Getting Into the Weeds of USDA’s Hemp Production Program Regulations

It seems as if the “hemp” debate has been raging forever.  Yet only a little over two years have passed since enactment of the Agricultural Improvement Act of 2018, the “Farm Bill,” in December 2018 that amended the Agricultural Marketing Act of 1946 directing the Department of Agriculture (“USDA”) to establish the regulatory framework for a domestic hemp production program.  Now USDA has issued the final regulations governing that program at lightning speed compared with other federal cannabis-related initiatives.  Establishment of a Domestic Hemp Production Program, 86 Fed. Reg. 5596 (Jan. 19, 2021).  USDA’s Agricultural Marketing Service (“AMS”), the delegated authority to administer the domestic hemp production program, received almost 6,000 comments after issuing an interim final rule on October 31, 2019.  Agricultural Marketing Service, Establishment of a Domestic Hemp Production Program; Document IDs AMS-SC-19-0042-0001 & AMS-SC-19-0042-4666, Regulations.gov (last visited Feb. 23, 2021).

The Farm Bill mandates that USDA establish and administer a national hemp production program.  As a reminder, “hemp,” as defined in the Farm Bill and final rule, is “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.”  7 C.F.R. § 990.1; see also 7 U.S.C. § 1639o(1).  Cannabis with a THC level exceeding 0.3 percent is marijuana, a schedule I controlled substance under the federal Controlled Substances Act.  Plants and plant material exceeding 0.3 percent THC concentration must be disposed of by a DEA-registered reverse distributor or law enforcement officer.  86 Fed. Reg. 5604.  In the alternative, non-conforming plants and materials can be “remediated” plowing the plants, composting into “green manure” for use on the same land, tilling, disking, burial, or burning.  Id.

The Farm Bill allows States and Indian Tribes wishing to exercise primary authority over hemp production within their territory to submit their own production plans for USDA approval.   USDA has approved 45 State and Tribal plans though not all States and Tribes have implemented their programs.  86 Fed. Reg. 5596.  USDA has also accepted production applications under its program since October 2019 and has issued 380 producer licenses.  86 Fed. Reg. 5608.  Licenses issued prior to final rule’s publication will remain in effect until their original expiration.  Id.  USDA will not issue production licenses to producers within States or Tribal territories that have a production plan pending for USDA approval and will deny applications from individuals in States or Tribes with USDA-approved plans.  Id.

The Farm Bill set general requirements on licensing, recordkeeping about the land where hemp is produced, testing for delta-9-tetrahydrocannabinol (“THC”), disposing of non-conforming plants, and conforming to compliance provisions and procedures for handling violations.

USDA Hemp Production Program

Hemp production in States or Tribal territories lacking a USDA-approved State or Tribal plan must comply with USDA hemp program requirements.  Producers must hold a valid license prior to producing hemp.  7 C.F.R. § 990.21(a)(1).  Applicants must provide contact information and a current criminal history report.  7 C.F.R. § 990.21(3).  A completed application serves as consent to comply with USDA requirements.  7 C.F.R. § 990.71(a)(3).  Persons with a state or federal felony conviction related to controlled substances are ineligible to produce hemp for ten years following the conviction date.  7 C.F.R. § 990.20(b).  Licenses are valid for three years and must be renewed prior to expiration.  7 C.F.R. § 990.21(a)(6), (b).  Producers of hemp for research must also obtain a USDA license.  7 C.F.R. § 990.21(d)(1) (effective Mar. 22, 2021).  Only research institutions registered with DEA to handle marijuana can maintain hemp testing over the acceptable THC level to the end of their study; all other licensees must ensure the disposal of non-conforming plants.  7 C.F.R. § 990.21(d)(2) (effective Mar. 22, 2021).

Producers must

1. Report hemp crop acreage to USDA’s Farm Services Agency (“FSA”) within 30 days of planting hemp;
2. Provide street address and geospatial location where hemp will be produced, and acreage or indoor footage dedicated to hemp production and hemp license; and
3. No earlier than 30 days prior to harvesting, have a trained agent collect samples from the flowering tops of the plant for THC level testing. 7 C.F.R. § 990.23; .24 (effective Mar. 22, 2021).

Hemp cannot be harvested prior to samples being taken.  7 C.F.R. § 990.24(e).

Producers cannot harvest any later than 30 days after sample collection and failing that, test a second pre-harvest sample of the lot.  7 C.F.R. § 990.26(a); (b) (effective Mar. 22, 2021).  Only lots with the acceptable THC level may enter commerce; plants exceeding that THC level are marijuana and must be disposed of by a DEA-registered reverse distributor or law enforcement or remediated on-site.  7 C.F.R. § 990.26(d); .27(a) (effective Mar. 22, 2021).  Producers must notify USDA of their intent to dispose of or remediate non-compliant plants and submit verification.  7 C.F.R. § 990.27(b) (effective Mar. 22, 2021).

Laboratories must:

1. Ensure the validity and reliability of test results;
2. Have effective disposal procedures for non-conforming plants;
3. Test samples for total THC using post-decarboxylation or other USDA-approved methods; and
4. Hold a DEA registration to test after December 22, 2022. 7 C.F.R. § 990.25(a); (e); (g) (effective Mar. 22, 2021).

Recordkeeping

Producers must maintain records of hemp plant acquisition, production and handling, and storage, as well as disposal and remediation of non-conforming cannabis plants.  7 C.F.R. § 990.32(c) (effective Mar. 22, 2021).  They must maintain records and reports for at least three years, and records must be available for inspection by USDA employees and representatives.  USDA inspectors and representatives must have access to any premises where hemp plants may be held.  7 C.F.R. § 990.32(d) (effective Mar. 22, 2021).

Reports

Producers must report disposal or remediation within 30 days after completion.  Reports must include producer’s name and address, license number, geospatial location, or other valid land descriptor for the production area subject to disposal or remediation and date of completion.  7 C.F.R. § 990.71(b) (effective Mar. 22, 2021).  Producers must also annually report lot, location type, geospatial location, total planted acreage, total acreage disposed and remediated, and total harvested acreage.  7 C.F.R. § 990.71(c) (effective Mar. 22, 2021).  Producers are also responsible for ensuring that laboratories testing samples report test results to USDA (informal testing conducted throughout the growing season for THC concentration need not to be reported to USDA).  7 C.F.R. § 990.71(d) (effective Mar. 22, 2021).  The test report must contain for each sample tested:

• Lot identification number for the sample;
• Laboratory name;
• Date of test and report;
• Identification of any pre-harvest or post-harvest retest; and
• Test result. Id.

Audits

USDA may audit hemp producers’ records for completeness and accuracy, and conduct on-site visits to farms, storage facilities, and locations affiliated with licensees’ hemp operation.  USDA audits may be conducted every three years and can focus on current crop year and previous crop years.  7 C.F.R. § 990.28(a), (b).  USDA will provide reports to producers within 60 days of an audit’s conclusion.  USDA requires a corrective action plan to correct a negligent violation, which USDA will approve or deny within 60 days of receipt.  7 C.F.R. § 990.28(d).  USDA may also revoke a producer’s USDA license for one year or until the producer becomes compliant.  7 C.F.R. § 990.28(d) (effective Mar. 22, 2021).

Enforcement

Producers are not subject to more than one negligent violation per calendar year.  7 C.F.R. § 990.29(a) (effective Mar. 22, 2021).  Negligent violations include failure to provide an accurate legal description of land where hemp is produced, production of hemp without a license, and production of cannabis that exceeds the acceptable hemp THC level.  7 C.F.R. § 990.29(a)(1)-(3).  USDA issues a notice of violation for each negligent violation requiring a corrective action plan from the producer.  Corrective action plans will be in place for a minimum of two years and include:

• The date by which the producer will correct violations;
• Steps the producer will take to correct violations; and
• Procedures that will demonstrate compliance that must be submitted to USDA. 7 C.F.R. § 990.29(b).

USDA will revoke the license of producers who commit negligent violations three times within five years, and they will be ineligible to produce hemp for five years.  7 C.F.R. § 990.29(e).

If USDA determines that a producer has violated the terms of their license or the regulations with a “culpable mental state greater than negligence,” it will immediately report the licensee to the U.S. Attorney General and the chief law enforcement officer of the State or Indian territory where the production is located.  7 C.F.R. § 990.29(f)(1).

USDA may issue a notice of suspension to a producer if they have violated a provision of the regulations or failed to comply with a written order from USDA related to negligence.  7 C.F.R. § 990.30(a).  Producers whose license has been suspended may appeal the suspension but cannot produce hemp during the suspension.  7 C.F.R. § 990.30(c), (d).  Producers whose licenses have been suspended and not restored on appeal may have their license restored after a waiting period of one year from the suspension date.  7 C.F.R. § 990.30(e).  USDA may also require a producer whose license has been suspended to operate under a corrective action plan to fully restore their license.  7 C.F.R. § 990.30(f).

USDA will revoke a license immediately if the licensee:

• Pleads guilty to, or is convicted of, any felony related to a controlled substance;
• Made any materially false statement to USDA or its representatives with a culpable mental state greater than negligence; or
• Is found to be growing cannabis exceeding the acceptable hemp THC level with a culpable mental state greater than negligence or has negligently violated the regulations three times in five years. 7 C.F.R. § 990.31.

Producers can appeal license denials, suspension, and revocations.  7 C.F.R. § 990.40; .41.  The regulations, under 21 C.F.R. § 990.42, also set forth the process for States and Tribes to appeal USDA actions on their hemp production plans.

State and Tribal Hemp Production Programs

The USDA final rule, tracking the Farm Bill, requires USDA-approved State and Tribal programs to include many of the same components as USDA’s program.  USDA exercises oversight of State and Tribal programs first by reviewing and approving their plans, then by conducting audits to ensure compliance with the Farm Bill and final rule.  States and Indian Tribes must submit their program plan to USDA for approval before implementation.    

State and Tribal plans must collect, maintain, and report to USDA, for each licensed or authorized producer, contact information, a legal description of the land on which the producer will produce hemp including geospatial location, and the producer’s license number and status.  7 C.F.R. § 990.3(a)(1).

In addition, State and Tribal plans must include procedures for:

• Sampling hemp, requiring agents to collect hemp within 30 days prior to harvest for THC testing. 7 C.F.R. § 990.3(a)(2)(i) (effective Mar. 22, 2021);
• Identifying through testing whether the hemp sample contains THC concentration exceeding the acceptable hemp THC level by validated testing methods using post-decarboxylation or similar methods (only DEA-registered laboratories registered may test hemp after December 22, 2022). 7 C.F.R. § 990.3(a)(3) (effective Mar. 22, 2021);
• Disposing of or remediating cannabis plants if the tests exceed the acceptable THC level by DEA-registered reverse distributors, law enforcement or remediation on-site. 7 C.F.R. § 990.3(a)(6) (effective Mar. 22, 2021); and
• Conducting annual inspections of a random group of producers to verify compliance. 7 C.F.R. § 990.3(a)(7) (effective Mar. 22, 2021).

USDA Approval and Audits

USDA must approve or disapprove State and Tribal plans within 60 days of receipt.  States and Tribes must submit amended plans if, after disapproval, they still wish to have primary regulatory authority over hemp production within their territory.  7 C.F.R. § 990.4(a), (b).

USDA may audit State and Tribal programs to determine compliance with their approved plans every three years but can adjust audit frequency based on performance, compliance issues, or other relevant factors identified and provided to State/Tribal governments.  7 C.F.R. § 990.5(a).  USDA audits can include:

• Resources and personnel administering and overseeing programs;
• Licensing and compliance review of hemp producers;
• Sampling and lab testing requirements and components;
• Disposal and/or remediation of non-conforming plants to ensure correct reporting;
• Results of and methodology used for annual inspections of producers; and
• Information collection procedures and accuracy. 7 C.F.R. § 990.5(b) (effective Mar. 22, 2021).

USDA will provide reports to State and Tribal governments within 60 days after completing audits.  USDA will advise of non-compliance and corrective measures required to bring programs into compliance.  States/Tribes will develop a corrective plan that must be reviewed and approved by USDA.  7 C.F.R. § 990.5(c)(1).  If USDA determines the State or Tribe is non-compliant after the second audit, it may revoke approval for one year or until the program becomes compliant.  7 C.F.R. § 990.5(c)(2).

Reports

States and Tribes with approved plans must submit a monthly report to USDA providing contact information and license status for every producer.  Monthly reports to USDA must contain:

1. For each new licensed producer who is an individual, their full name, license or authorization identifier, business entity Employee Identification Number, address, telephone number, and email address;
2. For each new licensed producer that is an entity, their full name; business address; license or authorization identifier; and full name, title, and email address of each employee for whom the entity is required to submit a criminal history report;
3. For producers in prior reports whose reported information has changed, the previously reported information and the new information;
4. Status of each producer’s license; and
5. Indication, if applicable, of no changes during the current reporting cycle. 7 C.F.R. § 990.70(a) (effective Mar. 22, 2021).

States and Tribes must also submit monthly reports notifying USDA of any occurrence of non-conforming plants or plant material and the disposal or remediation record by the producer.  Disposal and remediation reports must include:

1. Producer’s name and address;
2. Producer’s license or authorization identifier;
3. Location, such as lot number, location type, and geospatial location or other descriptor for the production area subject to disposal or remediation;
4. Disposal or remediation completion date; and
5. Total acreage. 7 C.F.R. § 990.70(b) (effective Mar. 22, 2021).

State and Indian Tribes must also report annually to USDA the total acreage planted, harvested, and disposed/remediated within their territory.  7 C.F.R. § 990.70(c) (effective Mar. 22, 2021).

Producers are responsible for ensuring labs testing their samples report results to USDA.  (Informal testing conducted throughout the growing season monitoring THC concentration do not need to be reported to USDA).  Test result reports must contain:

1. Producer’s license or authorization identifier;
2. Producer’s name and address;
3. Lot identification number for the sample;
4. Laboratory name and, no later than December 31, 2022, laboratory’s DEA registration number;
5. Date of test and report;
6. Identification of a pre-harvest or post-harvest retest; and
7. Test results. 7 C.F.R. § 990.70(d) (effective Mar. 22, 2021).

Enforcement

State and Tribal plans must include enforcement provisions for “negligent” and “culpable” producer violations as well as felonies.  7 C.F.R. § 990.6(a)-(e).  The plans must prohibit anyone who materially falsifies any application information from program participation.  7 C.F.R. § 990.6(f).  Hemp producers cannot receive more than one negligent violation per calendar year.  7 C.F.R. § 990.6(b) (effective Mar. 22, 2021).  As with USDA requirements, negligent violations include:

• Failing to provide a legal description of land where hemp is produced;
• Producing hemp without a license; and
• Producing cannabis exceeding the acceptable hemp THC level. Id.

For each negligent violation, the State/Tribe must require a corrective action plan for a minimum of two years that includes the date by which the producer will correct negligent violations and the producer’s regular reporting on compliance.  7 C.F.R. § 990.6(c).  Producers who negligently violate their license three times within five years will have their license revoked and are ineligible to produce hemp for five years.  7 C.F.R. § 990.29(e).

State/Tribal programs must also contain provisions relating to producers who commit violations with a “culpable mental state greater than negligence.”  86 Fed. Reg. 5606.  Programs must immediately report  licensees to the U.S. Attorney General, and the chief law enforcement officer of the State or Indian territory.  7 C.F.R. § 990.6(d).  State and Tribal programs must prohibit any person with a State or Federal controlled substance-related felony conviction from participation in hemp production for ten years from the conviction date.  7 C.F.R. § 990(e).

It will be interesting to see how USDA will administer its own hemp production program while overseeing numerous State and Tribal programs.  As noted, the final rule is effective March 22, 2021.