By: Paul Stevenson
Last December, the Agriculture Improvement Act of 2018, commonly known as the 2018 Farm Bill, was passed, which removed hemp from the Controlled Substances Act’s (“CSA”) definition of “marihuana.” The Farm Bill allows for the United States Department of Agriculture (“USDA”) to oversee and facilitate the commercial cultivation, processing, and marketing of hemp. As mandated by the Farm Bill, USDA has developed an interim final rule to establish the domestic hemp production program.
According to hemp lawyer Chelsie Spencer of Ritter Spencer PLLC, “These program rules will govern the entire hemp growth industry in the United States. It is important for those in the hemp industry to provide feedback and guidance to the USDA on the Interim rules during the public comment period.”
In this Series, we will address the various provisions of USDA’s hemp production plan (“USDA plan”). In Part I of the Series, we will discuss the license application requirements hemp producers must meet to be in conformity with the USDA plan. Next, in Part II, we will look at the rules and regulations covering the sampling and testing of hemp producers’ hemp crops. Lastly, in Part III of this Series, we will analyze compliance matters, violations of the USDA plan and the consequences, and the reporting requirements imposed upon licensed hemp producers.
It is imperative for hemp producers to understand what is required of them to become legally licensed. Special attention should be given to dates, deadlines, and documentation so that hemp producers are fully in compliance with USDA standards.
Part I: License Requirements
Ineligibilities Under the Plan
As a starting point, it is important to recognize who is not eligible to produce hemp. Under the USDA plan, if a person has a felony conviction relating to a controlled substance, they are automatically restricted from participating for 10 years from the time of their conviction. However, an exception applies for a person who was already legally producing hemp under the 2014 Farm Bill, and whose felony conviction occurred prior to passage of the 2018 Farm Bill (December 20, 2018). Additionally, a person who materially falsifies their license application information will be ineligible to participate in the USDA plan.
Suspensions and revocations of hemp producers’ licenses will be discussed in Part III of this Series.
License Requirements for Hemp Producers
So, who is eligible to produce hemp and how do you go about getting licensed? Under the USDA plan, any person or business entity seeking to produce, cultivate, or store hemp must have a valid and up-to-date license. To obtain a new license, an application must be sent to USDA within 30 days after publication of the USDA plan in the Federal Registrar and one year after said publication. According to the USDA plan, “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.” USDA § 990.21. USDA is open to comments regarding this time period, but this has been recommended based on the typical seasonal harvesting of hemp.
License applications shall include the person or business entity’s contact information (name, address, phone number, and email). If the applicant is a business entity, the employer identification number (EIN) of the business, as well as all the names and titles of “key participants,” must be included. The USDA plan defines “key participants” as the following:
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. Id. at § 990.1.
Moreover, license applications must include all key participants’ current criminal history reports dated within 60 days prior to submission.
All completed applications are to be sent to USDA. If any applications are missing essential information, they will be returned to the applicant as incomplete, and the applicant shall have the opportunity to resubmit a completed application.
USDA Hemp License Approval
After receiving a hemp producer’s submitted hemp application, USDA will then send written notification as to whether it has been approved or denied (unless the applicant’s resident-State has submitted and is awaiting USDA approval). If a hemp producer’s application is approved by USDA, a license shall be issued and their license “shall be valid until December 31 of the year three years after the year in which license was issued.” Id. at § 990.21.
Congratulations! Your patience has been rewarded—you now know what is required to become a legally licensed hemp producer at the federal level. However, this is just the first major step in the process of being able to legally produce hemp.
Hemp producers must renew their licenses before they expire (warning: license renewal is NOT automatic). Thankfully, under the USDA plan, the application process for renewal is identical to that of the initial application.
Once a producer does receive their hemp license from USDA, they are required to provide certain information to the Farm Service Agency (“FSA”). Licensed hemp producers must at least provide the following information: all addresses and locations where their hemp will be produced, the acreage or square footage to be dedicated to hemp production, and their license number. See id. at § 990.23.
It is important to note that if hemp producers make any material changes to their application’s information (e.g., a change in key participants, addition of a new location of hemp production, etc.), a license modification is mandatory. USDA will provide further guidance on where this information shall be sent on its website.
USDA will not issue a hemp license to a producer if their application does not conform with all the licensing requirements, if they are ineligible (as described in the initial section on Ineligibilities), or if the State in which the applicant produces or intends to produce hemp does not have a USDA-approved plan or has not submitted a plan for approval. See id. at § 990.22.
Preview of Part II:
In Part II of this Series, we will guide you through all the hurdles of the numerous sampling and testing requirements hemp producers must comply with under the USDA plan. Stay tuned.
Note: Further information on approved licenses will become available on USDA’s Agricultural Marketing Service (“AMS”) website.
Paul Stevenson is a graduate of the University of Oklahoma College of Law and a licensed Texas attorney. Paul currently works with the hemp lawyers at Ritter Spencer on various issues, ranging from transaction to litigation.