Our hemp attorneys recently sat down to identify six issues with the Texas Department of Agriculture’s (“TDA”) Revised Proposed Rules for Texas’ hemp program. If you are a hemp industry business, it is not too late to submit your comments directly to TDA. Comments on the Revised TDA Hemp Production Plan may be submitted HERE.
“GOOD STANDING” WITH THE TDA
As criteria for evaluation of an applicant for a hemp license, the Revised Proposed Rules require that an applicant “be in good standing with TDA.” What exactly does this mean?
Because the term “good standing” is undefined, your guess is as good as ours. The TDA does not define or elaborate what “good standing” entails. This subjective and ambiguous requirement should concern anyone in the Texas hemp industry. If you got in a fender bender with the TDA Commissioner twenty years ago on the way to your high school prom, does this mean you are not in “good standing” with the TDA? Although this hypothetical illustrates an extreme scenario, it certainly demonstrates the ambiguity of this provision.
Why is it a problem?
If you are not in “good standing” with the TDA, your hemp license application could be denied. For denial of a hemp license application, the TDA should be required to follow definitive guidelines and not be permitted to rest on vague and subjective verbiage and mere assertions that an applicant is not in “good standing” with TDA.
U.S. AUTHORITY INTERACTION NOTIFICATION
The TDA rules also impose an incredibly burdensome notification requirement on hemp license holders. License holders must notify TDA of any interaction with any U.S. authority. The required notification must be given to the TDA by telephone within 24 hours of the interaction. License holders must then follow-up with a report in writing detailing the interaction for the TDA within three (3) days. U.S. authority is broadly defined as “the United States of America, USDA or a subagency thereof, a state, a US territory, or an Indian Nation, or federal, state or local law enforcement agency.” That definition encompasses every regulatory agency in the entire United States’ government.
Like the good standing provision above, you might be asking yourself, “what does this mean, exactly?” Unfortunately, the overly broad language in the Revised Proposed Rules covers nearly every conceivable interaction with any state, government, or local authority, regardless of whether that interaction had anything to do with hemp. Were you at a Superbowl watch party and met someone that works for the IRS? As drafted, you may need to promptly notify the TDA of this U.S. authority interaction. Clearly, we are using extreme hypotheticals for illustration purposes. However, what happens in a more reasonable scenario? If you are pulled over for running a red light in your hometown, are you required to call TDA within 24 hours to tell them about it? As the governing authority responsible for our hemp program, TDA needs to ensure it provides clear guidance in its final rules.
ABSOLUTE CONSENT TO ENTRY
In order to maintain licensure with the TDA, hemp license holders must provide an absolute consent to entry on their lot by representatives of the TDA or a U.S. authority to enter and inspect any and all locations listed on their applications where hemp is located. According to the TDA Revised Rules, these representatives may enter these locations with or without cause, and with or without advanced notice.
Fortunately, we are guaranteed a right from unreasonable searches in the Fourth Amendment to the United States Constitution. As drafted, these unfettered entries and inspections of license holders’ lots and land may constitute unreasonable searches, especially if a hemp license holder’s home is on their lot. All law enforcement needs to do to gain entry is assert that hemp or “other cannabis plants or materials” are located in your home that sits on the area you identified as your lot. That’s it. There is no requirement that an officer have probable cause for entry.
$500 FACILITY MODIFICATION FEE
In addition to, but not limited to, the license application fees, annual renewal application fees, participation fees, sampling and collection fees, and transport manifest fees, the TDA Revised Rules requires that if a hemp producer modifies the facility in which hemp is handled or produced and it results in a change in the facility’s geospatial location, a minimum of a $500 facility modification fee must be paid. Hemp producers may want or need to modify where their hemp is produced for a myriad of reasons, such as facility expansion or logistical preferences. However, for any modification, a $500 fee and a facility addition or modification request form must be first received by the TDA. This is an excessive amount of oversight into normal business judgment for a regulatory agency.
PROHIBITION ON OUT-OF-STATE TRANSPLANTS
TDA’s Revised Rules provide that hemp seed cannot be sold or distributed for use in Texas, unless it has been certified or approved by the TDA. For many months, the TDA website has stated that a list of businesses whose hemp seed has been certified or approved for sale, distribution, or production in Texas will be posted on the TDA website; however, this has yet to happen. We have a plethora of farmers sitting on land ready to cultivate and no available option to purchase certified seed. To circumvent this, it seems logical that hemp farmers could purchase out-of-state transplants, but under the TDA plan, only cannabis transplants originating from germination in Texas can be cultivated. There are protocols to ensure that transplants shipping into Texas originate from a certified nursery or other operation to mitigate the risk of pests or diseases coming into Texas through transplants.
30 DAYS TO FILE A LOT REPORT POST-HARVEST
In addition to all of the other required documents and permits, hemp license holders must also submit detailed lot reports to the TDA within thirty (30) days of final sample collections from their lots (post-harvest window). The lot report must detail the final disposition of the cannabis plant materials produced or handled on the lot, the total acreage or square footage of the cannabis plant material handled or produced, the amount of plants disposed of, and a certified statement indicating whether any living plants remain on the lot. If living plants remain for cultivation, the license holder then has to register the location of the remaining living plants as new lots and pay another participation fee. This is an unnecessarily tedious process for our farmers and license holders.
If you are a hemp farmer or intend to handle hemp, these rules directly impact you. You need to submit comments to the TDA and voice your concerns with the issues identified above or any other issues you spot in the Revised TDA Hemp Production Plan. We chose our top six, but there are numerous others.
As a hemp attorney, Chelsie Spencer works with a wide range of clients in the hemp and CBD industries and remains active in legislative activity impacting legal hemp businesses. Contact Ritter Spencer or give us a call at 214.205.5070 for more information.