit a modified plan within the
calendar year of the effective date of the change, USDA will issue a
notification to the State or tribal government that approval of its
plan will be revoked. The revocation will be effective no earlier than
the beginning of the next calendar year. When USDA sends the
notification to the State or Tribe, it will accept applications for
USDA licenses from producers in the State or territory of the Indian
Tribe for 90 days after the notification even if that time period does
not coincide with the annual period in which USDA normally accepts
applications under Sec.  990.21.
    USDA has the authority to audit States and Tribes to determine if
they are in compliance with the terms and conditions of their approved
plans. If a State or Tribe is noncompliant with their plan, USDA will
work with that State or Tribe to develop a corrective action plan
following the first case of noncompliance. However, if additional
instances of noncompliance occur, USDA has the authority to revoke the
approval of the State or Tribal plan for one year. USDA believes that
one year is sufficient time for a noncompliant State or Tribe to
evaluate problems with their plan and make the necessary adjustments.
Should USDA determine the approval of a State or Tribal plan should be
revoked, such a revocation would begin after the end of the current
calendar year, so producers will have the opportunity to adjust their
operations as necessary. This one-year window will allow producers to
apply for a license under the USDA plan so that their operations do not
become disrupted due to the revocation of the State or Tribal plan.
    For the 2020 planting season, the 2018 Farm Bill provides that
States and institutions of higher education can continue operating
under the authorities of the 2014 Farm Bill. The 2018 Farm Bill
extension of the 2014 Farm Bill authority expires 12 months after the
effective date of this rule.
III. Department of Agriculture Plan
    This rule also establishes a USDA plan to regulate hemp production
by producers in areas where hemp production is legal but is not covered
by an approved State or Tribal plan. All hemp produced outside of
States and Tribes with approved plans must meet the requirements of the
USDA plan. The requirements of the USDA plan are similar to those under
State and Tribal plans.
A. USDA Hemp Producer License
1. Application
    To produce hemp under the USDA plan, producers must apply for and
be issued a license from USDA. USDA will begin accepting applications
30 days after the effective date of this interim rule. USDA is delaying
acceptance of applications for 30 days to allow States and Tribal
governments to submit their plans first. This is to prevent USDA from
reviewing and issuing USDA licenses to producers when there is a
likelihood that there will soon be a State or Tribal plan in place and
producers will obtain their licenses from the State or Tribe.
[[Page 58528]]
    While a State or Tribal government has a draft hemp production plan
pending for USDA approval, USDA will not issue USDA hemp production
licenses to individual producers located in those States or Tribal
Nations. Once USDA approves a draft hemp production plan from a State
or Tribe, it will deny any license applications from individuals
located in the applicable State or Tribal Nation. If USDA disapproves a
State or Tribal hemp production plan, individual producers located in
the State or Tribal Nation may apply for a USDA hemp production
license.
    For the first year after USDA begins to accept applications,
applications can be submitted any time. For all subsequent years,
license applications and license renewal applications must be submitted
between August 1 and October 31. For hemp grown outdoors, harvesting
usually occurs in the late summer and early fall. This application
period is close to or after the harvest season when producers are
preparing for the next growing season. USDA requests comments on
whether this application period is sufficient. USDA may consider an
alternative application window if experience demonstrates the need for
one. Having an established application period provides adequate time
for USDA to effectively and efficiently review and decide on
applications, while also providing producers with a licensing decision
well before planting season. All applications must comply with the
requirements as described below. The license application will be
available online at the USDA Domestic Hemp Production Program website.
Applications may be submitted electronically or by mail. Copies can be
also requested by email at [email protected].
    The application will require contact information such as name,
address, telephone number, and email address (if available). If the
applicant represents a business entity, and that entity will be the
producer, the application will require the full name of the business,
address of the principal business location, full name and title of the
key participants on behalf of the entity, an email address if
available, and EIN number of the business entity.
    All applications must be accompanied by a completed criminal
history report. If the application is for a business entity, a
completed criminal history report must be provided for each key
participant.
    Key participants are a person or persons who have a direct or
indirect financial interest in the entity producing hemp, such as an
owner or partner in a partnership. A key participant also includes
persons in a corporate entity at executive levels including chief
executive officer, chief operating officer and chief financial officer.
This does not include other management positions like farm, field or
shift managers. USDA is requiring a criminal history records report for
key participants because those persons are likely to have control over
hemp production, whether production is owned by an individual,
partnership, or a corporation. USDA considers those individuals to be
responsible for ensuring compliance with the regulatory requirements
and thereby active participants in the Domestic Hemp Production
Program. If those persons have a disqualifying felony, they can no
longer participate in the program as provided for by section
297B(e)(3)(B)(i) of the 2018 Farm Bill. An exception applies to a
person who was lawfully growing hemp under the 2014 Farm Bill before
December 20, 2018, and whose conviction also occurred before that date.
    USDA will not accept criminal history reports completed more than
60 days before the submission of an application, which provides USDA
with an expectation that the findings of the report are reasonably
current and accurate.
    The criminal history report must indicate the applicant has not
been convicted of a State or Federal felony related to a controlled
substance for the 10 years prior to the date of when the report was
completed. An exception applies to a person who was lawfully growing
hemp under the 2014 Farm Bill before December 20, 2018, and whose
conviction also occurred before that date.
    In addition to providing the information specified, the application
will also require license applicants to certify they will adhere to the
provisions of the plan.
    Once all the necessary information has been provided, applications
will be reviewed by USDA for completeness and to determine an
applicant's eligibility. USDA will approve or deny license applications
unless the applicant is from a State or Tribal Nation that has a plan
submitted to or approved by USDA. Applicants will be notified if they
have been granted or denied a license either by mail or email.
    If an application is denied, the applicant will receive a
notification letter or email specifying why the application was denied.
If denied, applicants will have the option of resubmitting a revised
application if the application was rejected for being incomplete.
Applicants may resubmit after October 31 as long as the original
application was submitted between August 1 and October 31. If the
application was rejected for other reasons, the applicant will have the
opportunity to appeal the USDA's decision in accordance with the
appeals process outlined in the regulation.
2. USDA Hemp Producer Licenses
    Once a license application has been approved, USDA will issue the
producer license. Licenses are not transferrable in any manner. An
applicant whose application has been approved will not be considered a
licensed producer under the USDA plan until the applicant receives
their producer license. Licenses do not renew automatically and must be
renewed every three years. Because of the felony ban, we believe it is
necessary to review producers' criminal history to ensure that they
have not committed a felony since the most recent license approval that
would disqualify them.
    Applications for renewal will be subject to the same terms and
approved under the same criteria as initial applications unless there
has been an intervening change in the applicable law or regulations
since approval of the initial or last application. In such a case the
subsequently enacted law or regulation shall govern renewal of the
license. Licenses will be valid until December 31 of the year that is
at least three years after the license is issued. This date is not tied
to the harvest and planting season. Rather it is tied to the window for
applications (Aug. 1-Oct. 31) and the 60 days for USDA to make a
decision. For example, if a producer applies for a license August 1,
2020 and is granted a license on September 15, 2020, the license would
expire December 31, 2023. A December 31 expiration date will allow
licensed producers time to apply for a license renewal prior to their
prior license's expiration and prevent a gap in licensing.
    Once a producer has been issued a USDA license, the producer must
report their hemp crop acreage to FSA. Producers must provide specific
information to FSA, as identified in this part, including, but not
limited to: The specific location where hemp is produced, and the
acreage, greenhouse, building, or site where hemp is produced. The
specific location where hemp is produced must be identified, to the
extent practicable, by the geospatial location.
    If at any time, there is a change to the information submitted in
the license application, a license modification is required. A license
modification is
[[Page 58529]]
required if, for example, the licensed business is sold to a new owner
or when hemp will be produced in a new location not described on the
original application. Producers must notify USDA immediately should
there be any change in the information provided on the license
application. USDA will provide guidance on where producers will submit
this information on its website.
B. Sampling and Testing for THC
    All hemp production must be sampled and tested for THC
concentration levels. Samples must be collected by a USDA-approved
sampling agent, or a Federal, State or local law enforcement agent
authorized by USDA to collect samples. It is the responsibility of the
licensed producer to pay any fees associated with sampling. USDA will
issue guidance on sampling procedures that will satisfy sampling
requirements to coincide with publication of this rule. This guidance
will be provided on the USDA website.
    The sampling procedures are designed to produce a representative
sample for testing. They describe procedures for entering a growing
area and collecting the minimum number of plant specimens necessary to
accurately represent the THC content, through laboratory testing, of
the sample to be tested.
    THC levels in representative samples must test at or below the
acceptable hemp THC level. Testing will be conducted using post-
decarboxylation or other similarly reliable methods where the total THC
concentration level measured includes the potential to convert delta-9-
tetrahydrocannabinolic acid (THCA) into THC. Further, test results
should be determined and reported on a dry weight basis, meaning the
percentage of THC, by weight, in a cannabis sample, after excluding
moisture from the sample. The moisture content is expressed as the
ratio of the amount of moisture in the sample to the amount of dry
solid in the sample.
    Based on USDA's review of scientific studies, internal research and
information gathered from the United Nations Office on Drugs and Crime:
Recommended Methods for the Identification and Analysis of Cannabis and
Cannabis Products (ISBN 978-92-1-148242-3), USDA has determined that
testing methodologies meeting these requirements include gas or liquid
chromatography with detection.
    USDA requires that all samples tested for THC concentration levels
be conducted in DEA registered laboratories. These laboratories must
also meet standards of performance described in this regulation.
Standards of performance ensure the validity and reliability of test
results, and that analytical method selection, validation, and
verification is appropriate (fit for purpose) and that the laboratory
can successfully perform the testing. Furthermore, the standards ensure
consistent, accurate, analytical performance and that the analytical
tests performed are sufficiently sensitive for the purposes of the
detectability requirements under this part.
    Laboratories who conduct THC testing must also be registered with
DEA to handle controlled substances under the CSA and DEA regulations
(21 CFR part 1301). USDA is adopting this requirement because of the
potential for these laboratories to handle cannabis products testing
above 0.3% THC. Such products are, by definition, marijuana, and a
controlled substance. DEA registration requirements verify a
laboratory's ability to properly handle controlled substances.
    As previously explained in the requirements for State and Tribal
plans, USDA is also considering requiring that testing for THC
concentration levels be conducted in USDA approved laboratories for
USDA plan licensees. USDA approved laboratories are authorized under
the USDA, AMS, Laboratory Approval Service, which administers the
Laboratory Approval Program (LAP). USDA-approved laboratories would
need to comply with the LAP requirements, as established under
``Laboratory Approval Program--General Policies & Procedures''
(www.ams.usda.gov/services/lab-testing/lab-approval), which describes
the general policies and procedures for a laboratory to apply for and
maintain status in a LAP. Under the LAP, an individual program for hemp
would be developed, with a set of documented requirements to capture
specific regulatory, legal, quality assurance and quality control, and
analytical testing elements. A requirement for a testing laboratory to
be approved by USDA would be in addition to the requirement in the
final rule that the laboratory be registered with DEA.
    USDA is considering a LAP for USDA licensees because it would be
tailored to a commodity to meet specific requirements in support of
domestic and international trade. In addition to requiring ISO 17025
accreditation, which assesses general competence of testing
laboratories, the LAP would provide a way for USDA to certify that
laboratories perform to a standard level of quality. This is an
important factor, as the issue of providing assurance as to proper
testing was raised on numerous occasions during the USDA outreach
process conducted prior to developing this rule. The LAP would give
USDA the proper oversight of the laboratories doing the testing,
providing quality assurance and control procedures that ensure a
validated and qualified analysis, and defensible data. Should USDA
require that testing laboratories be approved by USDA, a list of USDA
approved laboratories would be posted on the USDA Domestic Hemp
Production Program website. Although this proposal is not reflected in
the regulatory text of this interim rule, USDA is seeking comment on it
to determine whether to incorporate it in the subsequent final rule.
    Alternatively, USDA is considering requiring all laboratories
testing hemp to have ISO 17025 accreditation. We are requesting comment
on this requirement as well.
    It is the responsibility of the licensed producer to select the
DEA-registered laboratory that will conduct the testing and to pay any
fees associated with testing. Laboratories performing THC testing for
hemp produced under this program will be required to share test results
with the licensed producer and USDA. USDA will provide instructions to
all approved labs on how to electronically submit test results to USDA.
Laboratories may provide test results to licensed producers in whatever
manner best aligns with their business practices, but producers must be
able to produce a copy of test results. For this reason, providing test
results to producers through a web portal or through electronic mail,
so the producer will have ready access to print the results when
needed, is preferred.
    Samples exceeding the acceptable hemp THC level are marijuana and
will be handled in accordance with the procedures discussed in sections
C and D below.
    Any licensee may request that the laboratory retest samples if it
is believed the original THC concentration level test results were in
error. The licensee requesting the retest of the second sample would
pay the cost of the test. The retest results would be issued to the
licensee requesting the retest and a copy would be provided to USDA or
its agent.
C. Disposal of Non-Compliant Product
    If the results of a test conclude that the THC levels exceed the
acceptable hemp THC level, the approved laboratory will promptly notify
the producer and USDA or its authorized agent. If a licensed producer
is notified that they have produced cannabis exceeding the acceptable
hemp THC level, the cannabis must be disposed of
[[Page 58530]]
in accordance with the CSA and DEA regulations as such product is
marijuana and not hemp. The material must be collected for destruction
by a person authorized under the CSA to handle marijuana, such as a
DEA-registered reverse distributor, or a duly authorized Federal,
State, or local law enforcement officer, or official.
    Licensed producers notified they have produced product exceeding
the acceptable hemp THC level must arrange for disposal of the lot
represented by the sample in accordance with the CSA and DEA
regulations as specified above. Specific DEA procedures for arranging
for the disposal of non-compliant product will be listed on the USDA
Domestic Hemp Production Program website.
    Producers must document the disposal of all marijuana. This can be
accomplished by either providing USDA with a copy of the documentation
of disposal provided by the reverse distributor or by using the
reporting requirements established by USDA. These reports must be
submitted to USDA following the completion of the disposal process.
D. Compliance
    USDA has established certain compliance requirements for USDA
licensees as part of this rulemaking. This includes the ability for
USDA to conduct audits of USDA licensees and to issue corrective action
plans for negligent violations. Negligent violations by a producer may
lead to suspension or revocation of a producer's license.
    USDA may conduct random audits of licensees to verify hemp is being
produced in accordance with the provisions of this part. The format of
the audit will vary and may include a ``desk-audit'' where USDA
requests records from a licensee or the audit may be a physical visit
to a licensee's facility. When USDA visits a licensee's facility, the
licensee must provide access to any fields, greenhouses, storage
facilities or other locations where the licensee produces hemp. USDA
may also request records from the licensee to include production and
planting data, testing results, and other information as determined by
USDA.
    USDA will conduct an audit of all USDA licensees no more than every
three years based on available resources.
    USDA will issue a summary of the audit to the licensee after the
completed audit. Licensees who are found to have a negligent violation
will be subject to a corrective action plan. A negligent violation
includes: (1) Failure to provide a legal description of the land on
which the hemp is produced; (2) not obtaining a license before engaging
in production; or (3) producing plants exceeding the acceptable hemp
THC level. Similar to the requirements for State and Tribal plans, USDA
will not consider hemp producers as committing a negligent violation if
they produce plants exceeding the acceptable hemp THC level if they use
reasonable efforts to grow hemp and the plant does not have a THC
concentration of more than 0.5 percent on a dry weight basis.
    For sampling and testing violations, USDA will consider the entire
harvest from a distinct lot in determining whether a violation
occurred. This means that if testing determines that each sample of
five plants from distinct lots has a THC concentration exceeding the
acceptable hemp THC level (or 0.5 percent if the hemp producer has made
reasonable efforts to grow hemp), USDA considers this as one negligent
violation. If an individual produces hemp without a license, this will
be considered one violation. USDA will establish and review a
corrective action plan with the licensee and its implementation may be
verified during a future audit or site visit.
    When USDA determines that a negligent violation has occurred, USDA
will issue a Notice of Violation. This Notice of Violation will include
a corrective action plan. The corrective action plan will include a
reasonable date by which the producer will correct the negligent
violation or violations and require the producer to periodically report
to USDA on its compliance with the plan for a period of not less than
the next two calendar years. A producer who has negligently violated
this part three times in a five-year period is ineligible to produce
hemp for a period of five years from the date of the third violation.
Negligent violations are not subject to criminal enforcement. However,
USDA will report the production of hemp without a license issued by
USDA to the Attorney General.
    Hemp found to be produced in violation of this part, such as hemp
produced on a property not disclosed by the licensed producer, or
without a license, would be subject to the same disposal provisions as
for cannabis testing above the acceptable hemp THC level. Further, if
it is determined a violation was committed with a culpable mental state
greater than negligence, USDA will report the violation to the Attorney
General and the chief law enforcement officer of the State or Tribe as
applicable.
    The 2018 Farm Bill limited the participation of certain convicted
felons in hemp production. A person with a State or Federal felony
conviction relating to a controlled substance is subject to a 10-year
ineligibility restriction on producing hemp under the Act. An exception
applies to a person who was lawfully growing hemp under the 2014 Farm
Bill before December 20, 2018, and whose conviction also occurred
before that date.
E. Suspension of a USDA License
    A USDA license may be suspended if USDA or its representative
receives credible information that a licensee has either: (1) Engaged
in conduct violating a provision of this part; or (2) failed to comply
with a written order from the AMS Administrator related to a negligent
violation of this part. Examples of credible information are
information from local authorities of harvested plants without testing
or planting of hemp seed in non-approved locations.
    Any producer whose license has been suspended shall not handle or
remove hemp or cannabis from the location where hemp or other cannabis
was located at the time when USDA issued its notice of suspension
without prior written authorization from USDA. Any person whose license
has been suspended shall not produce hemp during the period of
suspension. A suspended license may be restored after a waiting period
of one year. A producer whose license has been suspended may be
required to comply with a corrective action plan to fully restore their
license.
    A USDA license shall be immediately revoked if the licensee: (1)
Pleads guilty to, or is convicted of, any felony related to a
controlled substance; \7\ or (2) made any materially false statement
with regard to this part to USDA or its representatives with a culpable
mental state greater than negligence; or (3) was found to be growing
cannabis exceeding the acceptable hemp THC level with a culpable mental
state greater than negligence or negligently violated the provision of
this part three times in five years.
---------------------------------------------------------------------------
    \7\ For a corporation, if a key participant has a disqualifying
felony conviction, the corporation may remove that person from a key
participant position. Failure to remove that person will result in a
license revocation.
---------------------------------------------------------------------------
    If the licensed producer wants to appeal any suspension or
revocation decision made by USDA under this section, they can do so
using the appeal process specified in section V.
F. Reporting and Recordkeeping
    The 2018 Farm Bill requires USDA to develop a process to maintain
relevant
[[Page 58531]]
information regarding the farm on which hemp is produced. USDA's FSA is
best suited to collect this information for the domestic hemp
production program. FSA has staff throughout the United States who are
trained to work with farmers to verify land uses. Many hemp producers
are likely to be familiar with the FSA since they already operate
traditional farms, and therefore already provide data to FSA on acres
and crops planted. Consequently, licensed producers will be required to
report their hemp crop acreage with FSA, and to provide FSA with
specific information regarding field acreage, greenhouse, or indoor
square footage of hemp planted. This information must include street
address, geospatial location or other comparable identification method
specifying where the hemp will be produced, and the legal description
of the land. Geospatial location or other methods of identifying the
production locations are necessary as not all rural locations have
specific addresses. This information is required for each field,
greenhouse, building, or site where hemp will be grown. USDA will use
this information to assemble and maintain the data USDA must make
available in real time to Federal, State, and local law enforcement as
required by the 2018 Farm Bill and as specified in section G below.
Specific procedures for reporting hemp acreage to FSA will be posted on
the USDA Domestic Hemp Production Program website. This information
will be maintained by USDA for at least three calendar years.
    Licensed producers will be required to maintain copies of all
records and reports necessary to demonstrate compliance with the
program. These records include those that support, document, or verify
the information provided in the forms submitted to USDA. Records and
reports must be kept for a minimum of three years.
    Under the USDA plan, there will be additional reporting
requirements for licensed producers. These include specific reporting
requirements to collect the information needed by the licensing
application, and the record and reporting requirements needed to
document disposal of cannabis produced in violation of the provisions
of this rule. Specific requirements may be referenced herein at Sec.
990.71.
G. Information Sharing
    USDA will develop and maintain a database of all relevant and
required information regarding hemp as specified by the 2018 Farm Bill.
This database will be accessible in real time to Federal, State, local
and Tribal law enforcement officers through a Federal Government law
enforcement system. USDA AMS will administer and populate this
database, which will include information submitted by States and
Tribes, laboratories, information submitted by USDA licensed producers,
and information submitted to FSA.
    USDA will use this information to create a comprehensive list of
all domestic hemp producers. USDA will also gather the information
related to the land used to produce domestic hemp. This information
will be comprehensive and include data both from State and Tribal plans
and include a legal description of the land on which hemp is grown by
each hemp producer and the corresponding geospatial location. Finally,
USDA will also gather information regarding the status of all licenses
issued under State and tribal governments and under the USDA plan.
    This information will be made available in real time to Federal,
State, local and Tribal law enforcement as required by the 2018 Farm
Bill.
    USDA has prepared a System of Records Notice (SORN) and a Privacy
Impact Analysis to be issued concurrently with this rule.
IV. Definitions
    In support of the foregoing regulations and hemp production plan
descriptions, USDA is establishing definitions for certain terms. The
following terms are integral to implement the 2018 Farm Bill and
establish the scope and applicability of the regulations of this part.
    The term ``Act'' refers to the Agricultural Marketing Act of 1946.
The 2018 Farm Bill amended the Agricultural Marketing Act of 1946 by
adding Subtitle G which is a new authority for the Secretary of
Agriculture to administer a national hemp production program. Section
297D of Subtitle G authorizes and directs USDA to promulgate
regulations to implement this program.
    The Agricultural Marketing Service (AMS) of the U.S. Department of
Agriculture is the agency the Secretary of Agriculture has charged with
the responsibility to oversee the administration of this new program.
    The term ``applicant'' means any State or Indian Tribe that has
applied for USDA approval of a State or tribal hemp production plan for
the State or Indian Tribe they represent. This term also applies to any
person or business in a State or territory of an Indian Tribe not
subject to a State or tribal plan, who applies for a hemp production
license under the USDA plan established under this part.
    The term ``cannabis'' is the Latin name of the plant that,
depending on its THC concentration level, is further defined as either
``hemp'' or ``marijuana.'' Cannabis is a genus of flowering plants in
the family Cannabaceae of which Cannabis sativa is a species, and
Cannabis indica and Cannabis ruderalis are subspecies thereof. For the
purposes of this part, Cannabis refers to any form of the plant where
the delta-9 tetrahydrocannabinol concentration on a dry weight basis
has not yet been determined. This term is important in describing
regulations that apply to plant production, sampling or handling prior
to determining its THC content.
    The Controlled Substances Act (CAS) is the statute, codified in 21
U.S.C. 801-971, establishing Federal U.S. drug policy under which the
manufacture, importation, exportation, possession, use, and
distribution of certain substances is regulated. Because cannabis
containing THC concentration levels of higher than 0.3 percent is
deemed to be marijuana, a schedule I controlled substance, its
regulation falls under the authorities of the CSA. Therefore, for
compliance purposes, the requirements of the CSA are relied upon for
the disposal of cannabis that contains THC concentrations above the
stated limit of this part.
    The rule includes a definition of ``conviction'' to explain what is
considered a conviction and what is not. Specifically, a plea of guilty
or nolo contendere or any finding of guilt is a conviction. However, if
the finding of guilt is subsequently overturned on appeal, pardoned, or
expunged, then it is not considered a conviction for purposes of part
990. This definition of ``conviction'' is consistent with how some
other agencies who conduct criminal history record searches determine
disqualifying crimes.
    A ``corrective action plan'' is a plan set forth by a State, tribal
government, or USDA for a licensed hemp producer to correct a negligent
violation of or non-compliance with a hemp production plan, its terms,
or any other regulation set forth under this part. This term is defined
in accordance with the 2018 Farm Bill, which mandates certain non-
compliance actions to be addressed through corrective action plans.
    ``Culpable mental state greater than negligence'' is a term used in
the 2018 Farm Bill to determine when certain actions would be subject
to specific compliance actions. This term means to act intentionally,
knowingly, willfully, recklessly, or with criminal negligence.
    The term ``decarboxylated'' refers to the completion of the
chemical reaction
[[Page 58532]]
that converts THC-acid (THCA) into delta-9-THC, the intoxicating
component of cannabis. The decarboxylated value is also calculated
using a conversion formula that sums delta-9-THC and eighty-seven and
seven tenths (87.7) percent of THCA. This term, commonly used in
scientific references to laboratory procedures, is the precursor to the
term ``post-decarboxylation,'' a term used in the 2018 Farm Bill's
mandate over cannabis testing methodologies to identify THC
concentration levels. This definition is based on the regulations
administered by the Kentucky Department of Agriculture as part of the
Kentucky industrial hemp research pilot program.
    ``Delta-9 tetrahydrocannabinol,'' also referred to as ``Delta-9
THC'' or ``THC'' is the primary psychoactive component of cannabis, and
its regulation forms the basis for the regulatory action of this part.
As mandated by the Act, legal hemp production must be verified as
having THC concentration levels of 0.3 percent on a dry weight basis or
below. For the purposes of this part, delta-9 THC and THC are
interchangeable.
    ``DEA'' means the ``Drug Enforcement Administration,'' a United
States Federal law enforcement agency under the United States
Department of Justice. The DEA is the lead agency for domestic
enforcement of the Controlled Substances Act. The DEA plays an
important role in the oversight of the disposal of marijuana, a
schedule I controlled substance, under the regulations of this part.
The DEA is also instrumental in registering USDA-approved laboratories
to legally handle controlled substances, including cannabis samples
that test above the 0.3 THC concentration level.
    ``Dry weight basis'' refers to a method of determining the
percentage of a chemical in a substance after removing the moisture
from the substance. Percentage of THC on a dry weight basis means the
percentage of THC, by weight, in a cannabis item (plant, extract, or
other derivative), after excluding moisture from the item.
    The Farm Service Agency (FSA) is an agency of the U.S. Department
of Agriculture, that provides services to farm operations including
loans, commodity price supports, conservation payments, and disaster
assistance. For the purposes of this program, FSA will assist in
information collection on land being used for hemp production.
    ``Gas chromatography'' or GC, is a scientific method (specifically,
a type of chromatography technique) used in analytical chemistry to
separate, detect, and quantify each component in a mixture. It relies
on the use of heat for separating and analyzing compounds that can be
vaporized without decomposition. Under the terms of this part, GC is
one of the valid methods by which laboratories may test for THC
concentration levels.
    For the purposes of this part, ``geospatial location'' means a
location designated through a global system of navigational satellites
used to determine the precise ground position of a place or object.
    This term ``handle'' is commonly understood by AMS and used across
many of its administered programs. For the purposes of this part,
``handle'' refers to the actions of cultivating or storing hemp plants
or hemp plant parts prior to the delivery of such plant or plant part
for further processing. In cases where cannabis plants exceed the
acceptable hemp THC level, handle may also refer to the disposal of
those plants.
    ``Hemp'' is defined by the 2018 Farm Bill as ``the plant species
Cannabis sativa L. and any part of that plant, including the seeds
thereof and all derivatives, extracts, cannabinoids, isomers, acids,
salts, and salts of isomers, whether growing or not, with a delta-9
tetrahydrocannabinol concentration of not more than 0.3 percent on a
dry weight basis.'' The statutory definition is self-explanatory, and
USDA is adopting the same definition without change for part 990.
    ``High-performance liquid chromatography (HPLC) or (LC)'' is a
scientific method (specifically, a type of chromatography) used in
analytical chemistry used to separate, identify, and quantify each
component in a mixture. It relies on pumps to pass a pressurized liquid
solvent containing the sample mixture through a column filled with a
solid adsorbent material to separate and analyze compounds. Under the
terms of this part, HPLC is one of the valid methods by which
laboratories may test for THC concentration levels. Ultra-Performance
Liquid Chromatography (UPLC) is an additional method that may also be
used as well as other liquid or gas chromatography with detection.
    ``Indian Tribe'' is defined in the 2018 Farm Bill by reference to
section 4 of the Indian Self-Determination and Education Assistance Act
(25 U.S.C. 5304). The statutory definition is self-explanatory, and
USDA is adopting the same definition without change for part 990.
    A ``key participant'' is a person or persons who have a direct or
indirect financial interest in the entity producing hemp, such as an
owner or partner in a partnership. A key participant also includes
persons in a corporate entity at executive levels including chief
executive officer, chief operating officer and chief financial officer.
This does not include such management as farm, field or shift managers.
    ``Law enforcement agency'' refers to all Federal, State, or local
law enforcement agencies. Under the 2018 Farm Bill, State submissions
of proposed hemp production plans to USDA must be made in consultation
with their respective Governors and chief law enforcement officers.
Moreover, the 2018 Farm Bill contemplates the involvement of law
enforcement in compliance actions related to offenses identified as
being made under a ``culpable mental state.'' To assist law enforcement
in the fulfillment of these duties, the 2018 Farm Bill also mandates an
information sharing system that provides law enforcement with real-time
data.
    The term ``lot'' refers to a contiguous area in a field,
greenhouse, or indoor growing structure containing the same variety or
strain of cannabis throughout. In addition, ``lot'' is a common term in
agriculture that refers to the batch or contiguous, homogeneous whole
of a product being sold to a single buyer at a single time. Under the
terms of this part, ``lot'' is to be defined by the producer in terms
of farm location, field acreage, and variety (i.e., cultivar) and to be
reported as such to the FSA.
    As defined in the CSA, ``marihuana'' (or ``marijuana'') means all
parts of the plant Cannabis sativa L., whether growing or not; the
seeds thereof; the resin extracted from any part of such plant; and
every compound, manufacture, salt, derivative, mixture, or preparation
of such plant, its seeds or resin. The term `marihuana' does not
include hemp, as defined in section 297A of the Agricultural Marketing
Act of 1946, and does not include the mature stalks of such plant,
fiber produced from such stalks, oil or cake made from the seeds of
such plant, any other compound, manufacture, salt, derivative, mixture,
or preparation of such mature stalks (except the resin extracted
therefrom), fiber, oil, or cake, or the sterilized seed of such plant
which is incapable of germination (7 U.S.C. 1639o(1)). ``Marihuana''
also means all cannabis that tests as having a concentration level of
THC on a dry weight basis of higher than 0.3 percent.
    ``Negligence'' is a term used in the 2018 Farm Bill to describe
when certain actions are subject to specific compliance actions. For
the purposes of this part, the term means failure to exercise the level
of care that a reasonably prudent person would exercise in complying
with the regulations set forth under this part.
[[Page 58533]]
    Used in relation to the other terms and regulations in this part,
``phytocannabinoids'' are cannabinoid chemical compounds found in the
cannabis plant, two of which are Delta-9 tetrahydrocannabinol (delta-9
THC) and cannabidiol (CBD). Testing methodologies under this part will
refer to the presence of ``phytocannabinoids'' as either THC or CBD.
    Under the terms of this program, ``plan'' refers to a set of
criteria or regulations under which a State or tribal government, or
USDA, monitors and regulates the production of hemp. ``Plan'' may refer
to a State or Tribal plan, whether approved by USDA or not, or the USDA
hemp production plan.
    The 2018 Farm Bill mandates that all cannabis be tested for THC
concentration levels using ``postdecarboxylation'' or similar methods.
In the context of this part, ``postdecarboxylation'' means testing
methodologies for THC concentration levels in hemp, where the total
potential delta-9-tetrahydrocannabinol content, derived from the sum of
the THC and THCA content, is determined and reported on a dry weight
basis. The postdecarboxylation value of THC can be calculated by using
a chromatograph technique using heat, known as gas chromatography,
through which THCA is converted from its acid form to its neutral form,
THC. The result of this test calculates total potential THC. The
postdecarboxylation value of THC can also be calculated by using a
high-performance liquid chromatograph technique, which keeps the THCA
intact, and requires a conversion calculation of that THCA to calculate
total potential THC. See also the definition for decarboxylation.
    The term ``produce,'' when used as a verb, is a common agricultural
term that is often used synonymously with ``grow'' and means to
propagate plants for market, or for cultivation for market, in the
United States. In the context of this part, ``produce'' refers to the
propagation of cannabis to produce hemp.
    The 2018 Farm Bill mandates that USDA maintain a real-time
informational database that identifies registered hemp production
sites, whether under a State, tribal, or USDA plan, for the purposes of
compliance and tracking with law enforcement. AMS will maintain this
system with the information collection assistance of FSA. In order to
maintain consistency and uniformity of hemp production locations, USDA
is recommending that FSA collect this information through their crop
acreage reporting system. In this context, a common use of the term
``producer'' is essential to maintaining a substantive database. For
this reason, the definition of ``producer'' incorporates the FSA
definition of ``producer'' with the additional qualifier that the
producer is licensed or authorized to produce hemp under the Hemp
Program.
    ``Secretary'' means the Secretary of Agriculture of the United
States.
    Section 297A of the Act defines ``State'' to mean any of one of the
fifty States of the United States of America, the District of Columbia,
the Commonwealth of Puerto Rico, and any other territory or possession
of the United States. The statutory definition is self-explanatory, and
USDA is adopting the same definition without change for part 990.
    This term ``State department of agriculture'' is defined by the
2018 Farm Bill as the agency, commission, or department of a State
government responsible for agriculture in the State. The statutory
definition is self-explanatory, and USDA is adopting the same
definition without change for part 990.
    The term ``store'' is part of the term ``handle'' under this part
and means to deposit hemp plants or hemp plant product in a storehouse,
warehouse or other identified location by a producer for safekeeping
prior to delivery to a recipient for further processing.
    As defined by the 2018 Farm Bill, the term ``tribal government''
means the governing body of an Indian Tribe. The statutory definition
is self-explanatory, and USDA is adopting the same definition without
change for part 990.
    The ``U.S. Attorney General'' is the Attorney General of the United
States.
    ``USDA'' is synonymous with the United States Department of
Agriculture.
    In the context of this part, ``licensee'' or ``USDA licensed hemp
producer'' means a person or business authorized by USDA to grow hemp
under the terms established in this part and who produces hemp.
V. Appeals
    An applicant for a USDA hemp production program license may appeal
a license denial to the AMS Administrator. Licensees may appeal denials
of license renewals, license suspensions, or license revocations to the
AMS Administrator. All appeals must be submitted in writing and
received within 30 days of the denial. This submission deadline should
provide adequate time to prepare the necessary information required to
formulate the appeal. States or Tribes may appeal USDA decisions either
denying, suspending or revoking State or Tribal hemp production plans.
As with the USDA license plans, these appeals must be submitted in
writing to the AMS Administrator and explain the reasoning behind the
appeal, e.g. why the Administrator's decision is not justified or is
improper. The appeal should include any additional information or
documentation the appellant or licensee believes USDA should consider
when reviewing its decision. The Administrator will take into account
the applicant or licensee's justification for why the license should
not be denied, suspended, or revoked, and then issue a final
determination. Determinations made by the Administrator under the
appeals process will be final unless the applicant or licensee requests
a formal adjudicatory proceeding to review the decision, which will be
conducted pursuant to the U.S. Department of Agriculture's Rules of
Practice Governing Formal Adjudicatory Proceedings, 7 CFR part 1,
subpart H. If the applicant or licensee does not request that the
Administrator initiate a formal adjudicatory proceeding within 30 days
of the Administrator's adverse ruling, such ruling becomes final. The
following paragraphs explain when and how a State or Tribe may appeal a
USDA decision. State or Tribal plans may include similar appeal
procedures; this following section is not applicable to individuals
subject to State or Tribal plans.\
Appeals Under a State or Tribe Hemp Production Plan
    A State or Tribe may appeal the denial of a proposed hemp
production plan, or the proposed suspension or revocation of a plan by
the USDA. USDA will consult with States and Tribes to help ensure their
draft plans meet statutory requirements, and that existing plan
requirements are monitored and enforced by States and Tribes. If,
however, a proposed State or Tribal plan is denied, or an existing plan
is suspended or terminated, the decision may be appealed.
    If the AMS Administrator sustains a State or Tribe's appeal of a
denied hemp plan application, the proposed State or Tribal hemp
production plan shall be established as proposed. If the AMS
Administrator denies an appeal, prospective producers located in the
State or Tribe may apply for hemp licenses under the terms of the USDA
hemp production plan. Similarly, if an appeal to a proposed State or
Tribal plan revocation is denied, producers located in the impacted
State or Tribal
[[Page 58534]]
territory may apply for licenses under the USDA plan.
    The appeal of a State or Tribal hemp production plan suspension or
termination must explain the reasoning behind the appeal and be filed
within the time-period provided in the letter of notification or within
30 business days from receipt of the notification, whichever occurs
later. This timeframe should be adequate for the assembly of the
information required to be submitted as part of the appeal.
VI. Interstate Commerce
    Nothing in this rule prohibits the interstate commerce of hemp. No
State or Indian Tribe may prohibit the transportation or shipment of
hemp produced in accordance with this part and with section 7606 of the
2014 Farm Bill through the State or the territory of the Indian Tribe,
as applicable.\8\
---------------------------------------------------------------------------
    \8\ See section 10114 of the 2018 Farm Bill and the USDA General
Counsel's Legal Opinion on the Authorities for Hemp Production at
https://www.ams.usda.gov/content/legal-opinion-authorities-hemp-production.
---------------------------------------------------------------------------
VII. Outreach
    As part of this rulemaking process, USDA engaged in numerous
discussions with industry stakeholders prior to issuing this rule. This
included numerous meetings with different State and tribal groups and
representatives, industry organizations, groups and individuals with
experience in the hemp industry, and representatives of law
enforcement.
    In addition, USDA also conducted a listening session on March 13,
2019, that had more than 2,100 participants, and included comments from
46 separate speakers representing States, Tribes, producers, end-users,
hemp organizations, and others. The recording of the listening session
is available on the USDA website. On May 1 and 2, 2019, USDA also
participated in tribal consultation meetings.
    As required by the Farm Bill, the Secretary has developed these
regulations and guidelines in consultation with the Attorney General.
In addition, USDA will submit an annual report to the Committee on
Agriculture of the House of Representatives and the Committee on
Agriculture, Nutrition, and Forestry of the Senate containing updates
on the implementation of the hemp requirements in the Farm Bill.
VIII. Severability
    This interim rule includes a severability provision. This is a
standard provision in regulations. This section provides that if any
provision of part 990 is found to be invalid, the remainder of the part
shall not be affected.
Paperwork Reduction Act
    In accordance with section 3507(d) of the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501 et seq.), through this document AMS announces
its intent to request approval from OMB for a new information
collection OMB No. 0581-NEW and comments are invited on this new
information collection. All comments received on this information
collection will be summarized and included in the final request for OMB
approval.
    Based on our review of the hemp production under the 2014 Farm
Bill, we estimate that there will be approximately 6,700 \9\ producers
under State and Tribal plans, approximately 1,000 producers under the
USDA plan, and 100 State and Tribal plans. We estimate that each
producer will have an average of two lots of hemp with most producers
growing one lot per year but larger producers growing many different
lots. Each lot will need to be tested for THC concentration.
---------------------------------------------------------------------------
    \9\ The 6,700 figure represents the average number of growers
operating under State and Tribal plans over the three years of the
program. In actuality, we estimate 5,500 such growers in 2020, 6,700
growers in 2021 and 8,000 growers in 2022 who will participate
through State and Tribal programs.
---------------------------------------------------------------------------
    Comments are invited on: (1) Whether the proposed collection of
information is necessary for the proper performance of the functions of
the agency, including whether the information will have practical
utility; (2) the accuracy of the agency's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used; (3) ways to enhance the quality,
utility, and clarity of the information to be collected; and (4) ways
to minimize the burden of the collection of information on those who
are to respond, including the use of appropriate automated, electronic,
mechanical, or other technological collection techniques or other forms
of information technology.
    Title: Domestic Hemp Production Program; 7 CFR 990.
    OMB Number: 0581-NEW.
    Type of Request: New Collection.
    Abstract: The proposed information collection and reporting
requirements will facilitate the effective administration and oversight
of the Domestic Hemp Production Program, as described above. The Hemp
Program includes provisions, among others, requiring licensed producers
to maintain information on the land where hemp is produced, hemp
testing for delta-9 tetrahydrocannabinol, and disposal of plants not
meeting necessary requirements. Additionally, as explained above, all
licensed producers must report hemp crop acreage to the USDA Farm
Service Agency (FSA). The licensed producer must maintain information
that supports, verifies, or documents information on all reports for a
minimum of three years. This includes, but is not limited to, the
producer's completed criminal history report, any records of required
disposal, notifications of THC test results, and the license. This new
information collection proposes to create seven new forms. These forms
will be available on the USDA domestic hemp website, or copies can be
requested from [email protected]. AMS is in the process of
building a database for applicants and producers to submit applications
and reports. The forms and information collected on those forms are
described below. The information reported for data collected under
State and Tribal plans incorporates the burden to producers licensed
under State and Tribal plans associated with providing the required
information.
    State and Tribal Hemp Producer Report. Every State or Tribe with an
approved plan must provide AMS with information on the hemp producers
covered under their plan using the State and Tribal Hemp Producer
Report form. States and Tribes are required to submit this information
to USDA not later than 30 days after the date it is received using this
report. This report should be submitted to USDA on the first day of
each month. If this date falls on a holiday or weekend, the report is
due the next business day. This information should be submitted to USDA
using a digital format compatible with USDA's information sharing
systems, whenever possible.
    If there are no changes from the previous reporting cycle, States
and Tribes could check the box indicating there were no changes during
the current reporting cycle. This information will be collected and
maintained by USDA and made available in real time to Federal, State,
and local law enforcement. States and Tribes will need to retain the
information used to populate this form for three calendar years.
State and Tribal Hemp Producer Report
    Estimate of Burden: Public burden for States and Tribes completing
and maintaining this form is estimated to be an average of 0.34 hours
per response.
    Respondents: States and Tribes with USDA approved hemp production
plans.
[[Page 58535]]
    Estimated Number of Respondents: 100.
    Estimated Number of Responses per Respondent: 12.
    Estimated Total Annual Responses: 1,200.
    Estimated Total Annual Hours per Respondent: 0.333 hours.
    Estimated Total Annual Reporting Hours: 400 hours (rounded).
    Estimated Number of Record Keepers: 100.
    Estimated Total Annual Hours per Record Keeper: 0.083 hours.
    Estimated Record Keeping Hours: 8.3 hours.
    Estimated Total Annual Burden Hours (Including 8.3 hours): 408.3
hours.
Information and Record Keeping for State and Tribal Producer Report
Responses
    Estimate of Burden: Public burden for State and Tribal producers
providing and maintaining the information for this form is estimated to
be an average of 0.25 hours per response.
    Estimated Number of Respondents: 8,000.
    Estimated Number of Responses per Respondent: 0.3330.
    Estimated Total Annual Responses: 2,664.
    Estimated Total Annual Hours per Respondent: 0.167 hours.
    Estimated Total Annual Burden Hours: 444.9 hours (2,664 x 0.1670
hours (10 mins)).
    Estimated Number of Record Keepers: 2,664.
    Estimated Total Annual Hours per Record Keeper: 0.083 hours.
    Estimated Record Keeping Hours: 221.1 hours.
    Estimated Total Annual Burden and Record Keeping Hours for State
and Tribal Producer Responses (Including 221.1 hours): 666 hours.
    State and Tribal Hemp Disposal Report: States or Indian Tribes
operating under approved hemp production plans must notify USDA of any
occurrence of non-conforming plants or plant material and provide the
disposal record of those plants and materials monthly. This includes
plants or plant material which test above the acceptable hemp THC level
or hemp otherwise produced in violation of this part. This information
should be submitted to USDA using a digital format compatible with
USDA's information sharing systems, whenever possible.
State and Tribal Hemp Disposal Report
    Estimate of Burden: Public burden for the States and Tribes
completing and maintaining this form is estimated to be an average of
0.34 hours per response.
    Respondents: States and Tribes with USDA approved hemp production
plans.
    Estimated Number of Respondents: 100.
    Estimated Number of Responses per Respondent: 12.
    Estimated Total Annual Responses: 1,200.
    Estimated Total Annual Hours per Respondent: 0.333 hours.
    Estimated Total Annual Reporting Hours: 400 hours (rounded).
    Estimated Number of Record Keepers: 100.
    Estimated Total Annual Hours per Record Keeper: 0.083 hours.
    Estimated Record Keeping Hours: 8.3 hours.
    Estimated Total Annual Burden Hours (Including the 8.3 hours: 408.3
hours.
Information and Record Keeping for State and Tribal Producer Report
Responses
    Estimate of Burden: Public burden for State and Tribal producers
providing and maintaining the information for this form is estimated to
be an average of 0.25 hours per response.
    Estimated Number of Respondents: 2,680.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Responses: 2,680.
    Estimated Total Annual Hours per Respondent: 0.167 hours.
    Estimated Total Annual Burden Hours: 447.6 hours.
    Estimated Number of Record Keepers: 2,680.
    Estimated Total Annual Hours per Record Keeper: 0.083 hours.
    Estimated Record Keeping Hours: 222.4 hours.
    Estimated Total Annual Burden and Record Keeping Hours for State
and Tribal Producer Responses (Including 222.4 hours): 670 hours.
    State and Tribal Hemp Annual Report: Each year, AMS is required to
provide an annual report to Congress regarding the implementation
Subtitle G of the AMA. In order to ensure that AMS has the best
available information on U.S. hemp production to populate this report,
AMS is requiring States and Tribes to submit an annual report to AMS.
This report includes a summary for all hemp planted, destroyed, and
harvested under each State or Tribe's hemp production plan. States and
Tribes would submit this information to USDA using the ``State and
Tribal Hemp Annual Report'' form annually by December 15.
State and Tribal Hemp Annual Report
    Estimate of Burden: Public burden for completing and maintaining
the information on this form is estimated to be an average of 0.42
hours per response.
    Respondents: States and Tribes with USDA approved hemp production
plans.
    Estimated Number of Respondents: 100.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Responses: 100.
    Estimated Total Annual Hours per Respondent: 0.333 hours.
    Estimated Total Annual Reporting Hours: 33.3 hours.
    Estimated Number of Record Keepers: 100.
    Estimated Total Annual Hours per Record Keeper: 0.083 hours.
    Estimated Record Keeping Hours: 8.3 hours.
    Estimated Total Annual Burden Hours (Including the 8.3 hours): 41.6
hours.
Information and Record Keeping for State and Tribal Producer Report
Responses
    Estimate of Burden: Public burden for completing and maintaining
the information for this form is estimated to be an average of 0.25
hours per response.
    Estimated Number of Respondents: 6,700.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Responses: 6,700.
    Estimated Total Annual Hours per Respondent: 0.167 hours.
    Estimated Total Annual Burden Hours: 1,118.9 hours.
    Estimated Number of Record Keepers: 6,700.
    Estimated Total Annual Hours per Record Keeper: 0.083 hours.
    Estimated Record Keeping Hours: 556.10 hours.
    Estimated Total Annual Burden and Record Keeping Hours for State
and Tribal Producer Responses (Including 556.1 hours): 1,675 hours.
    USDA Hemp Producer Licensing Application: To obtain a license from
USDA, producers would need to complete the ``USDA Hemp Plan Producer
Licensing Application'' form. This form will collect the information
identified in Sec.  990.21. By signing the application, the applicant
would certify, should they become a licensed producer, they would abide
by all rules and regulations relating to the USDA
[[Page 58536]]
plan, and to the truth and accuracy of the information provided in the
application.
    For the first application cycle, USDA will accept license
applications for the first year after the effective date of the rule.
After this initial period, license applications must be submitted
between August 1 and October 31 of each year. Licenses do not renew
automatically and must be renewed every three years. Applications for
license renewal would be subject to the same terms and approved under
the same criteria as initial license applications, unless there has
been an intervening change in the applicable law or regulations since
approval of the initial or last application. In such a case, the
subsequently enacted change in law or regulation shall govern renewal
of the license. Licenses will be valid until December 31 of the year
three after the year in which license is issued. For example, if you
apply for a license August 1, 2020 and are granted a license on
September 15, 2020, the license would expire December 31, 2022. The
license application will be available online at the USDA domestic hemp
production program website, or copies can be requested by email at
[email protected]. Applications may be submitted electronically or
through U.S. mail.
USDA Hemp Plan Producer Licensing Application
    Estimate of Burden: Public burden for completing and maintaining
this form is estimated to be an average of 0.25 hours per response.
    Respondents: Producers applying for the USDA plan.
    Estimated Number of Respondents: 1,000.
    Estimated Number of Responses per Respondent: 0.3333.
    Estimated Total Annual Responses: 333.
    Estimated Total Annual Hours per Respondent: 0.167 hours.
    Estimated Total Annual Reporting Hours: 55.6 hours.
    Estimated Number of Record Keepers: 333.
    Estimated Total Annual Hours per Record Keeper: 0.083 hours.
    Estimated Record Keeping Hours: 27.7 hours.
    Estimated Total Annual Burden Hours (Including the 27.7 hours):
83.3 hours.
    USDA Hemp Plan Disposal Notification: Producers licensed by USDA
must test hemp prior to harvest, dispose of all non-compliant cannabis
plants, and report to USDA disposal of all non-compliant cannabis
plants. Producers must document the disposal of all marijuana in
accordance with Sec.  990.27. Reporting can be accom plished by either
providing USDA with a copy of the documentation of disposal provided by
the reverse distributor or by submitting a ``USDA Hemp Plan Producer
Disposal Form'' to document the disposal process.
USDA Hemp Plan Producer Disposal Form
    Estimate of Burden: Public burden for completing and maintaining
this form is estimated to be an average of 0.42 hours per response.
    Respondents: Producers covered under the USDA plan.
    Estimated Number of Respondents: 400.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Responses: 400.
    Estimated Total Annual Hours per Respondent: 0.333 hours.
    Estimated Total Annual Reporting Hours: 133.3 hours.
    Estimated Number of Record Keepers: 400.
    Estimated Total Annual Hours per Record Keeper: 0.083 hours.
    Estimated Record Keeping Hours: 33.3 hours.
    Estimated Total Annual Burden Hours (Including the 33.3 hours):
166.6 hours (rounded).
    End of Year Harvest Reporting Requirements: The Farm Bill requires
AMS to prepare and submit an annual report to Congress on the
implementa tion of the domestic hemp production program. To ensure AMS
has adequate planting, production, and harvest data necessary for this
report, we are requiring producers to submit an annual harvest report.
Each producer would need to submit to USDA an annual report of their
total acreage planted, harvested, and, if applicable, disposed. If a
producer has multiple growing and harvesting cycles throughout the year
(e.g., greenhouse and producers in warm climates) they should all be
summarized and submitted on this form. Producers would submit this
information to USDA using the ``USDA Hemp Plan Producer Annual Report''
form by December 15 each year.
USDA Hemp Plan Producer Annual Report
    Estimate of Burden: Public burden for completing and maintaining
this form is estimated to be an average of 0.42 hours per response.
    Respondents: Producers applying for the USDA plan.
    Estimated Number of Respondents: 1,000.
    Estimated Number of Responses per Respondent: 1.
    Estimated Total Annual Responses: 1,000.
    Estimated Total Annual Hours per Respondent: 0.333 hours.
    Estimated Total Annual Reporting Hours: 333.3 hours.
    Estimated Number of Record Keepers: 1,000.
    Estimated Total Annual Hours per Record Keeper: 0.083 hours.
    Estimated Record Keeping Hours: 83.3 hours.
    Estimated Total Annual Burden Hours (Including the 83.3 hours):
416.6 hours rounded.
    Report of Acreage: Producers shall report name, address, license or
authorizing number, geospatial location for each lot or greenhouse
where hemp will be produced and hemp crop acreage to FSA. This will
establish an identification system for hemp production nationwide and
complies with the information sharing requirements of the 2018 Farm
Bill.
Report of Acreage FSA 578
    Estimate of Burden: Public burden for completing and maintaining
this form is estimated to be an average of 0.58 hours per response.
    Respondents: Producers under State, Tribal or the USDA plan.
    Estimated Number of Respondents: 7,700.
    Estimated Annual Number of Responses per Respondent: 1.
    Estimated Total Annual of Responses: 7,700.
    Estimated Total Annual Hours per Respondent: 0.5 hours.
    Estimated Total Annual Reporting Hours: 3,850.
    Estimated Number of Record Keepers: 7,700.
    Estimated Total Annual Hours per Record Keeper: 0.083 hours.
    Estimated Record Keeping Hours: 639.1 hours.
    Estimated Total Annual Burden Hours (Including the 639.1 hours):
4,489.1 hours.
    Laboratory Test Results Report: The Farm Bill requires that all
domestically produced hemp be tested for total THC content on a dry
weight basis. All test results, whether passing, failing, or re-tests
must be reported to USDA.
Laboratory Test Results Report
    Estimate of Burden: Public burden for completing and maintaining
this form is estimated to be an average of 1.08 hours per response.
    Respondents: Laboratories testing hemp for THC content.
[[Page 58537]]
    Estimated Number of Respondents: 7,700.
    Estimated Annual Number of Responses per Respondent: 2.
    Estimated Total Annual of Responses: 15,400.
    Estimated Total Annual Hours per Respondent: 0.5 hours.
    Estimated Total Annual Reporting Hours: 7,700.
    Estimated Number of Record Keepers: 7,700.
    Estimated Total Annual Hours per Record Keeper: 0.083 hours.
    Estimated Record Keeping Hours: 639.1 hours.
    Estimated Total Annual Burden Hours (Including the 639.1 hours):
8,339.1 hours.
    This new information collection assumes 9,100 total respondents,
17,363 burden hours, and annual costs of $989,714.94. This is
calculated by multiplying the mean hourly wage of $57 by 17,363 hours.
The mean hourly wage of a compliance officer, as reported in the May
2018 Occupational Employment Statistics Survey of the Bureau of Labor
and Statistics, was $35 per hour. Assuming 39 percent of total
compensation accounts for benefits, assumed total compensation of a
compliance officer is $57 per hour.
[GRAPHIC] [TIFF OMITTED] TR31OC19.008
E-Government Act
    AMS is committed to complying with the E-Government Act, to promote
the use of the internet and other information technologies to provide
increased opportunities for citizen access to Government information
and services, and for other purposes. We recognize using an electronic
system will promote efficiencies in developing and implementing the new
USDA Domestic Hemp Production Program. Since this is a new program, AMS
is working to make this process as effective and user-friendly as
possible.
Civil Rights Review
    AMS has considered the potential civil rights implications of this
rule on minorities, women, and persons with disabilities to ensure that
no person or group shall be discriminated against on the basis of race,
color, national origin, gender, religion, age, disability, sexual
orientation, marital or family status, political beliefs, parental
status, or protected genetic information. This review included persons
that are employees of the entities who are subject to these
regulations. This interim rule does not require affected entities to
relocate or alter their operations in ways that could adversely affect
such persons or groups. Further, this rule would not deny any persons
or groups the benefits of the program or subject any persons or groups
to discrimination.
    A 60-day comment period is provided to allow interested persons to
respond to this interim rule. All written comments received in response
to this rule by the date specified will be considered.
Executive Order 13132 Federalism
    AMS has examined the effects of provisions in the interim final
rule on the relationship between the Federal Government and the States,
as required by Executive Order 13132 on ``Federalism.'' Our conclusion
is that this rule does have federalism implications because the rule
has substantial direct effects on States, on the relationship between
the national government and States, and on the distribution of power
and responsibilities among the various levels of government. The
federalism implications of the rule, however, flow from and are
consistent with the underlying statute. Section 297B of the AMA, 7
U.S.C. 1639p, directs USDA to review and approve State plans that meet
statutory requirements and to audit a State's compliance with its State
plans. Overall, the final rule attempts to
[[Page 58538]]
balance both the autonomy of the States with the necessity to create a
Federal framework for the regulation of hemp production.
    Section 3(b) of E.O. 13132 recognizes that national action limiting
the policymaking discretion of States will be imposed ``. . . only
where there is constitutional and statutory authority for the action
and the national activity is appropriate in light of the presence of a
problem of national significance.'' Section 297B of the AMA is the
statutory authority underlying the rules for USDA to review, approve,
disapprove, or revoke State plans for hemp production. Until the
passage of the 2018 Farm Bill, hemp was a schedule I controlled
substance as it fell within the CSA definition of marijuana. When hemp
was exempted from the definition of marijuana as part of the 2018 Farm
Bill, in connection with removing it from that list, Congress
established a national regulatory framework for the production of hemp.
Because cannabis plants with a THC level higher than 0.3 are marijuana
and on the Federal controlled substances list, ensuring that hemp
produced under this program is not marijuana is of national
significance.
    In addition to establishing a national regulatory framework for
hemp production, Congress expressly preempted State law with regard to
the interstate transportation of hemp. Section 10114 of the 2018 Farm
Bill States that ``[n]o State or Indian Tribe shall prohibit the
transportation or shipment of hemp or hemp products produced in
accordance with subtitle G of the Agricultural Marketing Act of 1946
(as added by section 10113) through the State or the territory of the
Indian Tribe, as applicable.'' Thus, States and Indian Tribes may not
prevent the movement of hemp through their States or territories even
if they prohibit its production. Congress also expressly preempted a
State's ability to prosecute negligent violations of its plan as a
criminal act in section 297B(e)(2)(c). That preemption is incorporated
into this rule.
    Section 3(d)(2) of the E.O. 13132 requires the Federal Government
to defer to the States to establish standards where possible. Section
4(a), however, expressly contemplates preemption when there is a
conflict between exercising State and Federal authority under Federal
statute. Section 297C of the AMA requires State plans to include six
practice and procedures and a certification. It also expressly states
that it does not preempt a State's ability to adopt more stringent
requirements or to prohibit the production of hemp. Section 297D of the
AMA requires USDA to promulgate regulations to implement subtitle G of
the AMA which includes section 297B. Subpart B of the final rule
repeats those requirements, providing more detail where necessary.
States have wide latitude to develop the required practice and
procedures. Subpart B includes more details on the testing and sampling
of hemp plants to establish a national standard to determine whether
the plants meet the statutory definition of hemp. Likewise, the final
rule requires States to follow DEA requirements for disposal of
marijuana for cannabis plants exceeding the acceptable hemp THC level.
Finally, the interim final rule also reaffirms that States may adopt
more stringent standards and prohibit hemp production within their
jurisdiction.
    Section 6 of E.O. 13132 requires consultation with State officials
in development of the regulations. AMS conducted significant outreach
with State officials including individual meetings, participation in
conferences with State officials, and listening session where State
officials from all States were invited. During our consultation with
the States, representatives from various State agencies and offices
expressed the following concerns about sampling and testing procedures.
Most requested that USDA adopt uniform, national requirements to
facilitate the marketing of hemp. Some States advocated that USDA defer
to each State to determine the appropriate procedures for its plan.
USDA recognizes the value of a national standard to promote consistency
while allowing States the flexibility to adopt procedures that fit
their circumstances. As explained above, USDA is adopting performance
standards for sampling and testing. As long as the procedures in the
State plans meet those standards, AMS will find those procedures
acceptable.
    As AMS implements this new program, we will continue to consult
with State officials to obtain their feedback on implementation. We
encourage States to submit comments on this interim final rule during
the comment period which closes on December 30, 2019.
    Finally, we have considered the cost burden that this rule would
impose on States as discussed in the Regulatory Impact Analysis of this
document.
    AMS has assessed this final rule in light of the principles,
criteria, and requirements in Executive Order 13132. We conclude that
this final rule: Is not inconsistent with that E.O.; will not impose
significant additional costs and burdens on the States; and will not
affect the ability of the States to discharge traditional State
governmental functions.
E.O. 13175 Consultation and Coordination With Indian Tribal Governments
    AMS has examined the effects of provisions in the final rule on the
relationship between the Federal Government and Tribal governments, as
required by E.O. 13175 on ``Consultation and Coordination with Indian
Tribal Governments.'' We conclude that the final rule does have
substantial direct effects on tribal governments, on the relationship
between the national government and tribal governments, and on the
distribution of power and responsibilities among the various levels of
government. The effects of the rule, however, flow from and are
consistent with the underlying statute. Section 297B of the AMA, 7
U.S.C. 1639p, directs USDA to review and approve Tribal plans that meet
statutory requirements and to audit a tribal government's compliance
with its Tribal plans. Overall, the final rule attempts to balance both
the autonomy of the tribal governments with the necessity to create a
Federal framework for the regulation of hemp production.
    As with State plans, tribal governments will have wide latitude in
adopting the required procedures including adopting requirements that
are more stringent than the statutory ones. For reasons stated above in
the federalism analysis, AMS is adopting national standards for
sampling, testing, and disposal of non-compliant plants that Tribal
plans must adhere to.
    AMS has conducted extensive outreach to tribal governments. On May
1 and 2, 2019, USDA held a formal tribal consultation on the 2018 Farm
Bill including a session on hemp production. In addition to the
listening sessions for the general public, USDA hosted one for tribal
governments following the formal tribal consultation on May 2, 2019.
USDA officials attended meetings with representatives of tribal
governments.
    During those outreach events, tribal representatives from several
Tribal Governments expressed their opinion that the 2018 Farm Bill
permitted the USDA Secretary to allow AMS to approve Tribe plans ahead
of issuing regulations of the USDA plan. Approving plans immediately
would allow those Tribes (and States) with a plan to begin planting for
the commercial production of hemp in 2019. The USDA Secretary released
a Notice to Trade (NTT) on February 27, 2019 to explain that tribal and
State
[[Page 58539]]
plans would not be reviewed or approved until AMS finalized regulations
ahead of the 2020 planting season. Additionally, the NTT stated that
until regulations were in place, States, Tribes, and institutions of
higher education can continue operating under authorities of the 2014
Farm Bill. The 2018 Farm Bill extension of the 2014 authority expires
12 months after USDA has established the plan and regulations required
under the 2018 Farm Bill. A second Notice to Trade was issued on May
27, 2019 to clarify again that Tribal governments through the
authorities in the 2014 Farm Bill are permitted grow industrial hemp
for research purposes during the 2019 growing season. USDA appreciates
the urgency in which the Indian Tribes wish to engage in this new
economic opportunity. We have worked expeditiously to develop and
promulgate this interim final rule so that States and Tribes will be
able to submit their plans in time for the 2020 season.
    Some tribal representatives stated that the Act requires that the
tribal plans have the specified practice and procedures and USDA is not
authorized to evaluate them as part of the review and approval process.
We note that the statute requires that USDA approve plans that include
procedures that meet the statutory requirements. For example, section
297B(a)(2)(A)(iii) required a procedure for effective disposal and USDA
must evaluate whether the plan's procedure is effective.
    Although Indian Tribes will incur costs in complying with final
rule, those costs should be outweighed by the benefits that the Indian
Tribes realize in commercial hemp production occurring within their
territories.
Executive Orders 12866, 13563, and 13771
    USDA is issuing this rule in conformance with Executive Orders
12866 and 13563, which direct agencies to assess all costs and benefits
of available regulatory alternatives and, if regulation is necessary,
to select regulatory approaches that maximize net benefits, which
include potential economic, environmental, public health and safety
effects, distributive impacts, and equity. Executive Order 13563
emphasizes the importance of quantifying both costs and benefits,
reducing costs, harmonizing rules, and promoting flexibility.
    This rule meets the definition of an economically significant
regulatory action under Executive Order 12866, as it is likely to
result in an annual effect on the economy of $100 million or more. USDA
considers this to be a deregulatory action as it allows the development
of a niche market that cannot exist under current regulation. This
action will expand production options and enable interested farmers to
grow hemp.
    USDA requests public comment on the estimated impacts of the rule,
specifically whether there is information or data that may inform
whether or not the market will experience a significant shift, either
positive or negative, in the developing hemp market and on consumers.
In addition, USDA seeks comments and requests any data or information
on what impacts the regulation may have on current and future
innovation in the areas of industrial hemp usages and how much such
impacts on innovation may affect rural communities.
    Regulations must be designed in the most cost-effective manner
possible to obtain the regulatory objective while imposing the least
burden on society. This rule would establish a national regulatory
oversight program for the production of hemp. This program is necessary
to effectuate the Farm Bill mandate to coordinate State and tribal
government hemp production regulations with the newly established
Federal regulations for hemp production in States not regulated by
State or Tribal plans. This program is intended to provide consistency
in production, sampling and testing of hemp product to ensure
compliance with the acceptable hemp THC level.
    This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule is not intended to have retroactive effect.
The discussion on E.O. 13132, Federalism, above, addressed the extent
in which the 2018 Farm Bill and the interim rule preempt State law. The
discussion on E.O. 13179, Consultation and Coordination with Tribal
governments, above, addresses the impact that the interim rule impacts
tribal governments. The discussion above regarding appeals under new
part 990, subpart D, describes the administrative procedures that must
be exhausted prior to a judicial challenge.
Regulatory Impact Analysis/Initial Regulatory Flexibility Analysis
Introduction
    The future of the hemp industry in the United States (U.S.) is
anything but certain. While hemp was produced previously in the U.S.
for hundreds of years, its usage diminished in favor of alternatives.
Hemp fiber, for instance, which had been used to make rope and
clothing, was replaced by less expensive jute and abaca imported from
Asia. Ropes made from these materials were lighter and more buoyant,
and more resistant to salt water than hemp rope, which required
tarring. Improvements in technology further contributed to the decline
in hemp usage. The cotton gin, for example, eased the harvesting of
cotton, which replaced hemp in the manufacture of textiles.\10\
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    \10\ Presentation to USDA by Dr. Eric Walker, Assistant
Professor in the Department of Plant Sciences at the University of
Tennessee, on May 21, 2019.
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    Hemp production in the U.S. has seen a massive resurgence in the
last five years; however, it remains unclear whether consumer demand
will meet the supply. From 2017 to 2018, acreage planted for hemp
tripled, reaching 77,844 acres. Hemp planted acreage in 2018 was eight
times the acreage planted just two years prior in 2016. Acreage in 2019
is expected to at least double from 2018.\11\
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    \11\ Vote Hemp, U.S. Hemp Crop Reports.
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    High prices for hemp, driven primarily by demand for use in
producing CBD, relative to other crops, have driven increases in
planting. Prices for hemp products vary from source to source. Prices
for hemp fiber range from $0.07 per pound to $0.67 per pound, and
prices for hemp grain or seed range from $0.65 per pound to $1.70 per
pound. Prices for hemp flowers, in which concentrations of the
cannabinoid cannabidiol, or CBD, are located, range from $3.50 to
$30.00 per pound or more, depending on the CBD content. Producer
interest in hemp production is largely driven by the potential for high
returns from sales of hemp flowers to be processed into CBD oil. From
2017 to 2018, the number of licensed producers of hemp more than
doubled to reach 3,543 producers.
    The hemp plant is a varietal of the species Cannabis sativa. While
belonging to the same species as the plant that produces marijuana,
hemp is distinctive from marijuana in its chemical makeup. The
marijuana plant contains high levels of the cannabinoid delta-9
tetrahydrocannabinol (THC), which is the chemical that produces
psychoactive effects. Hemp may contain no greater than 0.3 percent THC
on a dry weight basis.
    The 2018 Farm Bill explicitly preserved the authority of the U.S.
Food and Drug Administration (FDA) to regulate hemp products under the
Federal Food, Drug, and Cosmetic Act (FD&C Act) and section 351 of the
Public Health Service Act (PHS Act). Accordingly, products containing
cannabis and cannabis-derived
[[Page 58540]]
compounds are subject to the same authorities and requirements as FDA-
regulated products containing any other substance.
Legislative History
    The production of hemp has a long history in the United States
(U.S.). Prior to the mid-20th century, hemp had been cultivated in the
U.S. for hundreds of years to make flags, sails, rope, and paper. The
first regulation of hemp occurred in 1937 with the Marihuana Tax Act,
which required all producers of the species Cannabis sativa to register
with and apply for a license from the Federal Government. The ``Hemp
for Victory'' Campaign during World War II promoted production of hemp
for rope to be used by U.S. military forces, but at the end of the war,
the requirements in the Marihuana Tax Act resumed. In 1970, Congress
passed the Controlled Substances Act, granting the Attorney General the
authority to regulate production of hemp.
    The Agricultural Act of 2014, also known as the 2014 Farm Bill,
defined hemp as the plant Cannabis sativa L. and any part of that plant
with concentrations of THC no greater than 0.3 percent on a dry weight
basis. Prior to the 2014 Farm Bill, hemp had never been designated in a
Federal law as different from cannabis generally. The 2014 Farm Bill
authorized institutions of higher education and State departments of
agriculture to allow for cultivation of hemp as part of a pilot program
as authorized by State law for research. Research allowed under pilot
programs included market research, so hemp was cultivated and sold as
inputs into various consumer products under the 2014 Farm Bill. This
analysis assumes that such cultivation would have continued and even
expanded in the absence of the 2018 Farm Bill.
Need for Regulation
    The Agriculture Improvement Act of 2018, known as the 2018 Farm
Bill, removed hemp from the list of controlled substances,
decontrolling hemp production in all U.S. States, and in territories of
Indian Tribes, unless prohibited by State or Tribal Law. This action
eliminates the uncertain legal status at the Federal level of hemp
production and allows the U.S. Department of Agriculture (USDA) to
provide hemp producers with crop insurance programs, potentially
reducing risk to producers and providing easier access to capital. The
statute also prohibits interference in the interstate transport of hemp
by States, including those States which prohibit hemp production and
sales. As a result, hemp producers will have access to nationwide
markets. The rule is necessary to facilitate this market by creating a
set of minimum standards to ensure that hemp being produced under this
program meets all statutory requirements. Moreover, both the
declassification of hemp, and the prohibition on interference with
interstate transportation apply to hemp that is grown under an approved
State or Tribal plan, or under a Federal license. As a result, this
regulation facilitates provisions of the Farm Bill that would otherwise
be self-implementing.
Overview of the Action
    The 2018 Farm Bill granted regulatory authority of domestic hemp
production to the State departments of agriculture, Tribal governments,
and USDA. States and Tribes must submit to USDA plans which include
provisions for maintaining information regarding the land on which hemp
is produced, for testing the levels of THC, for disposal of plants that
do not meet necessary requirements, and for procedures to ensure
compliance with the requirements of the new part. State and Tribal
Plans must be approved by USDA. This rule outlines requirements by
which the USDA would approve plans submitted by States and Tribal
governments for oversight of hemp production. The 2018 Farm Bill also
directs USDA to develop a plan for use by hemp producers in States or
Tribes where no State or Tribal Plan has been approved and which do not
prohibit the cultivation of hemp. These actions will promote
consistency in regulations governing the legal production of hemp
across the country.
Baseline Definition
    In order to measure the impacts of this rule on affected entities,
AMS defines the baseline such that sales of hemp products from 2014
through 2019 will be treated as attributable to the 2014 Farm Bill
only. While the 2018 Farm Bill permits commercial production of hemp,
and the 2014 Farm Bill permits production of hemp for research purposes
only, AMS assumes some of the increasing trend of U.S. hemp production
would have continued under the provisions of the 2014 Farm Bill in the
absence of the 2018 Farm Bill. AMS assumes, therefore, that only 50
percent of the growth in sales of hemp products from 2020 and beyond
will be attributable to the 2018 Farm Bill. This assumption considers
the rate at which hemp acreage has increased in recent years, the
number of States whose hemp pilot programs produced a crop in recent
years, and the number of States which have passed legislation following
the signing of the 2018 Farm Bill in anticipation of this rule's
enactment in time for the 2020 growing season. As this rule enables the
2018 Farm Bill, 50 percent of the growth in sales of hemp products
beginning in 2020 will be attributable to this rule.
    The 2018 Farm Bill provided that States, Tribes, and institutions
of higher education may continue to operate under the authorities of
the 2014 Farm Bill for the 2019 planting season. Under the 2018 Farm
Bill, the authority of the 2014 Farm Bill expires one year from the
time that USDA establishes the plan and regulations required under the
2018 Farm Bill. As this will occur in the fall of 2019, growers could
continue to grow hemp under the provisions of the 2014 Farm Bill in the
2020 planting season. For the purpose of this analysis, however, AMS
defines the 2020 planting season as the first year of this rule's
impact, with 50 percent of the growth in sales in 2020 being counted as
attributable to the 2018 Farm Bill and this enabling rule. This
analysis considers the impact of this rule on affected entities from
2020 to 2022. This analysis utilizes hemp market data from industry
associations, state departments of agriculture, and universities.
    While the 2018 Farm Bill permits commercial production of hemp, and
the 2014 Farm Bill permits production of hemp for research purposes
only, AMS assumes the increasing trend of U.S. hemp production would
have continued under the provisions of the 2014 Farm Bill in the
absence of the 2018 Farm Bill. AMS assumes, therefore, that 50 percent
of the growth in sales of hemp products from 2020 and beyond will be
attributable to the 2018 Farm Bill. This assumption considers the rate
at which hemp acreage has increased in recent years, the number of
States whose hemp pilot programs produced a crop in recent years, and
the number of States which have passed legislation following the
signing of the 2018 Farm Bill in anticipation of this rule's enactment
in time for the 2020 growing season. As this rule enables the 2018 Farm
Bill, 50 percent of the growth in sales of hemp products beginning in
2020 will be attributable to this rule.
    The 2018 Farm Bill provided that States, Tribes, and institutions
of higher education may continue to operate under the authorities of
the 2014 Farm Bill for the 2019 planting season. Under the 2018 Farm
Bill, the authority of the 2014 Farm Bill expires one year from the
time that USDA establishes the plan and regulations required under the
2018
[[Page 58541]]
Farm Bill. As this will occur in the fall of 2019, growers could
continue to grow hemp under the provisions of the 2014 Farm Bill in the
2020 planting season. For the purpose of this analysis, however, AMS
defines the 2020 planting season as the first year of this rule's
impact, with 50 percent of the growth in sales in 2020 being counted as
attributable to the 2018 Farm Bill and this enabling rule. This
analysis considers the impact of this rule on affected entities from
2020 to 2022. This analysis utilizes hemp market data from industry
associations, state departments of agriculture, and universities.
Affected Entities
    Hemp producers in States and territories of Indian Tribes that
allow for hemp production will be impacted by this rule.
    State departments of agriculture and Tribal governments will also
be affected by this rule. State departments of agriculture and Tribal
governments will bear the responsibility to ensure that hemp producers
abide by the State and Tribal plans for regulating hemp. Prior to the
passage of the 2018 Farm Bill, at least 40 States had enacted hemp
legislation.\12\ With the passage of the 2018 Farm Bill, nearly all of
the remaining U.S. States have followed suit. Discussions with State
departments of agriculture that currently oversee hemp pilot programs
indicate that the authorization requirements for growing hemp for
research purposes are similar to those included in State Plans
submitted to USDA for approval. The 2018 Farm Bill, however, includes
greater requirements for authorization than what the 2014 Farm Bill
mandated, such as information sharing and a criminal history report for
licensees. States that oversaw pilot programs under the 2014 Farm Bill,
therefore, will likely need additional resources to run the State
programs under the 2018 Farm Bill. States and Indian Tribes that did
not have a pilot program under the 2014 Farm Bill and that submit plans
to USDA for a program under the 2018 Farm Bill may require hiring of
new staff to oversee the program. States and Tribes will also be
subject to reporting and recordkeeping requirements resulting from this
rule. If a State or Tribe chooses not to develop its own plan, then
hemp producers within that State or Tribe may utilize the plan
developed by USDA, unless prohibited by State or Tribal Law.
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    \12\ Vote Hemp, 2017 U.S. Hemp Crop Report.
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Regulatory Impact Analysis
    Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives when an action
is deemed to have significant impacts. If regulation is necessary, then
agencies must select the action that maximizes net benefits, including
potential economic, environmental, public health and safety effects,
and equity.
    Executive Order 13771 mandates that agencies provide the best
approximation of total costs associated with a new or repealed
regulation. AMS has prepared this Regulatory Impact Analysis with the
purpose of accomplishing these objectives.
    USDA considers this to be a deregulatory action under Executive
Order 13771 as it allows for the development of a niche market that
cannot exist under current regulation. This rule removes barriers to
entry and enables domestic farmers to grow hemp.
Expected Benefits and Costs of the Rule
    The 2018 Farm Bill grants authorization for production of hemp to
all States and Indian Tribes, unless prohibited by State or Tribal Law.
This rule enables States, Tribes, and USDA to regulate this
authorization. This rule is expected to generate benefits and costs to
hemp producers and State departments of agriculture and Tribal
governments. The benefits of this rule are expected to outweigh the
costs, however, and the burden on the impacted entities is anticipated
to be minimal.
Benefits and Costs of Production
    Farmers grow hemp for three products: Floral material, fiber, and
grain. Based on data from State departments of agriculture and from
surveys by the National Industrial Hemp Regulators, a working group
comprised of industrial hemp program managers from State departments of
agriculture, AMS estimates that about two-thirds of hemp acreage
planted is for floral material, while the remaining third is divided
evenly between fiber and grain.
    The nascent market for industrial hemp causes estimates of yield
and price for hemp products to vary widely from source to source. Table
1 shows a range of potential gross revenues received by producers using
ranges of yield and price estimates from Vote Hemp, the University of
Kentucky, the Kentucky Department of Agriculture, and the Congressional
Research Service.\13\ Using low and high estimates for yield and price
from these sources, AMS calculated a potential range of gross revenue
to producers of hemp products of $2,443 per acre to $25,682 per acre.
---------------------------------------------------------------------------
    \13\ Vote Hemp, U.S. Hemp Crop Report available at https://www.votehemp.com/u-s-hemp-crop-report/.
    Mark, Tyler and Shepherd, Jonathan, Hemp & Enterprise CBD Budget
Model available at http://hemp.ca.uky.edu/.
    Johnson, Renee, Hemp as an Agricultural Commodity, Congressional
Research Service, June 2018.
[GRAPHIC] [TIFF OMITTED] TR31OC19.009
    Variable costs per acre to producers, as estimated by the
University of Kentucky, are shown in Table 2. These variable costs are
weighted by the portion of planted acreage for each product as
estimated in Table 1. The
[[Page 58542]]
result is a weighted variable cost of $19,421 to produce one acre of
hemp products.
[GRAPHIC] [TIFF OMITTED] TR31OC19.010
    To estimate producer returns above variable cost, the weighted
variable cost per acre is subtracted from the low and high estimates of
gross revenue per acre under the scenario of lowest yield and lowest
price received per acre and the scenario of highest yield and highest
price received per acre. Under the low estimate of gross revenue per
acre, a hemp producer who plants two-thirds of an acre for flowers, and
the remaining one-third acre split between fiber and grain loses
$16,978 per acre. Under the high estimate of gross revenue per acre, a
hemp producer sees a return of $6,260 above variable costs. It is
important to consider that fixed costs are not included among these
estimates; therefore, net returns will likely be lower than these
results.
    In addition to the previously-mentioned variable costs to grow
hemp, AMS considered the opportunity costs to the hemp producer of
crops that may have otherwise been planted. Using data from the
National Agricultural Statistics Service (NASS), AMS calculated an
average gross return per acre of cropland, weighted by area planted or
bearing, of $591. This estimate represents the potential revenue per
acre of the crop that a potential hemp producer foregoes to plant hemp
instead of other crops including traditional field crops. However, hemp
may also attract new producers not currently growing other crops.
Subtracting this opportunity cost from the average gross revenue per
acre (discussed in more detail below) yields a net social benefit
estimate of approximately $2,060 per acre. For individual growers,
however, returns may vary widely--and even be negative.
    The per acre net return estimates are based largely on crop
enterprise budgets which represent expected costs and returns assuming
the grower actually brings a crop to market. There are many things that
can preclude actually bringing a planted crop to market including; loss
due to weather, pests, or disease, reduced output due to inexperience
with the crop, and growing a crop that exceeds the acceptable hemp THC
level.
    The gross social benefit of the crop is best represented by what
customers are willing to pay for the crop. To generate a social benefit
per acre, we looked at data from the 2018 Processor/Handler Production
Reports to the Kentucky Department of Agriculture. In 2018 Kentucky
farmers were paid $17.75 million for harvested hemp materials from
6,700 planted acres. This results in a societal willingness to pay
(assuming Kentucky is sufficiently representative of the United States)
of around $2,650 per acre. Using this average accounts for acres with
unusually high returns as well as acres with low or no returns.
    So, while individual growers may see returns ranging from a loss of
$17,578 to a return of $5,669 per acre, society can expect a benefit of
$2,058 (= $2,650-$591) per acre.
Estimated Number of Producers
    In each year since the 2014 Farm Bill, the number of licensed
producers and the amount of acreage planted has increased
substantially. According to Vote Hemp, there were a total of 3,543
producer licenses issued by States in 2018, up from 1,456 in 2017, and
817 licenses in 2016. Planted acreage in 2018 was 77,844 acres, up from
25,723 in 2017, and 9,649 acres in 2016. No official estimates of hemp
planted acreage, or the number of producer licenses exist for 2019 as
of yet; however, industry members agree that 2019 planted acreage will
likely at least double acreage planted in 2018. If this occurs, then
hemp planted acreage will reach almost 160,000 acres in 2019. See Table
3 below. This increase in acreage is likely due in part to new
producers entering the market and in part to current producers
expanding their acreage.
    Based on data from the State departments of agriculture in
Colorado, Kentucky, and Oregon, which together make up 47 percent of
planted acreage and 45 percent of producer licenses nationwide, average
planted acreage per producer is 24 acres. Assuming that all 77,844
additional acres in 2019 are planted by new producers entering the
market, and that each one plants the average of 24 acres, then 2019
should see approximately 3,244 new producers. This is a reasonable
assumption given the growth in licenses year over year. Based on this,
there should be approximately 6,787 U.S. hemp producers in 2019, as
shown in Table 3. For purposes of this analysis, we expect the number
of producers to increase at the same rate as increased hemp sales as
discussed below.
[GRAPHIC] [TIFF OMITTED] TR31OC19.011
[[Page 58543]]
Projected Growth in Gross Revenues
    The Hemp Business Journal estimates sales of U.S. hemp-based
products from 2018 to 2022. The growth rates of these sales from year
to year are shown in Chart 1. It is important to remember that even
though the 2018 Farm Bill removed hemp from the list of controlled
substances, it preserved the authority of the Food and Drug
Administration (FDA) to regulate products which contain cannabis. Sales
of hemp-based products are expected to increase about 15 percent from
2018 to 2019. In 2020, sales are expected to grow about 14 percent, in
2021, 19 percent, and in 2022, 16 percent. While these growth rates
represent consumer sales and may not necessarily accurately depict the
state of the hemp market at the producer level, these estimates are the
best available to AMS at this time. Although certain cannabis-derived
compounds are generally prohibited to be added to food and dietary
supplements, because of their status as pharmaceutical ingredients, the
FDA has authority to issue a regulation allowing the use of such
ingredients in food and dietary supplements. FDA has stated that they
are actively considering this issue. If FDA does not provide clarity
about their plans for future regulation of CBD, there will continue to
be uncertainty and downward pressure on the CBD portion of the hemp
market. This is important because the Hemp Business Journal estimates
appear to assume that there are no prohibitions on adding CBD to
consumer products. As a result, full realization of the benefits
estimated here could be delayed pending regulatory certainty.
BILLING CODE 3410-02-P
[GRAPHIC] [TIFF OMITTED] TR31OC19.012
[GRAPHIC] [TIFF OMITTED] TR31OC19.013
[[Page 58544]]
    Data from the 2018 Processor/Handler Production Reports to the
Kentucky Department of Agriculture also show that gross sales by
processors reached $57.75 million in 2018. Of this, gross returns to
farmers was approximately 31 percent of total processor gross sales.
Applying 31 percent to the consumer sales estimates in the chart above
provides an estimate of gross producer returns (and social willingness
to pay) over the next four years.
[GRAPHIC] [TIFF OMITTED] TR31OC19.014
BILLING CODE 3410-02-C
    If gross producer returns are 31 percent of total consumer sales,
estimated total producer returns in 2018 were approximately $315
million. In 2019, estimated total producer returns will be
approximately $362 million, in 2020, approximately $413 million, in
2021, approximately $491 million, and in 2022, approximately $570
million. Not all of the producer sales in Chart 3 are the direct result
of this rule, however. The forecasts shown in Chart 1 were published by
the Hemp Business Journal in the summer of 2018, before the 2018 Farm
Bill was passed by Congress. This indicates that the hemp market was
expected to grow regardless of the hemp provisions in the 2018 Farm
Bill.
    Total costs for State licensing, sampling, and testing under the
pilot programs generally amounted to about $1,000 per producer. This
includes administration of certified seed schemes in certain States.
Measurable impacts to the hemp industry resulting from this rule will
not occur until 2020. It is difficult to estimate the increase in total
returns to producers as a result of this rule. AMS estimates that this
rule is responsible for as much as 50 percent of the increase in total
producer returns from year to year. This assumption considers the rate
at which hemp acreage has increased in recent years, the number of
States whose hemp pilot programs produced a crop in recent years, and
the number of States which have passed legislation following the
signing of the 2018 Farm Bill in anticipation of this rule's enactment
in time for the 2020 growing season.
    Because we would expect hemp production to continue to grow under
preexisting State programs, we do not believe it is appropriate to
attribute all production growth beyond 2020 to this rule. Since roughly
half of the States had operating programs in 2018, we assumed that half
of future projected growth could have occurred in the absence of this
rule. Based on the total estimated producer returns, AMS estimates that
increases in hemp sales directly resulting from the rule will be
approximately $25.5 million in 2020, $64.5 million, cumulative, in
2021, and $104 million, cumulative, in 2022. Media reports about the
2018 Farm Bill's approach to hemp seem to indicate that there may be
future innovation that would increase producer returns and investment.
We request comment about the potential for innovation and the
uncertainty and its impact on the market vis a vis steady state.
Costs of State and Tribal Plans
    Under most State pilot programs administered under the 2014 Farm
Bill, hemp producers paid fees to State departments of agriculture for
State licenses to grow hemp, and for sampling and testing of THC
content. These fees generally fully fund the program's operation and
are a reasonable proxy for the costs to States of administering a plan.
Total costs for State licensing, sampling, and testing under the pilot
programs generally amounted to about $1,000 per producer. Discussions
with State departments of agriculture that oversee hemp pilot programs
indicate that the provisions for growing hemp for research purposes
will be similar to those in the State Plans submitted to USDA for
approval. While the 2018 Farm Bill added additional requirements for
growing hemp that were not in the 2014 Farm Bill, it is difficult to
determine how these additional requirements will impact fees for
licensing, sampling, and testing paid by producers to States. For the
purpose of this analysis, AMS finds that a cost of $1,000 per producer
is the most reasonable estimate of these annual fees and, by extension
the cost to States and Tribes of administering a regulatory program. We
have no reason at this time to assume that the Federal government will
be any more or less efficient at implementing the Federal program for
producers who operate under a USDA license rather than a State or
Tribal program. The Federal plan does not require licensed producers to
use certified seed, nor will USDA provide producers with access to
certified seed. Accordingly, we use this same $1,000 estimate as a
proxy for the cost of administering a program by the Federal Government
as well.
    In addition to these fees, a producer bears the burden of gathering
the information for and filling out an application for licensing. AMS
estimates that the time required of a producer to apply for a license
to grow hemp will be approximately 10 minutes or 0.17 hours. The mean
hourly wage of a compliance officer, as reported in the May 2018
Occupational Employment
[[Page 58545]]
Statistics Survey of the Bureau of Labor and Statistics, was $35 per
hour. Assuming 39 percent of total compensation accounts for benefits,
total compensation of a compliance officer is $57 per hour. Multiplying
this wage by the time spent to complete a license application results
in an annual burden cost to producers of about $10 per license
application.
    State departments of agriculture and Tribal governments will likely
need to increase their staff to successfully oversee hemp programs.
States with pilot programs typically employ about four full-time staff
members to manage their industrial hemp programs. The estimated
increase in hemp acreage in 2019 indicates a likely increase in
licenses and applications; therefore, States with hemp programs may
need to hire additional employees. States and Tribes without hemp pilot
programs under the 2014 Farm Bill that have their own plans in place
under the 2018 Farm Bill will also need to hire new staff members. The
fees paid by producers to States and Tribes to participate in the hemp
program will likely cover the staffing costs.
Costs of USDA Plan
    AMS has developed a Federal Plan for hemp producers to utilize when
their State or Tribe does not have its own plan in place. The Federal
Plan requires an initial application for a license. The license must
then be renewed every three years. A criminal history report is
required with every license application. The costs to a producer of
completing a license application and of submitting a criminal history
report will be quantified in the ``Costs of Reporting and
Recordkeeping'' section. The Federal Plan also includes sampling and
testing provisions, which will result in costs to producers. USDA will
bear the costs of program administration and does not intend to charge
producers a licensing fee unless Congress provides the authority to
USDA to charge fees for this program in the future. On average, the
annual fee that producers paid to States to participate in the pilot
programs, which included licensing, was $1,000 per license. This will
be used as a proxy for the cost to USDA of program administration.
    Sampling and testing costs under the Federal Plan are tied to
acreage and how licensees designate the lots where hemp is grown.
Projected costs for sampling and testing an average 24-acre lot are
summarized in Table 4.
[GRAPHIC] [TIFF OMITTED] TR31OC19.015
    The hourly total compensation, which includes wage and benefits,
for a federally-contracted inspector who conducts sampling is $152, and
the hourly total compensation for a federally-employed lab technician
who tests the sample is $161. The standard rate for reimbursement for
miles driven at the Federal level is $0.58 per mile. With information
from State departments of agriculture, AMS calculated a range of time
spent on sampling, and an average of time spent driving and miles
driven by an inspector to and from the sampling location. The range of
time spent on testing and of costs for testing and reporting were
calculated using input from licensing and testing specialists within
AMS. Depending upon the quality of the sample taken and the time spent
on sampling and testing, the total cost of sampling and testing to a
producer ranges from $599 to $830 per tested sample per 24-acre lot.
AMS notes that transportation costs are fixed under this analysis
assuming all lots tested are at the same farm. If a producer grows
multiple varieties of hemp, or designates multiple lots of hemp with
the same variety, then each lot is subject to individual sampling and
testing. Total sampling and testing costs, therefore, depend upon the
number and size of lots.
Costs of Reporting and Recordkeeping
    The 2018 Farm Bill requires AMS to prepare and submit an annual
report containing updates on the implementation of the domestic hemp
production program to the Committee on Agriculture of the House of
Representatives and the Committee on Agriculture, Nutrition, and
Forestry of the Senate. To help collect the information necessary to
complete this report, and to collect additional information, as
necessary, to administer the hemp program, AMS has developed seven new
forms. These forms require specific information be submitted by States
and Tribes operating their own domestic hemp plans, from producers
participating in the USDA Plan, and from laboratories testing for THC
content. The annual burden in time and cost has been evaluated for each
form. These time and cost figures have been
[[Page 58546]]
approximated to the nearest whole number.
Respondents: States and Tribes Operating Their Own Plans
    States and Tribes with approved plans are required to report
certain information to USDA. USDA will collect this information from
States and Tribes through three forms: The ``State and Tribal Hemp
Producer Report'' form, the ``State and Tribal Hemp Disposal Report''
form, and the ``State and Tribal Hemp Annual Report'' form. AMS
estimates that the time required of States and Tribes to fill in the
information for each of these forms will be 20 minutes or 0.33 hours.
The time required of producers to supply the information for the
``State and Tribal Hemp Producer Report'' form and the ``State and
Tribal Hemp Disposal Report'' form will be 10 minutes, or 0.17 hours,
apiece. The ``State and Tribal Hemp Producer Report'' form and the
``State and Tribal Hemp Disposal Report'' form are due to USDA every
month. The annual time burden for States and Tribes to respond to each
of these two forms, therefore, is 4 hours per respondent. The annual
time burden for producers to supply the information for each of these
forms will be 10 minutes, or 0.167 hours, per respondent, plus an
additional 5 minute recordkeeping burden per form. The ``State and
Tribal Hemp Annual Report'' form must be submitted to USDA once per
year; the annual time burden, therefore, remains 0.33 hours per
respondent. The ``State and Tribal Hemp Annual Report'' form is
anticipated to place a burden on producers participating in the State
and Tribal Plan of 15 minutes per producer (10 minutes for reporting
and 5 minutes for recordkeeping).
    Each of these forms required from States and Tribes is expected to
generate a recordkeeping burden of 5 minutes or 0.08 hours, apiece, per
recordkeeper. Altogether, the annual time burden of reporting and
recordkeeping per State and Tribe operating under its own plan is
estimated to be 9 hours. The mean hourly wage of a compliance officer,
as reported in the May 2018 Occupational Employment Statistics Survey
of the Bureau of Labor and Statistics, was $35 per hour. Assuming 39
percent of total compensation accounts for benefits, total compensation
of a compliance officer is $57 per hour. Multiplying this by 9 hours
results in a total annual burden cost to each State and Tribe operating
under its own plan of $490. AMS estimates that 100 States and Tribes
will operate under their own plans. The annual burden for these 100
States and Tribes of reporting and recordkeeping is 858 hours costing
$49,046 per year.
    The information necessary for States and Tribes to submit the
``States and Tribal Hemp Producer Report comes from the information
supplied by producers in their license applications. AMS estimates that
8,000 producers will submit license applications over three years. AMS
estimates a cost of approximately $10 per license application (based on
approximately 10 minutes of burden). These costs will not occur
uniformly over the three years as both new and existing processors will
need to provide this information in the first year of the program. As
result, AMS estimates a cost to producers operating under State and
Tribal plans of $55,000 in 2020, $12,000 in 2021, and $13,000 in 2022--
or an average cost of $27,000 per year.
    In addition, producers will be required to prove that they do not
have prior drug related convictions that would disqualify them from
participation in the program. States have some flexibility in what they
require of applicants to make this demonstration. However, for purposes
of this analysis, we will use the same cost for States and Tribes that
we use for USDA licensees, which is $54 per licensee. This results in
estimated costs of $291,000 in 2020, $65,000 in 2021, and $70,000 in
2022--or an average cost of $142,000.
    Additionally, AMS estimates that an average of 2,680 \14\ producers
will supply information to States and Tribes for the ``State and Tribal
Hemp Disposal Report'' form each year at an estimated cost of $38,000
per year.
---------------------------------------------------------------------------
    \14\ There is no way to know for certain how many samples will
test beyond the 0.3 percent threshold for THC on a dry-weight basis;
however, based on information discussions with States that have a
hemp program under the 2014 Farm Bill, AMS estimates that 20 percent
of lots per year will produce cannabis that tests high for THC
content.
---------------------------------------------------------------------------
    The total average annual burden on producers to supply information
to States and Tribes associated with these two reports will be 1,169
hours, with an estimated cost (including criminal history information)
of $230,000.
    In addition, growers of crops that test above the acceptable hemp
THC level are responsible for the proper disposal of those non-
compliant crops. While the rule makes the producer responsible for the
costs of this disposal, such disposal represents a real expenditure of
societal resources; as such they are a cost of the rule irrespective of
who is directly responsible for those costs. The opportunity cost of
lost sales is already incorporated in our calculation of benefits since
our average benefits per acre are based on total sales and total
planted acres and non-compliant acres (which have zero value as hemp)
are included in the average expected benefit. However, the additional
physical costs of disposal are not represented in the calculation of
benefits. As a result, we need to calculate the additional cost imposed
by the disposal requirement.
    We have no information on the cost of disposing of non-compliant
hemp. So, we developed an assumed disposal cost of $200 per acre based
on the estimated cost of the physical activities related to disposal.
According to the University of Kentucky crop enterprise budgets for
hemp, the cost of harvesting and transporting hemp grown for fiber is
roughly $100 per acre.\15\ We double this amount to account for the
likelihood that there will be additional oversight and documentation
required to demonstrate legal disposal. However, we still have no way
to estimate any additional cost associated with the physical
destruction required after the crop is removed from the farm.
---------------------------------------------------------------------------
    \15\ We used hemp grown for fiber as the basis for our
assumption because hemp grown for flower or seed use more refined
methods of harvesting that are no longer necessary if the resultant
product (flower or seed) no longer has market value.
---------------------------------------------------------------------------
    Using this rough cost estimate, the average annual quantified cost
of disposal under State and Tribal programs is $6.432 million.
Respondents: Producers Participating in the USDA Plan
    To produce hemp under the USDA Plan, a producer, which may be an
individual producer or a business, would need to complete the ``USDA
Hemp Plan Producer Licensing Application'' form and be issued a
license. AMS estimates the time required of a producer to fill out this
form to be 10 minutes or 0.17 hours. The recordkeeping required for
this form is estimated to be 5 minutes, or 0.08 hours. The total burden
per respondent of this form is 15 minutes, or .25 hours. Licenses under
the USDA Plan must be renewed every three years. Assuming that there
will be 1,000 participants in the USDA Plan, AMS estimates that over a
three-year period, there will be 667 respondents in each year. The
total annual burden for this form, therefore, will be 167 hours with a
cost of $9,541.
    In addition to the ``USDA Hemp Plan Producer Licensing
Application'' form to be submitted once every three years, producers
must submit criminal history reports for each of their key
participants. AMS estimates each
[[Page 58547]]
producer to have three key participants that would submit criminal
history reports to USDA. The cost of a criminal history report is $18
apiece, which results in a cost of $54 per participant. As stated
previously, AMS estimates that it will receive 333 license renewals in
each year over a three-year period. The average annual cost of the
criminal history reports that will accompany these renewals is $17,982
annually.
    Similar to the required annual report submitted by States and
Tribes to USDA, producers operating under the USDA Plan must submit the
``USDA Hemp Plan Producer Annual Report'' to USDA each year. AMS
estimates the time burden of submitting this form to be 20 minutes, or
0.33 hours. The recordkeeping burden of this form is estimated to be 5
minutes, or 0.08 hours. Together, the burden of this form is 25
minutes, or 0.42 hours, per respondent. AMS estimates 1,000
participants in the USDA Plan. The total burden of this form,
therefore, is 417 hours, costing $23,808 annually.
    When a hemp sample tests above the acceptable hemp THC level, the
material from the production area which the sample represents must be
destroyed by a person authorized under the CSA to handle marijuana,
such as a DEA-registered reverse distributor, or a duly authorized
Federal, State, or local law enforcement officer or their designee.
Producers must document the disposal of all marijuana. This can be
accomplished by either providing USDA with a copy of the documentation
of disposal provided by the reverse distributor or with the ``USDA Hemp
Plan Producer Disposal Form''. AMS estimates the time required to
complete this form to be 20 minutes, or 0.33 hours, which would be
split between the producer and authorized agent who carries out the
disposal. The recordkeeping required for this form would amount to 5
minutes, or 0.08 hours, per respondent. The total burden of this form
is, therefore, 15 minutes, or 0.25 hours, for a producer, and 10
minutes, or 0.17 hours, for an authorized agent. Together, the burden
is 25 minutes, or 0.42 hours, per respondent.
    Using the same assumptions regarding the prevalence of non-
compliant crops and the costs of disposal that were used in generating
the estimates of hemp disposal reporting (and disposal) for State and
Tribal programs, the 1,000 producers that will participate in the USDA
Plan will generate 400 samples will test high for THC content. The
total reporting burden of this form will amount to 167 hours and cost
$9,523 annually. Additionally, producers operating under USDA licenses
are expected to incur quantified disposal costs of $960,000 annually.
    Altogether, the annual burden of the ``USDA Hemp Plan Producer
Licensing Application'', the ``USDA Hemp Plan Producer Disposal Form'',
and the ``USDA Hemp Plan Producer Annual Report'' amounts to an annual
total of 666 hours and a cost of $37,962. Adding in the criminal
history report cost brings the total to $55,962 annually.
Respondents: Laboratories
    The Farm Bill requires that all domestically produced hemp be
tested for total THC content on a dry-weight basis, whether produced
under a State or Tribal Plan or the USDA Plan. To facilitate this, AMS
is requiring all laboratories testing hemp for THC to submit all test
results, whether passing or failing, via the ``Laboratory Test Results
Report''. AMS estimates this form to generate a total annual reporting
burden of 30 minutes, or 0.5 hours, per test or submitted form, and a
total annual recordkeeping burden of 5 minutes, or 0.08 hours, per
producer. Together, the reporting and recordkeeping burden for this
form is 35 minutes, or .58 hours.
    There is no way to know for certain how many tests laboratories
will conduct in a single year and how many of them will be subject to
re-testing. AMS estimates, however, that laboratories will receive two
samples representing two lots of hemp material from 7,700 producers,
resulting in 15,400 tests annually. The total annual burden of these
tests and the accompanying ``Laboratory Test Results Report'' form is,
therefore, 8,399 hours, and costs of $478,743.
Respondents: All Producers
    The Farm Service Agency (FSA) collects information on crop acreage
through the ``Report of Acreage'' form. All hemp producers will be
required to fill in the information for this form once they receive
their license or authorization from USDA, a State, or Tribe. AMS
estimates this form to generate a reporting burden of 30 minutes, or
0.5 hours, and a recordkeeping burden of 5 minutes, or 0.08 hours. AMS
assumes that an average of 7,700 producers will respond to this form
each year, resulting in a total annual burden of 4,466 hours, and a
cost of $254,562.
Total Reporting and Recordkeeping Costs for All Respondents
    Altogether, the annual burden for reporting and recordkeeping for
all respondents is 17,362 hours, costing a total of $$989,634 per year.
This is the sum of the annual burden of reporting and recordkeeping to
States and Tribes operating their own plans, to producers participating
in the State and Tribal Plans, to producers participating in the USDA
Plan, including the cost of a criminal history report for three key
participants, and to laboratories testing samples for THC content.
Alternatives to the Rule
    The actions in this rule are mandated by the 2018 Farm Bill, which
enables States, Tribes, and USDA to establish rules and regulations for
the domestic production of hemp. The statute requires USDA to develop
criteria for approval of plans submitted by State and Tribal
governments for regulation of domestic hemp production. If no State or
Tribal Plan has been approved, then hemp producers in these States or
Tribes may utilize the plan developed by USDA. These plans will promote
a greater level of consistency in regulations governing the legal
production of hemp across the United States.
    In developing the sampling procedures for the Federal Plan, AMS
considered the protocols for sampling used by State departments of
agriculture and by countries that regulate hemp production. In
addition, AMS reviewed sampling methods recommended by Codex
Alimentarius, which is the central part of the Joint Food and
Agriculture Organization (FAO)/World Health Organization (WHO) Food
Standards Program and was established by FAO and WHO to protect
consumer health and promote fair practices in food trade. After
research and review of multiple sampling protocols, AMS adopted the
best option among the alternatives.
    The 2018 Farm Bill mandates testing using post-decarboxylation or
other similarly reliable methods where the total THC concentration
level considers the potential to convert delta-9-tetrahydrocannabinolic
acid (THC-A) into THC. Testing methodologies meeting these requirements
include those using gas or liquid chromatography with detection. These
methods are the industry standard for post-decarboxylation testing.
While these methods were chosen by AMS as the best option for testing,
alternative sampling and testing protocols will be considered if they
are comparable to the baseline mandated by the 2018 Farm Bill and
established under the USDA Plan and Procedures.
    Alternatives to the selected procedures for sampling and testing
for THC content included connecting a
[[Page 58548]]
producer lot of cultivated hemp to a standard unit of measure. AMS
considered describing one lot as one acre of hemp. This alternative was
abandoned, however, as it would have required every acre of hemp to be
sampled and tested, which would have resulted in high costs to
producers and overwhelming volume to laboratories.
Net Benefits From the Rule
    AMS has provided the approximation of the total costs and benefits
associated with this new regulation. Using the costs and benefits
introduced in the preceding sections, AMS has calculated the net
benefits of this rule in Table 5 using an upper bound estimate of
costs. The results shown in Table 5 were calculated using many
assumptions. These figures are only estimates using the data that was
available to AMS. The absence of industry and government data along
with the high degree of uncertainty regarding the future of the hemp
market makes accurately capturing the impact of this rule on the hemp
industry an impossible task. Regardless, AMS estimated the net benefits
of this rule in years 2020, 2021, and 2022 as shown in Table 5. AMS has
also calculated the net benefits of the rule using a lower bound
estimate of costs. The results of that analysis are shown in Table 5a.
The assumptions used to calculate the lower bound estimate are
discussed later in this document.
    The costs and benefits associated with this rule will begin in the
year 2020. From the signing of the 2018 Farm Bill to the enactment of
this rule in time for the 2020 growing season, the domestic hemp market
will be in a state of transition as cultivation of hemp moves from
research only to commercialization. The hemp industry in 2018
represents the baseline of this analysis, and the first year which will
see impacts from this rule is 2020. The time between will be considered
a transitional period as the hemp industry adjusts to incorporate the
provisions authorized in the 2018 Farm Bill.
    The benefits of this rule primarily include producer sales that are
estimated to be due to the hemp provisions in the 2018 Farm Bill and
this rule which enables those provisions. Gross revenues represent the
best proxy for consumer willingness to pay and social benefits.\16\ As
the demand for and sales of hemp increase over time, the number of
licensees is estimated to grow proportionally (for the purposes of this
analysis). As a result, we estimate the number of licensees (State,
Tribal, or Federal) to increase from roughly 6,494 in 2020 to 7,720 in
2021, to 8,962 in 2022.
---------------------------------------------------------------------------
    \16\ We note that if gross willingness-to-pay is presented as a
regulatory benefit, then marginal costs of production must be
included as a line item in the regulatory cost analysis. An
alternative, reduced-form approach would be to include only producer
surplus (or the related concept of profits) and consumer surplus in
the benefits analysis.
---------------------------------------------------------------------------
    The benefits and cost of this rule are shown in Tables 5
(summarizing upper-bound cost estimates and associated net benefits)
and 5a (summarizing lower-bound cost estimates and associated net
benefits). In Table 5, the estimated net benefits of this rule amount
to a loss of $4 million in 2020, a benefit of $23 million in 2021, and
a benefit of $49 million in 2022. As noted previously, this calculation
is based on an upper bound estimate of the costs of the rule. This
estimate includes costs to all growers, not just the new entrants
resulting from the rule. (In other words, we are incorporating a
significant amount of cost that would have been incurred by producers
even in the absence of this rule.)
    Benefits are based on a share of growth being attributable to the
rule while the cost calculations include the costs of compliance borne
by all producers, including those that are already growing hemp under
the 2014 program and those that would expect to grow hemp under that
program in the event that USDA did not promulgate this rule. This leads
to costs being overstated relative to the benefits calculated. Many of
the costs estimated as attributable to this rule actually represent
expenditures of resources that would have taken place under the 2014
program.
    We did this for two reasons. The first is simply to demonstrate
what we think the full cost of a program similar to the one we are
promulgating would be. The second is because the specific requirements
of this rule may be slightly different from requirements already in
place in States operating hemp programs under the 2014 Farm Bill and we
did not want to ignore the fact that these changes may have costs. Put
another way, producers under the 2014 plan may already have been
required to submit license applications, but not applications that were
identical to what is being required. The preexisting State requirement
may have been more or less costly, but this assumed that new and
existing growers would bear the full cost of providing the information
required under this program. Because we believe the 2018 requirements
for producers are very similar to the plans already in operation, we
think the estimates used to this point represent an upper bound
estimate.
    We have also developed a lower bound estimate of costs based on
applying costs related to the rule only to those producers who would
not have produced hemp in the absence of this rule. Requirements for
States and Tribes are all new and will remain attributed to the rule.
Similarly, the costs associated with producers reporting information to
States and Tribes to facilitate State and Tribal reporting requirements
will still be attributable to this rule.
    The largest changes in estimated costs result from a reduction in
the number of acres (and, by extension growers) directly attributable
to this rule. In the upper bound cost case we include the transactions
cost (e.g., permit application, crop reporting, testing, disposal etc.)
to every producer required to produce the $491 million worth of hemp in
2021--or 7,700 producers. In the lower bound we recognize that $362
million of that production is estimated to occur in 2019 before any new
rule is published, so only $129 million could possibly be related to
publication of a new rule. We also acknowledge that there were avenues
available to further increase production under the 2014 program and
that up to half of that $129 million in increased revenue could occur
without this rule. As a result, only $65 million of that new growth in
2021 is attributable to this rule. It only takes 1,000 new growers to
meet this level of increased demand. So, the lower bound is based on
the costs associated with those 1,000 growers vs. the 7,700 used in
calculating the upper bound.
    This alignment of new producers to new growth allows costs and
benefits to be measured relative to a consistent baseline. However, we
also acknowledge that this rule will impose costs on entities beyond
just those new entrants into the market who supply a portion of the
projected growth in demand for hemp. For example, States and Tribes
face new reporting requirements under this rule. Those reporting
requirements are independent of the number of licensed producers in
their programs that produce to meet existing demand as opposed to those
who's production is enabled by this rule. So, the reporting burden for
States and Tribes is the same in both the upper bound and lower bound
estimates. On the other hand, since State administrative costs are
directly tied to the number of program participants, those costs to the
State only grow as a function of the number of new entrants into the
market. As a result, administrative costs for States and Tribes (as
well as the Federal Government) are estimated to be
[[Page 58549]]
significantly lower in the lower bound estimate.
    The following is a discussion of how each major cost or benefit
category is modified to move from the upper bound estimate to the lower
bound estimate.
    Both revenues and opportunity cost were already based on only the
new acres enabled by the rule, so those estimates do not change.
    The estimate of State and Tribal administrative costs will decline.
The upper bound cost estimate included the total cost of administering
a hemp program. The lower bound recognizes that States and Tribes were
already incurring administrative costs associated with existing
production and would expect such costs to increase with increased
production under the 2014 program. State and Tribal administrative
costs would only increase as a result of new entrants directly enabled
by the rule. Using 2021 as an example, 7,700 producers are required to
produce all $491 million in projected demand for hemp. However, only
1,000 producers are required to produce the approximately $65 million
in projected demand attributable to the rule. Some of those producers
will operate under State and Tribal programs and some under USDA
license. Based on the proportions used in calculating the upper bound
cost, we assume 13 percent of growers to be operating under USDA
license and 87 percent to be operating under State license. So, of the
7,700 producers operating in 2021 only 870 are expected to be growing
under State or Tribal authority to meet demand increases attributable
to the rule. So, the estimate of State and Tribal administrative costs
goes from $6.7 million in the upper bound to $870,000 in the lower
bound estimate.
    Similarly, we assume that all producers will be subject to some
form of licensing. In the upper bound estimate, we attribute all
licensing costs to this rule even though we know that most, if not all,
States already have some form of licensing as part of their 2014
programs. So, if we only account for the licensing costs of producers
enabled under this rule, the upper bound estimate is $77,000 to $35,000
in 2021.
    Like State and Tribal administrative costs, USDA administrative
costs are tied to the number of entrants into the market in response to
demand increases that can be fulfilled as a result of the rule. As
previously discussed, this is estimated to be 130 producers in 2021
(the 1,000 new producers minus the 870 who register under State or
Tribal programs) at a cost of $130,000.
    Like licensing, we expect that most, if not all, State programs
already have some form of product testing. As a result, only the
testing of acres attributable to this rule should be included in the
estimated cost of the rule. This results in a change from the upper
bound estimate of $11.6 million to an estimated lower bound cost of
$1.5 million. It should be noted, however, that existing sampling and
testing regimes may be more or less stringent than the one imposed by
this rule. As a result, this rule could impose additional costs, or
represent cost savings, on producers not directly enabled by this rule.
These cost changes are not reflected in the lower bound estimate.
    As previously mentioned the reporting and recordkeeping burden on
the States is independent of the number of program participants and is
the same in both upper and lower bound estimates. Also, the burden on
producers to supply the information required to be reported by the
States and Tribes is required of all producers, so the estimate of
those costs also remains the same under upper and lower bound
estimates.
    The reporting burden for producers operating under USDA license, on
the other hand is a function of the number of new licensees and the
lower bound estimates reflects this smaller number.
    The reporting of information to the Farm Services Agency is a new
requirement that applies to all producers. As a result, the estimated
cost associated with these provisions of the rule are identical in both
upper and lower bound estimates. Similarly, the requirement of testing
labs to submit information is new and applies to all tests irrespective
of whether or not the producer is new as a result of this rule.
Laboratory reporting costs are, therefore, also the same in the upper
and lower bound estimates.
    Like sampling and testing, we assume that existing producers are
already required to dispose of non-compliant crops. As a result, the
estimated disposal cost (in 2021) goes from $7.4 million in the upper
bound estimate to $960,000 in the lower bound estimate. Also, like
sampling and testing, the validity of the estimate is a function of the
relative costs of Federal disposal requirements relative to existing
State disposal requirements. Any change in the costs of disposal
(positive or negative) would apply to all producers, not just those new
as a result of this rule.
    The benefits and cost of this rule using the lower bound cost
estimate are shown in Table 5a. The estimated net benefits of this rule
amount to $18 million in 2020, a benefit of $47 million in 2021, and a
benefit of $79 million in 2022.
    The benefits of this rule primarily include producer sales that are
estimated to be due to the hemp provisions in the 2018 Farm Bill and
this rule which enables those provisions. Gross revenues represent the
best proxy for consumer willingness to pay and social benefits. \17\ As
the demand for and sales of hemp increase over time, the number of
licensees is estimated to grow proportionally (for the purposes of this
analysis). As a result, we estimate the number of licensees (State,
Tribal, or Federal) to increase from roughly 7,584 in 2020 to 8,818 in
2021, to 10,054 in 2022 and beyond.
---------------------------------------------------------------------------
    \17\ We note that if gross willingness-to-pay is presented as a
regulatory benefit, then marginal costs of production must be
included as a line item in the regulatory cost analysis. An
alternative, reduced-form approach would be to include only producer
surplus (or the related concept of profits) and consumer surplus in
the benefits analysis.
---------------------------------------------------------------------------
BILLING CODE 3410-02-P
[[Page 58550]]
[GRAPHIC] [TIFF OMITTED] TR31OC19.016
[[Page 58551]]
[GRAPHIC] [TIFF OMITTED] TR31OC19.017
BILLING CODE 3410-02-C
    The net benefits in each of the three years have been discounted to
reflect their present value and annualized. The results of these
calculations are presented in Table 6 at using a discount rate of three
percent and in Table 6a using a discount rate of seven percent. The
final result of this analysis indicates that this rule is estimated to
have annual net benefits of between 23 and 47 million dollars at a
discount rate of three percent and between 21 and 44 million dollars at
a discount rate of seven percent.
[[Page 58552]]
          Table 6--Annualized Costs, Benefits, and Net Benefit
                             [At 3 percent]
------------------------------------------------------------------------
                                            Lower bound     Upper bound
------------------------------------------------------------------------
Benefit.................................     $65,810,000     $65,810,000
Cost....................................      19,016,000      43,172,000
                                         -------------------------------
    Net Benefit.........................      46,794,000      22,638,000
------------------------------------------------------------------------
          Table 6a--Annualized Costs, Benefits, and Net Benefit
                             [At 7 percent]
------------------------------------------------------------------------
                                            Lower bound     Upper bound
------------------------------------------------------------------------
Benefit.................................     $62,440,000     $62,440,000
Cost....................................      18,053,000      41,283,000
                                         -------------------------------
    Net Benefit.........................      44,386,000      21,156,000
------------------------------------------------------------------------
Regulatory Flexibility Analysis
    Pursuant to the requirements set forth in the Regulatory
Flexibility Act (5 U.S.C. 601-612), AMS has considered the economic
impact of this action on small entities. AMS has prepared this
Regulatory Flexibility Analysis and has determined that this rule will
have a significant economic impact on a substantial number of small
businesses because many small businesses will not be able to
participate in the hemp market without this rule.
Reasons Action Is Being Considered
    The Agriculture Improvement Act of 2018 mandates that States and
Tribes submit to USDA plans for regulation of hemp to include
procedures for information management, testing for THC, and compliance
with the regulation. State and Tribal plans must be approved by USDA.
If no State or Tribal Plan has been approved, then hemp producers in
those States or Tribes may use the plan developed by USDA, unless
prohibited by State or Tribal Law.
Potentially Affected Small Entities
    The Small Business Administration (SBA) defines, in 13 CFR part
121, small agricultural producers as those having annual receipts of no
more than $750,000. Unfortunately, very little data exists that shows
the annual receipts of industrial hemp producers. To conduct this
analysis, however, AMS utilized State acreage data and an estimate of
gross revenue per acre received by producers calculated using the 2018
Processor/Handler Production Reports to the Kentucky Department of
Agriculture. USDA seeks comments on other reliable data sources that
may be available.
    AMS used State acreage data by producer from three of the four
States with the largest amount of licensed acreage to serve as a proxy
for the portion of small producers nationwide. Together, Colorado,
Oregon, and Kentucky make up about 47 percent of planted acreage and 45
percent of producer licenses nationwide, according to Vote Hemp data.
While acreage data by producer was not available for Montana, its State
department of agriculture reported that very few hemp operations in
Montana received annual receipts in excess of $750,000 in 2018.
    Vote Hemp estimates that on average, about 70 percent of licensed
acreage is planted. AMS applied this percentage to 2018 licensed
acreage data from Colorado, Oregon, and Kentucky to estimate 2018
cultivated acreage. The estimate of gross revenue per acre to producers
of $3,293 was used to find the number of acres required to generate an
annual receipt of $750,000. The result is shown in Table 7.
[GRAPHIC] [TIFF OMITTED] TR31OC19.018
    With a gross revenue of $3,293 per acre, a producer with no more
than 228 acres would be considered small under SBA standards. Based on
this estimate of gross revenue per acre, 99 percent of producers would
meet the SBA definition of a small agricultural service firm. ``Using
estimated costs from the RIA, anticipated costs per entity that want to
enter the hemp industry are expected to be about $2,941 in 2020, and
$2,900 in 2021. However, entry into this market is voluntary and
benefits are anticipated to outweigh the estimated costs.''
Alternatives To Minimize Impacts of the Rule
    The actions in this rule are mandated by the 2018 Farm Bill, which
enables States, Tribes, and USDA to establish rules and regulations for
the domestic production of hemp. The statute requires USDA to develop
criteria for approval of plans submitted by State and Tribal
governments for regulation of domestic hemp production. If no State or
Tribal Plan has been approved, then hemp producers in these States or
Tribes may utilize the plan developed by USDA. These plans will promote
consistency in regulations governing the legal production of hemp
across the U.S.
    In developing the sampling procedures for the Federal Plan, AMS
considered the protocols for sampling used by State departments of
agriculture and by countries that regulate hemp production. In
addition, AMS reviewed sampling methods recommended by Codex
Alimentarius, which is the
[[Page 58553]]
central part of the Joint Food and Agriculture Organization (FAO)/World
Health Organization (WHO) Food Standards Program and was established by
FAO and WHO to protect consumer health and promote fair practices in
food trade. After research and review of multiple sampling protocols,
AMS adopted the best option among the alternatives.
    The 2018 Farm Bill mandates testing using post-decarboxylation or
other similarly reliable methods where the total THC concentration
level considers the potential to convert delta-9-tetrahydrocannabinolic
acid (THC-A) into THC. Testing methodologies meeting these requirements
include those using gas or liquid chromatography with detection. These
methods are the industry standard for post-decarboxylation testing.
While these methods were chosen by AMS as the best option for testing,
alternative sampling and testing protocols will be considered if they
are comparable to the baseline mandated by the 2018 Farm Bill and
established under the USDA Plan and Procedures.
    Alternatives to the selected procedures for sampling and testing
for THC content included connecting a producer lot of cultivated hemp
to a standard unit of measure. AMS considered describing one lot as one
acre of hemp. This alternative was abandoned, however, as it would have
required every acre of hemp to be sampled and tested, which would have
resulted in high costs to producers and overwhelming volume to
laboratories.
Good Cause Analysis
    Pursuant to the Administrative Procedure Act (APA), notice and
comment are not required prior to the issuance of a final rule if an
agency, for good cause, finds that ``notice and public procedure
thereon are impracticable, unnecessary, or contrary to the public
interest.'' (5 U.S.C. 553(b)(B)).
    USDA recognizes that courts have held that the good cause exception
to notice and comment rulemaking is to be narrowly construed and only
reluctantly countenanced. USDA does not take lightly its decision to
forego a formal notice and comment process, but under a totality of the
circumstances analysis, has concluded that this interim final rule
(IFR), accompanied by a 60-day comment period, best balances Congress's
interest in the expeditious implementation of a regulatory program for
domestic hemp production with its longstanding interest in ensuring
that an agency's decisions be informed and responsive. The IFR will
also provide sorely needed guidance to the many stakeholders whose
coordinated efforts are critical to the success of the domestic hemp
production economy, and will serve the public's interest by expediting
hemp entry into that market.
    Congress's intention that USDA expeditiously develop a regulatory
program for domestic hemp production is clear from language in the
Agriculture Improvement Act of 2018, Public Law 115-334 (2018 Farm
Bill), which the President signed into law on December 20, 2018. The
2018 Farm Bill amended the Agricultural Marketing Act of 1946 (Act) (7
U.S.C. 1621 et seq.) by adding subtitle G, Hemp Production. Upon
enactment of the 2018 Farm Bill, hemp, as defined therein, is no longer
a controlled substance. Section 10114 of the 2018 Farm Bill further
clarifies that the interstate commerce of hemp is not prohibited, and
that States and Indian Tribes cannot prohibit the transportation or
shipment of hemp or hemp products produced in accordance with the
Agricultural Marketing Act of 1946 through the State or territory of
the Indian Tribe. However, the Act also states that it is unlawful to
produce hemp unless produced pursuant to a State, Tribal, or USDA plan.
See 7 U.S.C. 1639p(a)(1) and 1639q(c)(1). Congress provided that the
Secretary approve or disapprove of any State or Tribal plan within 60
days of its submission. 7 U.S.C. 1639(p)(b).
    In order to meet this 60-day approval deadline, Congress understood
that USDA would need time to establish its own plan and develop a
process for quickly (i.e., within 60 days of submission) approving or
disapproving of State and Tribal plans. Although the Act does not
contain an express end-date by which such regulations and guidelines
must be issued, in section 10113 of the 2018 Farm Bill, Congress
provided that ``[t]he Secretary shall promulgate regulations and
guidelines to implement this subtitle as expeditiously as
practicable.'' (emphasis added). ``To ensure that the Secretary moved
forward with issuing regulations in as timely a fashion as possible,''
the Act requires the Secretary to ``periodically report to Congress
with updates regarding implementation of this title.'' H.R. Rep. 115-
1072, at 738 (Dec. 10, 2018) (Conf. Rep.).
    USDA takes seriously Congress's directive to issue regulations as
expeditiously as practicable. USDA also understands that while Congress
did not expect USDA to issue regulations within 60 days, it also did
not anticipate the process extending two years into 2021. This is
apparent from Congress's continued legislation on hemp. In Section 107
of the Additional Supplemental Appropriations for Disaster Relief Act,
2019, Public Law 116-20, (Disaster Relief Act), Congress required:
``Beginning not later than the 2020 reinsurance year, the Federal Crop
Insurance Corporation [FCIC] shall offer coverage under the whole farm
revenue protection insurance policy (or a successor policy or plan of
insurance) for hemp (as defined in section 297A of the Agricultural
Marketing Act of 1946 (7 U.S.C. 1639o)).'' Congress anticipated that
regulations governing the interstate commerce of hemp would be issued
prior to 2020; otherwise, the deadline in Section 107 of the Disaster
Relief Act would be irrelevant. Additionally, several Members of
Congress and Senators urged USDA to expedite the rulemaking or take
steps to allow farmers to begin hemp production in 2019.
    Despite USDA's diligence, the complexity of establishing a new
regulatory program for domestic hemp production, a crop that could not
be legally grown on a commercial basis under Federal law for several
decades, has taken a substantial amount of time and resources. Adding a
formal notice and comment period on top of that would push the
effective date of USDA's domestic hemp production regulatory program
well beyond 2020 and into 2021. This IFR effectuates Congress's will,
which is one of several factors that provide good cause to justify
foregoing a notice and comment period.
    A second factor justifying good cause is that this rule not only
affects AMS's ability to implement the congressionally mandated
regulatory framework for a domestic program, but also provides critical
guidance to numerous stakeholders that anxiously await the publication
of this IFR. The FCIC's insurance policy program discussed above is
just one of these. For FCIC to offer the whole farm revenue protection
insurance policy in 2020 to lawful producers of hemp under the Act, the
IFR must take effect this fall to provide the Risk Management Agency
(RMA) sufficient time to take the necessary steps to authorize FCIC to
offer the insurance coverage and for producers to engage in activities
to qualify for the coverage for their hemp production.
    In addition, the FSA, the Rural Business-Cooperative Service, and
the Natural Resources and Conservation Service provide financial
incentives and support used by agricultural producers and private
sector entities. These agencies similarly need regulatory guidance to
develop commercial instruments such as loan documents, re-insurance
contracts, and commodity
[[Page 58554]]
disaster program provisions that are typically done on a crop year
basis.
    Individuals and commercial entities also need the IFR's guidance to
engage in the production, harvesting, transportation, storage, and
processing of hemp and hemp products. Absent an interim rule promptly
implementing the regulatory program required by the 2018 Farm Bill,
there are no procedures in place to determine whether a cannabis crop
qualifies as hemp as defined in section 297A of the Agricultural
Marketing Act of 1946. It is necessary to issue the IFR now to provide
individuals and entities sufficient time to make the required plans and
purchases and to obtain financing ahead of planting hemp in 2020.
    The banking industry is awaiting these regulations in order to
develop guidance regarding deposits derived from hemp operations.
Without these regulations, the banking industry is not willing to take
the risk of accepting deposits or lending money to these businesses.
Additionally, with the IFR effective this fall, producers will be able
to plan and execute the steps necessary to plant during the 2020 crop
year. Those steps include identifying the land and acreage for the
planting, contract for seed and other supplies, obtain financing, and
identify and contract with potential buyers. Those steps are also
necessary for producers to qualify for the USDA programs and products
described above.
    Finally, and importantly, law enforcement needs guidance from the
IFR. While the States and Tribes may not prohibit the transportation of
hemp produced under the 2014 Farm Bill, law enforcement does not
currently have the means to quickly verify whether the cannabis being
transported is hemp or marijuana. The IFR will assist law enforcement
in identifying lawfully-produced hemp versus other forms of cannabis
that may not be lawfully transported in interstate commerce.
    Adding a formal notice and comment period would push the effective
date of USDA's regulatory program well beyond 2020 and into 2021 and
delay the guidance these stakeholders sorely need.
    A third factor justifying good cause for this rule is that the
Administrator has solicited comments through listening sessions and
webinar that solicited the public participation and consultations with
State and Tribal officials.\18\ He is also allowing for a 60-day
comment period for this IFR. The Administrator recognizes the value of
public comment to refine the IFR and will keep an open mind as to any
and all comment submissions. All written comments timely received will
be considered before a final determination is made on this matter.
---------------------------------------------------------------------------
    \18\ For example, public comments from the March 19, 2019
webinar can be found at https://www.ams.usda.gov/rules-regulations/farmbill-hemp/webinar-comments.
---------------------------------------------------------------------------
    Finally, a fourth factor justifying good cause for the IFR is the
public's interest in expediting the ability of the nation's farmers to
enter the new agricultural market presented by hemp. As explained in
the regulatory impact analysis above, USDA estimates that the industry
should gain annualized benefits of almost $66 million once the rule
becomes effective and the domestic hemp production program is
implemented. Any delay in the issuing regulations will cause producers
to forgo realizing those benefits in 2020. In fact, earlier this year,
USDA faced litigation from a party who believed that the language in 7
U.S.C. 1639(p)(b) required USDA to approve State and tribal plans
submitted to it in 60 days as soon as the law went into effect. See
Flandreau Santee Sioux Tribe v. United States Dep't of Agriculture et
al., 4:19-cv-04094-KES (D.S.D.). The end of the spring planting season
temporarily lowered the urgency felt by farmers seeking to enter the
hemp market, but fall preparations for spring 2020's planting season
are fast approaching. USDA has no doubt that it will again be subject
to litigation if the IFR is not adopted in time for parties to prepare
for the 2020 spring planting season.
    Accordingly, the Administrator finds that, under the totality of
the circumstances presented, there is good cause to forego notice and
comment through the issuance of a notice of proposed rulemaking. By
publishing this rule and making it effective this fall, USDA is
complying with Congress's will, providing sorely needed guidance to all
stakeholders, permitting public comment, and serving the public's
interest in engaging in a new and promising economic endeavor. For
similar reasons, the Administrator also finds good cause for the IFR to
be effective upon publication in the Federal Register.
List of Subjects in 7 CFR Part 990
    Acceptable hemp THC level, Agricultural commodities, Cannabis,
Corrective action plan, Delta-9 tetrahydrocannabinol, Drugs, Dry weight
basis, Hemp, High-performance liquid chromatography, Laboratories,
Marijuana.
0
For the reasons set forth in the preamble, and under authority of 7
U.S.C. 601-674 and Public Law 107-171, add 7 CFR part 990 to read as
follows:
PART 990--DOMESTIC HEMP PRODUCTION PROGRAM
Subpart A--Definitions
Sec.
990.1 Meaning of terms.
Subpart B--State and Tribal Hemp Production Plans
990.2 State and Tribal plans; General authority.
990.3 State and Tribal plans; Plan requirements.
990.4 USDA approval of State and Tribal plans.
990.5 Audit of State or Tribal plan compliance.
990.6 Violations of State and Tribal plans.
990.7 Establishing records with USDA Farm Service Agency.
990.8 Production under Federal law.
Subpart C--USDA Hemp Production Plan
990.20 USDA requirements for the production of hemp.
990.21 USDA hemp producer license.
990.22 USDA hemp producer license approval.
990.23 Reporting hemp crop acreage with USDA Farm Service Agency.
990.24 Responsibility of a USDA licensed producer prior to harvest.
990.25 Standards of performance for detecting delta-9
tetrahydrocannabinol (THC) concentration levels.
990.26 Responsibility of a USDA producer after laboratory testing is
performed.
990.27 Non-compliant cannabis plants.
990.28 Compliance.
990.29 Violations.
990.30 USDA producers; License suspension.
990.31 USDA licensees; Revocation.
990.32 Recordkeeping requirements.
Subpart D--Appeals
990.40 General adverse action appeal process.
990.41 Appeals under the USDA hemp production plan.
990.42 Appeals under a State or Tribal hemp production plan.
Subpart E--Administrative Provisions
990.60 Agents.
990.61 Severability.
990.62 Expiration of this part.
990.63 Interstate transportation of hemp.
Subpart F--Reporting Requirements
990.70 State and Tribal hemp reporting requirements.
990.71 USDA plan reporting requirements.
    Authority:  7 U.S.C. 1639o note, 1639p, 16939q, and 1639r.
Subpart A--Definitions
Sec.  990.1   Meaning of terms.
    Words used in this subpart in the singular form shall be deemed to
impart the plural, and vice versa, as the case may demand. For the
purposes of
[[Page 58555]]
provisions and regulations of this part, unless the context otherwise
requires, the following terms shall be construed, respectively, to
mean:
    Acceptable hemp THC level. When a laboratory tests a sample, it
must report the delta-9 tetrahydrocannabinol content concentration
level on a dry weight basis and the measurement of uncertainty. The
acceptable hemp THC level for the purpose of compliance with the
requirements of State, Tribal, or USDA hemp plans is when the
application of the measurement of uncertainty to the reported delta-9
tetrahydrocannabinol content concentration level on a dry weight basis
produces a distribution or range that includes 0.3% or less. For
example, if the reported delta-9 tetrahydrocannabinol content
concentration level on a dry weight basis is 0.35% and the measurement
of uncertainty is +/-0.06%, the measured delta-9 tetrahydrocannabinol
content concentration level on a dry weight basis for this sample
ranges from 0.29% to 0.41%. Because 0.3% is within the distribution or
range, the sample is within the acceptable hemp THC level for the
purpose of plan compliance. This definition of ``acceptable hemp THC
level'' affects neither the statutory definition of hemp, 7 U.S.C.
1639o(1), in the 2018 Farm Bill nor the definition of ``marihuana,'' 21
U.S.C. 802(16), in the CSA.
    Act. Agricultural Marketing Act of 1946.
    Agricultural Marketing Service or AMS. The Agricultural Marketing
Service of the U.S. Department of Agriculture.
    Applicant. An applicant is:
    (1) A State or Indian Tribe that has submitted a State or Tribal
hemp production plan to USDA for approval under this part; or
    (2) A producer in a State or territory of an Indian Tribe who is
not subject to a State or Tribal hemp production plan and who has
submitted an application for a license under the USDA hemp production
plan under this part.
    Cannabis. A genus of flowering plants in the family Cannabaceae of
which Cannabis sativa is a species, and Cannabis indica and Cannabis
ruderalis are subspecies thereof. Cannabis refers to any form of the
plant in which the delta-9 tetrahydrocannabinol concentration on a dry
weight basis has not yet been determined.
    Controlled Substances Act (CSA). The Controlled Substances Act as
codified in 21 U.S.C. 801 et seq.
    Conviction. Means any plea of guilty or nolo contendere, or any
finding of guilt, except when the finding of guilt is subsequently
overturned on appeal, pardoned, or expunged. For purposes of this part,
a conviction is expunged when the conviction is removed from the
individual's criminal history record and there are no legal
disabilities or restrictions associated with the expunged conviction,
other than the fact that the conviction may be used for sentencing
purposes for subsequent convictions. In addition, where an individual
is allowed to withdraw an original plea of guilty or nolo contendere
and enter a plea of not guilty and the case is subsequently dismissed,
the individual is no longer considered to have a conviction for
purposes of this part.
    Corrective action plan. A plan established by a State, Tribal
government, or USDA for a licensed hemp producer to correct a negligent
violation or non-compliance with a hemp production plan and this part.
    Criminal History Report. Criminal history report means the Federal
Bureau of Investigation's Identity History Summary.
    Culpable mental state greater than negligence. To act
intentionally, knowingly, willfully, or recklessly.
    Decarboxylated. The completion of the chemical reaction that
converts THC-acid (THC-A) into delta-9-THC, the intoxicating component
of cannabis. The decarboxylated value is also calculated using a
conversion formula that sums delta-9-THC and eighty-seven and seven
tenths (87.7) percent of THC-acid.
    Decarboxylation. The removal or elimination of carboxyl group from
a molecule or organic compound.
    Delta-9 tetrahydrocannabinol or THC. Delta-9-THC is the primary
psychoactive component of cannabis. For the purposes of this part,
delta-9-THC and THC are interchangeable.
    Drug Enforcement Administration or DEA. The United States Drug
Enforcement Administration.
    Dry weight basis. The ratio of the amount of moisture in a sample
to the amount of dry solid in a sample. A basis for expressing the
percentage of a chemical in a substance after removing the moisture
from the substance. Percentage of THC on a dry weight basis means the
percentage of THC, by weight, in a cannabis item (plant, extract, or
other derivative), after excluding moisture from the item.
    Entity. A corporation, joint stock company, association, limited
partnership, limited liability partnership, limited liability company,
irrevocable trust, estate, charitable organization, or other similar
organization, including any such organization participating in the hemp
production as a partner in a general partnership, a participant in a
joint venture, or a participant in a similar organization.
    Farm Service Agency or FSA. An agency of the United States
Department of Agriculture.
    Gas chromatography or GC. A type of chromatography in analytical
chemistry used to separate, identify, and quantify each component in a
mixture. GC relies on heat for separating and analyzing compounds that
can be vaporized without decomposition.
    Geospatial location. For the purposes of this part, ``geospatial
location'' means a location designated through a global system of
navigational satellites used to determine the precise ground position
of a place or object.
    Handle. To harvest or store hemp plants or hemp plant parts prior
to the delivery of such plants or plant parts for further processing.
``Handle'' also includes the disposal of cannabis plants that are not
hemp for purposes of chemical analysis and disposal of such plants.
    Hemp. The plant species Cannabis sativa L. and any part of that
plant, including the seeds thereof and all derivatives, extracts,
cannabinoids, isomers, acids, salts, and salts of isomers, whether
growing or not, with a delta-9 tetrahydrocannabinol concentration of
not more than 0.3 percent on a dry weight basis.
    High-performance liquid chromatography or HPLC. A type of
chromatography technique in analytical chemistry used to separate,
identify, and quantify each component in a mixture. HPLC relies on
pumps to pass a pressurized liquid solvent containing the sample
mixture through a column filled with a solid adsorbent material to
separate and analyze compounds.
    Indian Tribe. As defined in section 4 of the Indian Self-
Determination and Education Assistance Act (25 U.S.C. 5304).
    Information sharing system. The database mandated under the Act
which allows USDA to share information collected under State, Tribal,
and USDA plans with Federal, State, Tribal, and local law enforcement.
    Key participants. A sole proprietor, a partner in partnership, or a
person with executive managerial control in a corporation. A person
with executive managerial control includes persons such as a chief
executive officer, chief operating officer and chief financial officer.
This definition does not include non-executive managers such as farm,
field, or shift managers.
[[Page 58556]]
    Law enforcement agency. Any Federal, State, or local law
enforcement agency.
    Lot. A contiguous area in a field, greenhouse, or indoor growing
structure containing the same variety or strain of cannabis throughout
the area.
    Marijuana. As defined in the CSA, ``marihuana'' means all parts of
the plant Cannabis sativa L., whether growing or not; the seeds
thereof; the resin extracted from any part of such plant; and every
compound, manufacture, salt, derivative, mixture, or preparation of
such plant, its seeds or resin. The term `marihuana' does not include
hemp, as defined in section 297A of the Agricultural Marketing Act of
1946, and does not include the mature stalks of such plant, fiber
produced from such stalks, oil or cake made from the seeds of such
plant, any other compound, manufacture, salt, derivative, mixture, or
preparation of such mature stalks (except the resin extracted
therefrom), fiber, oil, or cake, or the sterilized seed of such plant
which is incapable of germination (7 U.S.C. 1639o). ``Marihuana'' means
all cannabis that tests as having a concentration level of THC on a dry
weight basis of higher than 0.3 percent.
    Measurement of Uncertainty (MU). The parameter, associated with the
result of a measurement, that characterizes the dispersion of the
values that could reasonably be attributed to the particular quantity
subject to measurement.
    Negligence. Failure to exercise the level of care that a reasonably
prudent person would exercise in complying with the regulations set
forth under this part.
    Phytocannabinoid. Cannabinoid chemical compounds found in the
cannabis plant, two of which are Delta-9 tetrahydrocannabinol (delta-9
THC) and cannabidiol (CBD).
    Plan. A set of criteria or regulations under which a State or
Tribal government, or USDA, monitors and regulates the production of
hemp.
    Postdecarboxylation. In the context of testing methodologies for
THC concentration levels in hemp, means a value determined after the
process of decarboxylation that determines the total potential delta-9
tetrahydrocannabinol content derived from the sum of the THC and THC-A
content and reported on a dry weight basis. The postdecarboxylation
value of THC can be calculated by using a chromatograph technique using
heat, gas chromatography, through which THCA is converted from its acid
form to its neutral form, THC. Thus, this test calculates the total
potential THC in a given sample. The postdecarboxylation value of THC
can also be calculated by using a high-performance liquid chromatograph
technique, which keeps the THC-A intact, and requires a conversion
calculation of that THC-A to calculate total potential THC in a given
sample. See the definition for decarboxylation.
    Produce. To grow hemp plants for market, or for cultivation for
market, in the United States.
    Producer. Producer means a producer as defined in 7 CFR 718.2 that
is licensed or authorized to produce hemp under this part.
    Reverse distributor. A person who is registered with the DEA in
accordance with 21 CFR 1317.15 to dispose of marijuana under the
Controlled Substances Act.
    Secretary. The Secretary of Agriculture of the United States.
    State. Any one of the fifty States of the United States of America,
the District of Columbia, the Commonwealth of Puerto Rico, and any
other territory or possession of the United States.
    State department of agriculture. The agency, commission, or
department of a State government responsible for agriculture in the
State.
    Territory of the Indian Tribe has the same meaning as ``Indian
Country'' in 18 U.S.C. 1151.
    Tribal government. The governing body of an Indian Tribe.
    USDA licensed hemp producer or licensee. A person, partnership, or
corporation authorized by USDA to produce hemp.
Subpart B--State and Tribal Hemp Production Plans
Sec.  990.2  State and Tribal plans; General authority.
    States or Indian Tribes desiring to have primary regulatory
authority over the production of hemp in the State or territory of the
Indian Tribe for which it has jurisdiction shall submit to the
Secretary for approval, through the State department of agriculture (in
consultation with the Governor and chief law enforcement officer of the
State) or the Tribal government, as applicable, a plan under which the
State or Indian Tribe monitors and regulates that production.
Sec.  990.3   State and Tribal plans; Plan requirements.
    (a) General requirements. A State or Tribal plan submitted to the
Secretary for approval must include the practice and procedures
described in this paragraph (a).
    (1) A State or Tribal plan must include a practice to collect,
maintain, and report to the Secretary relevant, real-time information
for each producer licensed or authorized to produce hemp under the
State or Tribal plan regarding:
    (i) Contact information as described in Sec.  990.70(a)(1);
    (ii) A legal description of the land on which the producer will
produce hemp in the State or territory of the Indian Tribe including,
to the extent practicable, its geospatial location; and
    (iii) The status and number of the producer's license or
authorization.
    (2) A State or Tribal plan must include a procedure for accurate
and effective sampling of all hemp produced, to include the
requirements in this paragraph (a)(2).
    (i) Within 15 days prior to the anticipated harvest of cannabis
plants, a Federal, State, local, or Tribal law enforcement agency or
other Federal, State, or Tribal designated person shall collect samples
from the flower material from such cannabis plants for delta-9
tetrahydrocannabinol concentration level testing as described in
Sec. Sec.  990.24 and 990.25.
    (ii) The method used for sampling from the flower material of the
cannabis plant must be sufficient at a confidence level of 95 percent
that no more than one percent (1%) of the plants in the lot would
exceed the acceptable hemp THC level. The method used for sampling must
ensure that a representative sample is collected that represents a
homogeneous composition of the lot.
    (iii) During a scheduled sample collection, the producer or an
authorized representative of the producer shall be present at the
growing site.
    (iv) Representatives of the sampling agency shall be provided with
complete and unrestricted access during business hours to all hemp and
other cannabis plants, whether growing or harvested, and all land,
buildings, and other structures used for the cultivation, handling, and
storage of all hemp and other cannabis plants, and all locations listed
in the producer license.
    (v) A producer shall not harvest the cannabis crop prior to samples
being taken.
    (3) A State or Tribal plan must include a procedure for testing
that is able to accurately identify whether the sample contains a
delta-9 tetrahydrocannabinol content concentration level that exceeds
the acceptable hemp THC level. The procedure must include a validated
testing methodology that uses postdecarboxylation or other similarly
reliable methods. The testing
[[Page 58557]]
methodology must consider the potential conversion of delta-9
tetrahydrocannabinolic acid (THC-A) in hemp into THC and the test
result measures total available THC derived from the sum of the THC and
THC-A content. Testing methodologies meeting the requirements of this
paragraph (a)(3) include, but are not limited to, gas or liquid
chromatography with detection. The total THC concentration level shall
be determined and reported on a dry weight basis.
    (i) Any test of a representative sample resulting in higher than
the acceptable hemp THC level shall be conclusive evidence that the lot
represented by the sample is not in compliance with this part. Lots
tested and not certified by the DEA-registered laboratory at or below
the acceptable hemp THC level may not be further handled, processed or
enter the stream of commerce and the producer shall ensure the lot is
disposed of in accordance with Sec.  990.27.
    (ii) Samples of hemp plant material from one lot shall not be
commingled with hemp plant material from other lots.
    (iii) Analytical testing for purposes of detecting the
concentration levels of THC shall meet the following standards:
    (A) Laboratory quality assurance must ensure the validity and
reliability of test results;
    (B) Analytical method selection, validation, and verification must
ensure that the testing method used is appropriate (fit for purpose),
and that the laboratory can successfully perform the testing;
    (C) The demonstration of testing validity must ensure consistent,
accurate analytical performance;
    (D) Method performance specifications must ensure analytical tests
are sufficiently sensitive for the purposes of the detectability
requirements of this part; and
    (E) An effective disposal procedure for hemp plants that are
produced that do not meet the requirements of this part. The procedure
must be in accordance with DEA reverse distributor regulations found at
21 CFR 1317.15.
    (F) Measurement of uncertainty (MU) must be estimated and reported
with test results. Laboratories shall use appropriate, validated
methods and procedures for all testing activities and evaluate
measurement of uncertainty.
    (4) A State or Indian Tribe shall promptly notify the Administrator
by certified mail or electronically of any occurrence of cannabis
plants or plant material that do not meet the definition of hemp in
this part and attach the records demonstrating the appropriate disposal
of all of those plants and materials in the lot from which the
representative samples were taken.
    (5) A State or Tribal plan must include a procedure to comply with
the enforcement procedures in Sec.  990.6.
    (6) A State or Tribal plan must include a procedure for conducting
annual inspections of, at a minimum, a random sample of producers to
verify that hemp is not produced in violation of this part. These
procedures must enforce the terms of violations as stated in the Act
and defined under Sec.  990.6.
    (7) A State or Tribal plan must include a procedure for submitting
the information described in Sec.  990.70 to the Secretary not more
than 30 days after the date on which the information is received. All
such information must be submitted to the USDA in a format that is
compatible with USDA's information sharing system.
    (8) The State or Tribal government must certify that the State or
Indian Tribe has the resources and personnel to carry out the practices
and procedures described in paragraphs (a)(1) through (7) of this
section.
    (9) The State or Tribal plan must include a procedure to share
information with USDA to support the information sharing requirements
in 7 U.S.C. 1639q(d). The procedure must include the requirements
described in this paragraph (a)(9).
    (i) The State or Tribal plan shall require producers to report
their hemp crop acreage to the FSA, consistent with the requirement in
Sec.  990.7.
    (ii) The State or Tribal government shall assign each producer with
a license or authorization identifier in a format prescribed by USDA.
    (iii) The State or Tribal government shall require producers to
report the total acreage of hemp planted, harvested, and, if
applicable, disposed. The State or Tribal government shall collect this
information and report it to AMS.
    (b) Relation to State and Tribal law. A State or Tribal plan may
include any other practice or procedure established by a State or
Indian Tribe, as applicable; Provided, That the practice or procedure
is consistent with this part and Subtitle G of the Act.
    (1) No preemption. Nothing in this part preempts or limits any law
of a State or Indian Tribe that:
    (i) Regulates the production of hemp; and
    (ii) Is more stringent than this part or Subtitle G of the Act.
    (2) References in plans. A State or Tribal plan may include a
reference to a law of the State or Indian Tribe regulating the
production of hemp, to the extent that the law is consistent with this
part.
Sec.  990.4   USDA approval of State and Tribal plans.
    (a) General authority. No plans will be accepted by USDA prior to
October 31, 2019. No later than 60 calendar days after the receipt of a
State or Tribal plan for a State or Tribal Nation in which production
of hemp is legal, the Secretary shall:
    (1) Approve the State or Tribal plan only if the State or Tribal
plan complies with this part; or
    (2) Disapprove the State or Tribal plan if the State or Tribal plan
does not comply with this part. USDA shall provide written notification
to the State or Tribe of the disapproval and the cause for the
disapproval.
    (b) Amended plans. A State or Tribal government, as applicable,
must submit to the Secretary an amended plan if:
    (1) The Secretary disapproves a State or Tribal plan if the State
or Tribe wishes to have primary jurisdiction over hemp production
within its State or territory of the Indian Tribe; or
    (2) The State or Tribe makes substantive revisions to its plan or
its laws which alter the way the plan meets the requirements of this
part. If this occurs, the State or Tribal government must re-submit the
plan with any modifications based on laws and regulation changes for
USDA approval. Such re-submissions should be provided to USDA within
365 days from the date that the State or Tribal laws and regulations
are effective. Producers shall continue to comply with the requirements
of the existing plan while such modifications are under consideration
by USDA. If State or Tribal government laws or regulations in effect
under the USDA-approved plan change but the State or Tribal government
does not re-submit a modified plan within one year from the effective
date of the new law or regulation, the existing plan is revoked.
    (3) USDA approval of State or Tribal government plans shall remain
in effect unless an amended plan must be submitted to USDA because of a
substantive revision to a State's or Tribe's plan, a relevant change in
State or Tribal laws or regulations, or approval of the plan is revoked
by USDA.
    (c) Technical assistance. The Secretary may provide technical
assistance to help a State or Indian Tribe develop or amend a plan.
This may include the review of draft plans or other informal
consultation as necessary.
[[Page 58558]]
    (d) Approved State or Tribal plans. If the Secretary approves a
State or Tribal plan, the Secretary shall notify the State or Tribe by
letter or email.
    (1) In addition to the approval letter, the State or Tribe shall
receive their plan approval certificate either as an attachment or
assessable via website link.
    (2) The USDA shall post information regarding approved plans on its
website.
    (3) USDA approval of State or Tribal government plans shall remain
in effect unless:
    (i) The State or Tribal government laws and regulations in effect
under the USDA-approved plan change, thus requiring such plan to be re-
submitted for USDA approval.
    (ii) A State or Tribal plan must be amended in order to comply with
amendments to Subtitle G the Act and this part.
    (e) Producer rights upon revocation of State or Tribal plan. If
USDA revokes approval of the State or Tribal plan due to noncompliance
as defined in Sec.  990.5, producers licensed or authorized to produce
hemp under the revoked State or Tribal plan may continue to produce for
the remainder of the calendar year in which the revocation became
effective. Producers may then apply to be licensed under the USDA plan
for 90 days after the notification even if the time period does note
coincide with the annual application window.
Sec.  990.5   Audit of State or Tribal plan compliance.
    The Secretary may conduct an audit of the compliance of a State or
Indian Tribe with an approved plan.
    (a) Frequency of audits. Compliance audits may be scheduled, at
minimum, once every three years and may include an onsite-visit, a
desk-audit, or both. The USDA may adjust the frequency of audits if
deemed appropriate based on program performance, compliance issues, or
other relevant factors identified and provided to the State or Tribal
governments by USDA.
    (b) Scope of audit review. The audit may include, but is not
limited to, a review of the following:
    (1) The resources and personnel employed to administer and oversee
its approved plan;
    (2) The process for licensing and systematic compliance review of
hemp producers;
    (3) Sampling methods and laboratory testing requirements and
components;
    (4) Disposal of non-compliant hemp plants or hemp plant material
practices, to ensure that correct reporting to the USDA has occurred;
    (5) Results of and methodology used for the annual inspections of
producers; and
    (6) Information collection procedures and information accuracy
(i.e., geospatial location, contact information reported to the USDA,
legal description of land).
    (c) Audit reports. (1) Audit reports will be issued to the State or
Tribal government within 60 days after the audit concluded. If the
audit reveals that the State or Tribal government is not in compliance
with its USDA approved plan, USDA will advise the State or Indian Tribe
of non-compliances and the corrective measures that must be completed
to come into compliance with the regulations in this part. The USDA
will require the State or Tribe to develop a corrective action plan,
which will be reviewed and approved by the USDA, and the State or Tribe
will be able to demonstrate its compliance with the regulations in this
part through a second audit by USDA. If the State or Tribe requests
USDA assistance to develop a corrective action plan in the case of a
first instance of noncompliance, the State or Tribe must request this
assistance not later than 30 days after the issuance of the audit
report. The USDA will approve or deny the corrective action plan within
60 days of its receipt.
    (2) If the USDA determines that the State or Indian Tribe is not in
compliance after the second audit, the USDA may revoke its approval of
the State or Tribal plan for a period not to exceed one year. USDA will
not approve a State or Indian Tribe's plan until the State or Indian
Tribe demonstrates upon inspection that it is in compliance with all
regulations in this part.
Sec.  990.6  Violations of State and Tribal plans.
    (a) Producer violations. Producer violations of USDA-approved State
and Tribal hemp production plans shall be subject to enforcement in
accordance with the terms of this section.
    (b) Negligent violations. Each USDA-approved State or Tribal plan
shall contain provisions relating to negligent producer violations as
defined under this part. Negligent violations shall include, but not be
limited to:
    (1) Failure to provide a legal description of land on which the
producer produces hemp;
    (2) Failure to obtain a license or other required authorization
from the State department of agriculture or Tribal government, as
applicable; or
    (3) Production of cannabis with a delta-9 tetrahydrocannabinol
concentration exceeding the acceptable hemp THC level. Hemp producers
do not commit a negligent violation under this paragraph (b)(3) if they
make reasonable efforts to grow hemp and the cannabis (marijuana) does
not have a delta-9 tetrahydrocannabinol concentration of more than 0.5
percent on a dry weight basis.
    (c) Corrective action for negligent violations. Each USDA-approved
State or Tribal plan shall contain rules and regulations providing for
the correction of negligent violations. Each correction action plan
shall include, at minimum, the following terms:
    (1) A reasonable date by which the producer shall correct the
negligent violation.
    (2) A requirement that the producer shall periodically report to
the State department of agriculture or Tribal government, as
applicable, on its compliance with the State or Tribal plan for a
period of not less than the next 2 years from the date of the negligent
violation.
    (3) A producer that negligently violates a State or Tribal plan
approved under this part shall not as a result of that violation be
subject to any criminal enforcement action by the Federal, State,
Tribal, or local government.
    (4) A producer that negligently violates a USDA-approved State or
Tribal plan three times in a 5-year period shall be ineligible to
produce hemp for a period of 5 years beginning on the date of the third
violation.
    (5) The State or Tribe shall conduct an inspection to determine if
the corrective action plan has been implemented as submitted.
    (d) Culpable violations. Each USDA-approved State or Tribal plan
shall contain provisions relating to producer violations made with a
culpable mental state greater than negligence, including that:
    (1) If the State department of agriculture or Tribal government
with an approved plan determines that a producer has violated the plan
with a culpable mental state greater than negligence, the State
department of agriculture or Tribal government, as applicable, shall
immediately report the producer to:
    (i) The U.S. Attorney General; and
    (ii) The chief law enforcement officer of the State or Indian
Tribe, as applicable.
    (2) Paragraphs (b) and (c) of this section shall not apply to
culpable violations.
    (e) Felonies. Each USDA-approved State or Tribal plan shall contain
provisions relating to felonies. Such provisions shall state that:
[[Page 58559]]
    (1) A person with a State or Federal felony conviction relating to
a controlled substance is subject to a 10-year ineligibility
restriction on participating in the plan and producing hemp under the
State or Tribal plan from the date of the conviction. An exception
applies to a person who was lawfully growing hemp under the 2014 Farm
Bill before December 20, 2018, and whose conviction also occurred
before that date.
    (2) Any producer growing hemp lawfully with a license,
registration, or authorization under a pilot program authorized by
section 7606 of the Agricultural Act of 2014 (7 U.S.C. 5940) before
October 31, 2019 shall be exempted from paragraph (e)(1) of this
section.
    (3) For producers that are entities, the State or Tribal plan shall
determine which employee(s) of a producer shall be considered to be
participating in the plan and subject to the felony conviction
restriction for purposes of paragraph (e)(1) of this section.
    (f) False statement. Each USDA-approved State or Tribal plan shall
state that any person who materially falsifies any information
contained in an application to participate in such program shall be
ineligible to participate in that program.
    (g) Appeals. For States and Tribes who wish to appeal an adverse
action, subpart D of this part will apply.
Sec.  990.7  Establishing records with USDA Farm Service Agency.
    All producers licensed to produce hemp under an USDA-approved State
or Tribal plan shall report hemp crop acreage with FSA and shall
provide, at minimum, the following information:
    (a) Street address and, to the extent practicable, geospatial
location for each lot or greenhouse where hemp will be produced. If an
applicant operates in more than one location, that information shall be
provided for all production sites.
    (b) If an applicant has production sites licensed under a USDA-
approved State or Tribal plan, those sites will be covered under the
respective plan and will not need to be included under the producer's
application to become licensed under the USDA plan.
    (c) Acreage dedicated to the production of hemp, or greenhouse or
indoor square footage dedicated to the production of hemp.
    (d) License or authorization identifier.
Sec.  990.8   Production under Federal law.
    Nothing in this subpart prohibits the production of hemp in a State
or the territory of an Indian Tribe for which a State or Tribal plan is
not approved under this subpart if the production of that hemp is in
accordance with subpart C of this part, and if the production of hemp
is not otherwise prohibited by the State or Indian Tribe.
Subpart C--USDA Hemp Production Plan
Sec.  990.20  USDA requirements for the production of hemp.
    (a) General hemp production requirements. The production of hemp in
a State or territory of an Indian Tribe where there is no USDA approved
State or Tribal plan must be produced in accordance with this subpart
provided that the production of hemp is not prohibited by the State or
territory of an Indian Tribe where production will occur.
    (b) Convicted felon ban. A person with a State or Federal felony
conviction relating to a controlled substance is subject to a 10-year
ineligibility restriction on participating in the plan and producing
hemp under the USDA plan from the date of the conviction. An exception
applies to a person who was lawfully growing hemp under the 2014 Farm
Bill before December 20, 2018, and whose conviction also occurred
before December 20, 2018.
    (c) Falsifying material information on application. Any person who
materially falsifies any information contained in an application to for
a license under the USDA plan shall be ineligible to participate in the
USDA plan.
Sec.  990.21  USDA hemp producer license.
    (a) General application requirements--(1) Requirements and license
application. Any person producing or intending to produce hemp must
have a valid license prior to producing, cultivating, or storing hemp.
A valid license means the license is unexpired, unsuspended, and
unrevoked.
    (2) Application window. Applicants may submit an application for a
new license to USDA between December 2, 2019 and November 2, 2020. In
subsequent years, applicants may submit an application for a new
license or renewal of an existing license to USDA from August 1 through
October 31 of each year.
    (3) Required information on application. The applicant shall
provide the information requested on the application form, including:
    (i) Contact information. Full name, residential address, telephone
number and email address. If the applicant is a business entity, the
full name of the business, the principal business location address,
full name and title of the key participants, title, email address (if
available) and employer identification number (EIN) of the business;
and
    (ii) Criminal history report. A current criminal history report for
all key participants dated within 60 days prior to the application
submission date. A license application will not be considered complete
without all required criminal history reports.
    (4) Submission of completed application forms. Completed
application forms shall be submitted to USDA.
    (5) Incomplete application procedures. Applications missing
required information shall be returned to the applicant as incomplete.
The applicant may resubmit a completed application.
    (6) License expiration. USDA-issued hemp producer licenses shall be
valid until December 31 of the year three years after the year in which
license was issued.
    (b) License renewals. USDA hemp producer licenses must be renewed
prior to license expiration. Licenses are not automatically renewed.
Applications for renewal shall be subject to the same terms,
information collection requirements, and approval criteria as provided
in this subpart for initial applications unless there has been an
amendment to the regulations in this part or the law since approval of
the initial or last application.
    (c) License modification. A license modification is required if
there is any change to the information submitted in the application
including, but not limited to, sale of a business, the production,
handling, or storage of hemp in a new location, or a change in the key
participants producing under a license.
Sec.  990.22  USDA Hemp producer license approval.
    (a) A license shall not be issued unless:
    (1) The application submitted for USDA review and approval is
complete and accurate.
    (2) The criminal history report(s) submitted with the license
application confirms that all key participants to be covered by the
license have not been convicted of a felony, under State or Federal
law, relating to a controlled substance within the past ten (10) years
unless the exception in Sec.  990.20(b) applies.
    (3) The applicant has submitted all reports required as a
participant in the hemp production program by this part.
[[Page 58560]]
    (4) The application contains no materially false statements or
misrepresentations and the applicant has not previously submitted an
application with any materially false statements or misrepresentations.
    (5) The applicant's license is not currently suspended.
    (6) The applicant is not applying for a license as a stand-in for
someone whose license has been suspended, revoked, or is otherwise
ineligible to participate.
    (7) The State or territory of Indian Tribe where the person
produces or intends to produce hemp does not have a USDA-approved plan
or has not submitted a plan to USDA for approval and is awaiting USDA's
decision. For the first year, USDA will not accept request for licenses
under the USDA plan until December 2, 2019 to allow States and Tribes
to submit their plans.
    (8) The State or territory of Indian Tribe where the person
produces or intends to produce hemp does not prohibit the production of
hemp.
    (b) USDA shall provide written notification to applicants whether
the application has been approved or denied unless the applicant is
from a State or territory of an Indian Tribe that has a plan submitted
to USDA and is awaiting USDA approval.
    (1) If an application is approved, a license will be issued.
Information regarding approved licenses will be available on the AMS
website.
    (2) Licenses will be valid until December 31 of the year three
after the year in which the license was issued.
    (3) Licenses may not be sold, assigned, transferred, pledged, or
otherwise disposed of, alienated or encumbered.
    (4) If a license application is denied, the notification from USDA
will explain the cause for denial. Applicants may appeal the denial in
accordance with subpart D of this part.
    (c) If the applicant is producing in more than one location, the
applicant may have more than one license to grow hemp. If the applicant
has operations in a location covered under a State or Tribal plan, that
operation must be licensed under the State or Tribal plan, not a USDA
plan.
Sec.  990.23  Reporting hemp crop acreage with USDA Farm Service
Agency.
    All USDA plan producers shall report hemp crop acreage with FSA and
shall provide, at minimum, the following information:
    (a) Street address and, to the extent practicable, geospatial
location of the lot, greenhouse, building, or site where hemp will be
produced. All locations where hemp is produced must be reported to FSA.
    (b) Acreage dedicated to the production of hemp, or greenhouse or
indoor square footage dedicated to the production of hemp.
    (c) The license number.
Sec.  990.24  Responsibility of a USDA licensed producer prior to
harvest.
    (a) Within 15 days prior to the anticipated harvest of cannabis
plants, a producer shall have an approved Federal, State, local law
enforcement agency or other USDA designated person collect samples from
the flower material of such cannabis material for delta-9
tetrahydrocannabinol concentration level testing.
    (b) The method used for sampling from the flower material of the
cannabis plant must be sufficient at a confidence level of 95 percent
that no more than one percent (1%) of the plants in the lot would
exceed the acceptable hemp THC level. The method used for sampling must
ensure that a representative sample is collected that represents a
homogeneous composition of the lot.
    (c) During a scheduled sample collection, the producer or an
authorized representative of the producer shall be present at the
growing site.
    (d) Representatives of the sampling agency shall be provided with
complete and unrestricted access during business hours to all hemp and
other cannabis plants, whether growing or harvested, and all land,
buildings, and other structures used for the cultivation, handling, and
storage of all hemp and other cannabis plants, and all locations listed
in the producer license.
    (e) A producer shall not harvest the cannabis crop prior to samples
being taken.
Sec.  990.25  Standards of performance for detecting delta-9
tetrahydrocannabinol (THC) concentration levels.
    (a) Analytical testing for purposes of detecting the concentration
levels of delta-9 tetrahydrocannabinol (THC) in the flower material of
the cannabis plant shall meet the following standard:
    (1) Laboratory quality assurance must ensure the validity and
reliability of test results;
    (2) Analytical method selection, validation, and verification must
ensure that the testing method used is appropriate (fit for purpose)
and that the laboratory can successfully perform the testing;
    (3) The demonstration of testing validity must ensure consistent,
accurate analytical performance; and
    (4) Method performance specifications must ensure analytical tests
are sufficiently sensitive for the purposes of the detectability
requirements of this part.
    (b) At a minimum, analytical testing of samples for delta-9
tetrahydrocannabinol concentration levels must use post-decarboxylation
or other similarly reliable methods approved by the Secretary. The
testing methodology must consider the potential conversion of delta-9
tetrahydrocannabinolic acid (THCA) in hemp into delta-9
tetrahydrocannabinol (THC) and the test result reflect the total
available THC derived from the sum of the THC and THC-A content.
Testing methodologies meeting the requirements of this paragraph (b)
include, but are not limited to, gas or liquid chromatography with
detection.
    (c) The total delta-9 tetrahydrocannabinol concentration level
shall be determined and reported on a dry weight basis. Additionally,
measurement of uncertainty (MU) must be estimated and reported with
test results. Laboratories shall use appropriate, validated methods and
procedures for all testing activities and evaluate measurement of
uncertainty.
    (d) Any sample test result exceeding the acceptable hemp THC level
shall be conclusive evidence that the lot represented by the sample is
not in compliance with this part.
Sec.  990.26  Responsibility of a USDA producer after laboratory
testing is performed.
    (a) The producer shall harvest the crop not more than fifteen (15)
days following the date of sample collection.
    (b) If the producer fails to complete harvest within fifteen (15)
days of sample collection, a secondary pre-harvested sample of the lot
shall be required to be submitted for testing.
    (c) Harvested lots of hemp plants shall not be commingled with
other harvested lots or other material without prior written permission
from USDA.
    (d) Lots that meet the acceptable hemp THC level may enter the
stream of commerce.
    (e) Lots tested and not certified by the DEA-registered laboratory
not exceeding the acceptable hemp THC level may not be further handled,
processed, or enter the stream of commerce and the licensee shall
ensure the lot is disposed of in accordance with Sec.  990.27.
    (f) Any producer may request additional testing if it is believed
that the original delta-9 tetrahydrocannabinol concentration level test
results were in error.
Sec.  990.27  Non-compliant cannabis plants.
    (a) Cannabis plants exceeding the acceptable hemp THC level
constitute
[[Page 58561]]
marijuana, a schedule I controlled substance under the Controlled
Substances Act (CSA), 21 U.S.C. 801 et seq., and must be disposed of in
accordance with the CSA and DEA regulations found at 21 CFR 1317.15.
    (b) Producers must notify USDA of their intent to dispose of non-
conforming plants and verify disposal by submitting required
documentation.
Sec.  990.28  Compliance.
    (a) Audits. Producers may be audited by the USDA. The audit may
include a review of records and documentation, and may include site
visits to farms, fields, greenhouses, storage facilities, or other
locations affiliated with the producer's hemp operation. The inspection
may include the current crop year, as well as any previous crop
year(s). The audit may be performed remotely or in person.
    (b) Frequency of audit verifications. Audit verifications may be
performed once every three (3) years unless otherwise determined by
USDA. If the results of the audit find negligent violations, a
corrective action plan may be established.
    (c) Assessment of producer's hemp operations for conformance. The
producer's operational procedures, documentation, and recordkeeping,
and other practices may be verified during the onsite audit
verification. The auditor may also visit the production, cultivation,
or storage areas for hemp listed on the producer's license.
    (1) Records and documentation. The auditor shall assess whether
required reports, records, and documentation are properly maintained
for accuracy and completeness.
    (2) [Reserved]
    (d) Audit reports. Audit reports will be issued to the licensee
within 60 days after the audit is concluded. If USDA determines under
an audit that the producer is not compliant with this part, USDA shall
require a corrective action plan. The producer's implementation of a
corrective action plan may be reviewed by USDA during a future site
visit or audit.
Sec.  990.29  Violations.
    Violations of this part shall be subject to enforcement in
accordance with the terms of this section.
    (a) Negligent violations. A hemp producer shall be subject to
enforcement for negligently:
    (1) Failing to provide an accurate legal description of land where
hemp is produced;
    (2) Producing hemp without a license; and
    (3) Producing cannabis (marijuana) exceeding the acceptable hemp
THC level. Hemp producers do not commit a negligent violation under
this paragraph (a) if they make reasonable efforts to grow hemp and the
cannabis (marijuana) does not have a delta-9 tetrahydrocannabinol
concentration of more than 0.5 percent on a dry weight basis.
    (b) Corrective action for negligent violations. For each negligent
violation, USDA will issue a Notice of Violation and require a
corrective action plan for the producer. The producer shall comply with
the corrective action plan to cure the negligent violation. Corrective
action plans will be in place for a minimum of two (2) years from the
date of their approval. Corrective action plans will, at a minimum,
include:
    (1) The date by which the producer shall correct each negligent
violation;
    (2) Steps to correct each negligent violation; and
    (3) A description of the procedures to demonstrate compliance must
be submitted to USDA.
    (c) Negligent violations and criminal enforcement. A producer that
negligently violates this part shall not, as a result of that violation
be subject to any criminal enforcement action by any Federal, State,
Tribal, or local government.
    (d) Subsequent negligent violations. If a subsequent violation
occurs while a corrective action plan is in place, a new corrective
action plan must be submitted with a heightened level of quality
control, staff training, and quantifiable action measures.
    (e) Negligent violations and license revocation. A producer that
negligently violates the license 3 times in a 5-year period shall have
their license revoked and be ineligible to produce hemp for a period of
5 years beginning on the date of the third violation.
    (f) Culpable mental state greater than negligence. If USDA
determines that a licensee has violated the terms of the license or of
this part with a culpable mental state greater than negligence:
    (1) USDA shall immediately report the licensee to:
    (i) The U.S. Attorney General; and
    (ii) The chief law enforcement officer of the State or Indian
territory, as applicable, where the production is located; and
    (2) Paragraphs (a) and (b) of this section shall not apply to
culpable violations.
Sec.  990.30  USDA producers; License suspension.
    (a) USDA may issue a notice of suspension to a producer if USDA or
its representative receives some credible evidence establishing that a
producer has:
    (1) Engaged in conduct violating a provision of this part; or
    (2) Failed to comply with a written order from the USDA-AMS
Administrator related to negligence as defined in this part.
    (b) Any producer whose license has been suspended shall not handle
or remove hemp or cannabis from the location where hemp or cannabis was
located at the time when USDA issued its notice of suspension, without
prior written authorization from USDA.
    (c) Any person whose license has been suspended shall not produce
hemp during the period of suspension.
    (d) A producer whose license has been suspended may appeal that
decision in accordance with subpart D of this part.
    (e) A producer whose license has been suspended and not restored on
appeal may have their license restored after a waiting period of one
year from the date of the suspension.
    (f) A producer whose license has been suspended may be required to
complete a corrective action plan to fully restore the license.
Sec.  990.31  USDA licensees; Revocation.
    USDA shall immediately revoke the license of a USDA producer if
such producer:
    (a) Pleads guilty to, or is convicted of, any felony related to a
controlled substance; or
    (b) Made any materially false statement with regard to this part to
USDA or its representatives with a culpable mental state greater than
negligence; or
    (c) Is found to be growing cannabis exceeding the acceptable hemp
THC level with a culpable mental state greater than negligence or
negligently violated this part three times in five years.
Sec.  990.32  Recordkeeping requirements.
    (a) USDA producers shall maintain records of all hemp plants
acquired, produced, handled, or disposed of as will substantiate the
required reports.
    (b) All records and reports shall be maintained for at least three
years.
    (c) All records shall be made available for inspection by USDA
inspectors, auditors, or their representatives during reasonable
business hours. The following records must be made available:
    (1) Records regarding acquisition of hemp plants;
    (2) Records regarding production and handling of hemp plants;
    (3) Records regarding storage of hemp plants; and
[[Page 58562]]
    (4) Records regarding disposal of all cannabis plants that do not
meet the definition of hemp.
    (d) USDA inspectors, auditors, or their representatives shall have
access to any premises where hemp plants may be held during reasonable
business hours.
    (e) All reports and records required to be submitted to USDA as
part of participation in the program in this part which include
confidential data or business information, including but not limited to
information constituting a trade secret or disclosing a trade position,
financial condition, or business operations of the particular licensee
or their customers, shall be received by, and at all times kept in the
custody and control of, one or more employees of USDA or their
representatives. Confidential data or business information may be
shared with applicable Federal, State, Tribal, or local law enforcement
or their designee in compliance with the Act.
Subpart D--Appeals
Sec.  990.40  General adverse action appeal process.
    (a) Persons who believe they are adversely affected by the denial
of a license application under the USDA hemp production program may
appeal such decision to the AMS Administrator.
    (b) Persons who believe they are adversely affected by the denial
of a license renewal under the USDA hemp production program may appeal
such decision to the AMS Administrator.
    (c) Persons who believe they are adversely affected by the
termination or suspension of a USDA hemp production license may appeal
such decision to the AMS Administrator.
    (d) States and territories of Indian Tribes that believe they are
adversely affected by the denial of a proposed State or Tribal hemp
plan may appeal such decision to the AMS Administrator.
Sec.  990.41  Appeals under the USDA hemp production plan.
    (a) Appealing a denied USDA-plan license application. A license
applicant may appeal the denial of a license application.
    (1) If the AMS Administrator sustains an applicant's appeal of a
licensing denial, the applicant will be issued a USDA hemp production
license.
    (2) If the AMS Administrator denies an appeal, the applicant's
license application will be denied. The applicant may request a formal
adjudicatory proceeding within 30 days to review the decision. Such
proceeding shall be conducted pursuant to the U.S. Department of
Agriculture's Rules of Practice Governing Adjudicatory Proceedings, 7
CFR part 1, subpart H.
    (b) Appealing a denied USDA-plan license renewal. A producer may
appeal the denial of a license renewal.
    (1) If the AMS Administrator sustains a producer's appeal of a
licensing renewal decision, the applicant's USDA hemp production
license will be renewed.
    (2) If the AMS Administrator denies the appeal, the applicant's
license will not be renewed. The denied producer may request a formal
adjudicatory proceeding within 30 days to review the decision. Such
proceeding shall be conducted pursuant to the U.S. Department of
Agriculture's Rules of Practice Governing Formal Adjudicatory
Proceedings, 7 CFR part 1, subpart H.
    (c) Appealing a USDA-plan license termination or suspension. A USDA
hemp plan producer may appeal the termination or suspension of a
license.
    (1) If the AMS Administrator sustains the appeal of a license
termination or suspension, the producer will retain their license.
    (2) If the AMS Administrator denies the appeal, the producer's
license will be terminated or suspended. The producer may request a
formal adjudicatory proceeding within 30 days to review the decision.
Such proceeding shall be conducted pursuant to the U.S. Department of
Agriculture's Rules of Practice Governing Formal Adjudicatory
Proceedings, 7 CFR part 1, subpart H.
    (d) Filing period. The appeal of a denied license application,
denied license renewal, suspension, or termination must be filed within
the time-period provided in the letter of notification or within 30
business days from receipt of the notification, whichever occurs later.
The appeal will be considered ``filed'' on the date received by the AMS
Administrator. The decision to deny a license application or renewal,
or suspend or terminate a license, is final unless a formal
adjudicatory proceeding is requested within 30 days to review the
decision. Such proceeding shall be conducted pursuant to the U.S.
Department of Agriculture's Rules of Practice Governing Adjudicatory
Proceedings, 7 CFR part 1, subpart H.
    (e) Where to file. Appeals to the Administrator must be filed in
the manner as determined by AMS.
    (f) What to include. All appeals must include a copy of the adverse
decision and a statement of the appellant's reasons for believing that
the decision was not proper or made in accordance with applicable
program regulations in this part, policies, or procedures.
Sec.  990.42  Appeals under a State or Tribal hemp production plan.
    (a) Appealing a State or Tribal hemp production plan application. A
State or Tribe may appeal the denial of a proposed State or Tribal hemp
production plan by the USDA.
    (1) If the AMS Administrator sustains a State or Tribe's appeal of
a denied hemp plan application, the proposed State or Tribal hemp
production plan shall be established as proposed.
    (2) If the AMS Administrator denies an appeal, the proposed State
or Tribal hemp production plan shall not be approved. Prospective
producers located in the State or territory of the Indian Tribe may
apply for hemp licenses under the terms of the USDA plan. The State or
Tribe may request a formal adjudicatory proceeding be initiated within
30 days to review the decision. Such proceeding shall be conducted
pursuant to the U.S. Department of Agriculture's Rules of Practice
Governing Adjudicatory Proceedings, 7 CFR part 1, subpart H.
    (b) Appealing the suspension or termination of a State or Tribal
hemp production plan. A State or Tribe may appeal the revocation by
USDA of an existing State or Tribal hemp production plan.
    (1) If the AMS Administrator sustains a State or Tribe's appeal of
a State or Tribal hemp production plan suspension or revocation, the
associated hemp production plan may continue.
    (2) If the AMS Administrator denies an appeal, the State or Tribal
hemp production plan will be suspended or revoked as applicable.
Producers located in that State or territory of the Indian Tribe may
continue to produce hemp under their State or Tribal license until the
end the calendar year in which the State or Tribal plan's disapproval
was effective or when the State or Tribal license expires, whichever is
earlier. Producers may apply for a USDA license under subpart C of this
part unless hemp production is otherwise prohibited by the State or
Indian Tribe. The State or Indian Tribe may request a formal
adjudicatory proceeding be initiated to review the decision. Such
proceeding shall be conducted pursuant to the U.S. Department of
Agriculture's Rules of Practice Governing Formal Adjudicatory
Proceedings, 7 CFR part 1, subpart H.
    (c) Filing period. The appeal of a State or Tribal hemp production
plan suspension or revocation must be filed within the time-period
provided in the letter of notification or within 30
[[Page 58563]]
business days from receipt of the notification, whichever occurs later.
The appeal will be considered ``filed'' on the date received by the AMS
Administrator. The decision to deny a State or Tribal plan application
or suspend or revoke approval of a plan, is final unless the decision
is appealed in a timely manner.
    (d) Where to file. Appeals to the Administrator must be filed in
the manner as determined by AMS.
    (e) What to include in appeal. All appeals must include a copy of
the adverse decision and a statement of the appellant's reasons for
believing that the decision was not proper or made in accordance with
applicable program regulations in this part, policies, or procedures.
Subpart E--Administrative Provisions
Sec.  990.60  Agents.
    As provided under 7 CFR part 2, the Secretary may name any officer
or employee of the United States or name any agency or division in the
United States Department of Agriculture, to act as their agent or
representative in connection with any of the provisions of this part.
Sec.  990.61   Severability.
    If any provision of this part is declared invalid or the
applicability thereof to any person or circumstances is held invalid,
the validity of the remainder of this part or the applicability thereof
to other persons or circumstances shall not be affected thereby.
Sec.  990.62   Expiration of this part.
    This part expires on November 1, 2021 unless extended by
notification in the Federal Register. State and Tribal plans approved
under subpart B of this part remain in effect after November 1, 2021
unless USDA disapproves the plan. USDA hemp producer licenses issued
under subpart C of this part remain in effect until they expire unless
USDA revokes or suspends the license.
Sec.  990.63   Interstate transportation of hemp.
    No State or Indian Tribe may prohibit the transportation or
shipment of hemp or hemp products lawfully produced under a State or
Tribal plan approved under subpart B of this part, under a license
issued under subpart C of this part, or under 7 U.S.C. 5940 through the
State or territory of the Indian Tribe, as applicable.
Subpart F--Reporting Requirements
Sec.  990.70  State and Tribal hemp reporting requirements.
    (a) State and Tribal hemp producer report. Each State and Tribes
with a plan approved under this part shall submit to USDA, by the first
of each month, a report providing the contact information and the
status of the license or other authorization issued for each producer
covered under the individual State and Tribal plans. If the first of
the month falls on a weekend or holiday, the report is due by the first
business day following the due date. The report shall be submitted
using a digital format compatible with USDA's information sharing
systems, whenever possible. The report shall contain the information
described in this paragraph (a).
    (1)(i) For each new producer who is an individual and is licensed
or authorized under the State or Tribal plan, the report shall include
full name of the individual, license or authorization identifier,
business address, telephone number, and email address (if available).
    (ii) For each new producer that is an entity and is licensed or
authorized under the State or Tribal plan, the report shall include
full name of the entity, the principal business location address,
license or authorization identifier, and the full name, title, and
email address (if available) of each employee for whom the entity is
required to submit a criminal history record report.
    (iii) For each producer that was included in a previous report and
whose reported information has changed, the report shall include the
previously reported information and the new information.
    (2) The status of each producer's license or authorization.
    (3) The period covered by the report.
    (4) Indication that there were no changes during the current
reporting cycle, if applicable.
    (b) State and Tribal hemp disposal report. If a producer has
produced cannabis exceeding the acceptable hemp THC level, the cannabis
must be disposed of in accordance with the Controlled Substances Act
and DEA regulations found at 21 CFR 1317.15. States and Tribes with
plans approved under this part shall submit to USDA, by the first of
each month, a report notifying USDA of any occurrence of non-conforming
plants or plant material and providing a disposal record of those
plants and materials. This report would include information regarding
name and contact information for each producer subject to a disposal
during the reporting period, and date disposal was completed. If the
first of the month fall on a weekend or holiday, reports are due by the
first business day following the due date. The report shall contain the
information described in this paragraph (b).
    (1) Name and address of the producer.
    (2) Producer license or authorization identifier.
    (3) Location information, such as lot number, location type, and
geospatial location or other location descriptor for the production
area subject to disposal.
    (4) Information on the agent handling the disposal.
    (5) Disposal completion date.
    (6) Total acreage.
    (c) Annual report. Each State or Tribe with a plan approved under
this part shall submit an annual report to USDA. The report form shall
be submitted by December 15 of each year and contain the information
described in this paragraph (c).
    (1) Total planted acreage.
    (2) Total harvested acreage.
    (3) Total acreage disposed.
    (d) Test results report. Each producer must ensure that the DEA-
registered laboratory that conducts the test of the sample(s) from its
lots reports the test results for all samples tested to USDA. The test
results report shall contain the information described in this
paragraph (d) for each sample tested.
    (1) Producer's license or authorization identifier.
    (2) Name of producer.
    (3) Business address of producer.
    (4) Lot identification number for the sample.
    (5) Name and DEA registration number of laboratory.
    (6) Date of test and report.
    (7) Identification of a retest.
    (8) Test result.
Sec.  990.71  USDA plan reporting requirements.
    (a) USDA hemp plan producer licensing application. USDA will accept
applications from December 2, 2019 through November 2, 2020. Thereafter
applicants, may submit a USDA Hemp Licensing Application to USDA from
August 1 through October 31 of each year. Licenses will be valid until
December 31 of the year three years after the license is issued. The
license application will be used for both new applicants and for
producers seeking renewal of their license. The application shall
include the information described in this paragraph (a).
    (1) Contact information. (i) For an applicant who is an individual,
the application shall include full name of the individual, business
address, telephone number, and email address (if available).
[[Page 58564]]
    (ii) For an applicant that is an entity, the application shall
include full name of the entity, the principal business location
address, and the full name, title, and email address (if available) of
each key participant of the entity.
    (2) Criminal history report. As part of a complete application,
each applicant shall provide a current Federal Bureau of
Investigation's Identity History Summary. If the applicant is a
business entity, a criminal history report shall be provided for each
key participant.
    (i) The applicant shall ensure the criminal history report
accompanies the application.
    (ii) The criminal history report must be dated within 60 days of
submission of the application submittal.
    (3) Consent to comply with program requirements. All applicants
submitting a completed license application, in doing so, consent to
comply with the requirements of this part.
    (b) USDA hemp plan producer disposal form. If a producer has
produced cannabis exceeding the acceptable hemp THC level, the cannabis
must be disposed of in accordance with the Controlled Substances Act
and DEA regulations found at 21 CFR 1317.15. Forms shall be submitted
to USDA no later than 30 days after the date of completion of disposal.
The report shall contain the information described in this paragraph
(b).
    (1) Name and address of the producer.
    (2) Producer's license number.
    (3) Geospatial location, or other valid land descriptor, for the
production area subject to disposal.
    (4) Information on the agent handling the disposal.
    (5) Date of completion of disposal.
    (6) Signature of the producer.
    (7) Disposal agent certification of the completion of the disposal.
    (c) USDA hemp plan producer annual report. Each producer shall
submit an annual report to USDA. The report form shall be submitted by
December 15 of each year and contain the information described in this
paragraph (c).
    (1) Producer's license number.
    (2) Producer's name.
    (3) Producer's address.
    (4) Lot, location type, geospatial location, total planted acreage,
total acreage disposed, and total harvested acreage.
    (d) Test results report. Each producer must ensure that the DEA-
registered laboratory that conducts the test of the sample(s) from its
lots reports the test results for all samples tested to USDA. The test
results report shall contain the information described in this
paragraph (d) for each sample tested.
    (1) Producer's license number.
    (2) Name of producer.
    (3) Business address of producer.
    (4) Lot identification number for the sample.
    (5) Name and DEA registration number of laboratory.
    (6) Date of test and report.
    (7) Identification of a retest.
    (8) Test result.
    Dated: October 28, 2019.
Bruce Summers,
Administrator, Agricultural Marketing Service.
[FR Doc. 2019-23749 Filed 10-30-19; 8:45 am]
 BILLING CODE 3410-02-P