[Federal Register Volume 85, Number 244 (Friday, December 18, 2020)]
[Rules and Regulations]
[Pages 82333-82355]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27999]
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Drug Enforcement Administration
21 CFR Parts 1301 and 1318
[Docket No. DEA-506]
RIN 1117-AB54
Controls To Enhance the Cultivation of Marihuana for Research in
the United States
AGENCY: Drug Enforcement Administration, Department of Justice.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Drug Enforcement Administration (DEA) is amending its
regulations to facilitate the cultivation of marihuana for research
purposes and other licit purposes to enhance compliance with the
Controlled Substances Act, including registering cultivators consistent
with treaty obligations. This final rule adopts, with minor
modifications, the notice of proposed rulemaking published on March 23,
2020, including regulations that govern applications by persons seeking
to become registered with DEA to grow marihuana as bulk manufacturers,
and regulations related to the purchase and sale of this marihuana by
DEA.
DATES: This final rule is effective January 19, 2021.
FOR FURTHER INFORMATION CONTACT: Scott A. Brinks, Regulatory Drafting
and Policy Support Section (DPW), Diversion Control Division, Drug
Enforcement Administration; Mailing Address: 8701 Morrissette Drive,
Springfield, Virginia 22152-2639; Telephone: (571) 362-3261.
SUPPLEMENTARY INFORMATION:
Legal Authority and Background
The Controlled Substances Act (CSA) requires all persons who seek
to manufacture a controlled substance to obtain a DEA registration.\1\
21 U.S.C. 822(a)(1). The CSA defines ``manufacture'' to include the
``production'' of a controlled substance, which in turn includes, among
other things, the planting, cultivation, growing, or harvesting of a
controlled substance. 21 U.S.C. 802(15), (22). Thus, any person who
seeks to plant, cultivate, grow, or harvest marihuana 2 3
[[Page 82334]]
to supply researchers or for other uses permissible under the CSA (such
as product development) must obtain a DEA manufacturing registration.
Because marihuana is a schedule I controlled substance, applications by
persons seeking to become registered to manufacture marihuana are
governed by 21 U.S.C. 823(a). See generally 76 FR 51403 (2011); 74 FR
2101 (2009), pet. for rev. denied, Craker v. DEA, 714 F.3d 17 (1st Cir.
2013). DEA's Administrator has the authority to grant a registration
under section 823(a). To do so, the Administrator must determine that
two conditions are satisfied: (1) The registration is consistent with
the public interest (based on the enumerated factors in section
823(a)), and (2) the registration is consistent with U.S. obligations
under the Single Convention on Narcotic Drugs, 1961 (``Single
Convention'' or ``Treaty''), 18 U.S.T. 1407.\4\
---------------------------------------------------------------------------
\1\ All functions vested in the Attorney General by the CSA have
been delegated to the Administrator of DEA. 28 CFR 0.100(b).
\2\ This document uses both the CSA spelling ``marihuana'' and
the modern spelling ``marijuana'' interchangeably.
\3\ As defined in Section 802(16).
\4\ Section 823(a) provides that the registrations to
manufacture controlled substances in schedule I or II must be
``consistent with the public interest and with United States
obligations under international treaties, conventions, or protocols
in effect on May 1, 1971.'' The Single Convention entered into force
for the United States on June 24, 1967. See Single Convention, 18
U.S.T. 1407.
---------------------------------------------------------------------------
In 2016, DEA issued a policy statement aimed at expanding the
number of manufacturers who could produce marihuana for research
purposes. See Applications to Become Registered under the Controlled
Substances Act to Manufacture Marijuana to Supply Researchers in the
United States, 81 FR 53846 (Aug. 12, 2016). Subsequently, the
Department of Justice (DOJ) undertook a review of the CSA, including
the requirement of section 823(a) that a registration to bulk
manufacture a schedule I or II controlled substance must be consistent
with United States obligations under international treaties such as the
Single Convention, and determined that certain changes to its 2016
policy were needed. As part of this review, in June 2018, the DOJ
Office of Legal Counsel (OLC) prepared an opinion (``OLC Opinion''),
now publicly available, examining DEA's policies and practices for
granting bulk manufacturing registrations to marihuana growers in light
of the CSA's requirement that DEA register manufacturers of schedule I
and II controlled substances in a manner consistent with the Single
Convention.\5\
---------------------------------------------------------------------------
\5\ That opinion is available at http://www.justice.gov/olc/opinion/licensing-marijuana-cultivation-compliance-single-convention-narcotic-drugs.
---------------------------------------------------------------------------
This rule is being implemented pursuant to the Administrator's
authority under the CSA ``to promulgate rules and regulations and to
charge reasonable fees relating to the registration and control of the
manufacture, distribution, and dispensing of controlled substances,''
21 U.S.C. 821, and to ``promulgate and enforce any rules, regulations,
and procedures which he may deem necessary and appropriate for the
efficient execution of his functions under [the CSA],'' 21 U.S.C.
871(b).
Summary of the Notice of Proposed Rulemaking
On March 23, 2020, DEA published a notice of proposed rulemaking
(NPRM) in the Federal Register to (1) facilitate the cultivation of
marihuana for research and licit purposes in compliance with the CSA,
including a provision requiring consistency with the Single Convention;
(2) amend DEA regulations pertaining to applications by persons seeking
to become registered with DEA to grow marihuana as bulk manufacturers;
and (3) establish regulations related to the purchase and sale of this
marihuana by DEA. 85 FR 16292. This final rule responds to comments
received concerning the proposed rule, and DEA is adopting the proposed
rule with minor modifications to the regulations to be codified at 21
CFR 1318.04, as described below.
Discussion of Public Comments
DEA received comments from the general public, DEA registrants,
applicants for registration to manufacture marijuana, organizations,
associations, and a United States Senator. Some commenters expressed
general support of the proposed rule because it will increase the
number of DEA-registered bulk manufacturers of marihuana for research.
Some commenters expressed general concern about the impact of the
proposed rule. Other commenters expressed specific concerns about,
among other things, the application process and applicant criteria,
quality of marihuana produced, DEA's ability and authority to lead the
program, controls for the purchase and sale of marihuana, harvest time,
quota, and costs. Other commenters submitted comments that are outside
of the scope of this rule.
Application Process and Criteria
Commenters expressed concerns about the application process and the
criteria for applicants. The following issues raised by the commenters,
and DEA's response to each, fall under this category.
Issue 1: Many commenters stated that the approval process for
applications takes too long and needs to be streamlined, suggesting
that a timeframe for the approval or denial of applications should be
determined, specifically within 30 days, 90 days, or six months of
receipt of the application.
Response 1: DEA has a process for receiving, reviewing, and acting
on applications for a DEA registration or re-registration, as described
in 21 CFR part 1301. The process involves applicants submitting
applications online or on paper and DEA evaluating all applications and
supporting documentation submitted in accordance with the factors
specified in 21 U.S.C. 823. The length of this process varies due to
the detailed review performed by DEA, and as explained in the NPRM, a
review of pending applications to manufacture marihuana has been
delayed due to the need to establish the additional policies reflected
in this rule. After receiving an application, DEA will send a
questionnaire to the applicant to be completed and returned to DEA
within 10 business days. DEA uses the information from the
questionnaire and the application to determine whether the application
should be granted under the factors specified in 21 U.S.C. 823. After
the completed questionnaire is processed, DEA publishes a notice of
application in the Federal Register, and current registrants and
applicants for bulk manufacture of the same class of substance have 60
days to comment on, or object to, the application, as required by 21
CFR 1301.33. During the application process, DEA investigators also
complete site visits and submit the appropriate reports to aid in the
determination of whether to grant a registration. Because the process
of evaluating an application to manufacture a schedule I controlled
substance includes a 60-day public comment period, DEA cannot act on
the application in a shorter timeframe, such as 30 days. Likewise, DEA
must balance limited resources to conduct pre-registration vetting of
numerous applicants, which impacts the length of time needed to
complete the application process. As a result, DEA declines to adopt a
specific approval date applicable to all applications for registration
to bulk manufacture marihuana.
However, in accordance with 21 U.S.C. 823(i), for applications to
manufacture a schedule I or II controlled substance for use only in a
clinical trial, DEA will issue a notice of application not later than
90 days after the application is accepted for filing. Additionally, DEA
will register the applicant, or serve an order to show cause upon the
applicant in accordance with 21 U.S.C. 824(c), not later than 90 days
after the date on which the period
[[Page 82335]]
for comment pursuant to such notice ends, unless DEA has granted a
hearing on the application under 21 U.S.C. 958(i). An applicant that
believes it qualifies for review under these procedures should identify
itself as an 823(i) applicant in its initial application for
registration submitted to DEA. DEA will then determine whether the
applicant qualifies for the review timeline specified under section
823(i).
Issue 2: Some commenters suggested that when there is a denial, DEA
should provide notice and allow a hearing.
Response 2: Pursuant to 21 U.S.C. 824(c) and 21 CFR 1301.37, when
DEA proposes to deny an application, DEA must serve the applicant with
an order to show cause setting forth the factual and legal basis for
the proposed denial. The applicant may file a request for a hearing, in
accordance with 21 CFR 1301.43. If a hearing is requested, DEA will
hold the hearing in accordance with the provisions for formal
adjudications set forth in the Administrative Procedure Act and DEA
regulation found at 21 CFR 1316 subpart D.
Issue 3: Another commenter stated that DEA used an internal
memorandum to delay approval of applications to bulk manufacture
marihuana.
Response 3: As mentioned in the NPRM, after the 2016 marihuana
grower policy statement issued by DEA,\6\ DOJ reviewed DEA's policies
and practices for issuing bulk marihuana manufacturing registrations in
light of the CSA and determined that DEA needed to amend its
policies.\7\ DEA has acted as expeditiously as possible to amend its
policies to ensure consistency with the Single Convention as required
by the CSA, while increasing the number of marihuana growers for
research purposes. DOJ and DEA fully support research into the effects
of marihuana and the potential medical utility of its chemical
constituents, and DEA is working to expand the number of DEA-registered
bulk manufacturers of marijuana, including through the finalization of
this rule.
---------------------------------------------------------------------------
\6\ Applications to Become Registered under the Controlled
Substances Act to Manufacture Marijuana to Supply Researchers in the
United States,'' 81 FR 53846 (Aug. 12, 2016).
\7\ The Attorney General determined that adjustments were
necessary after receiving the aforementioned advisory OLC Opinion.
---------------------------------------------------------------------------
Issue 4: One commenter requested that DEA make the revised Form 225
and updated questionnaire available online for applicants.
Response 4: As required by the Paperwork Reduction Act (PRA), DEA
must receive approval from the Office of Management and Budget (OMB)
when a rule creates a new information collection or modifies an
existing collection. This approval must be granted before an agency can
use a revised form. In the NPRM, DEA discussed the modification of the
existing information collection which would revise Form 225 and add
questionnaires to the registration application process. Within the PRA
section of the NPRM, DEA explained that an interested party could
contact DEA for a copy of the form and questionnaires. The revision of
the collection is awaiting approval; and, as such, DEA cannot yet post
the proposed revisions to the form online for applicants. However,
after the form has been approved, DEA will post the application to its
website, and an applicant can complete and submit it online. DEA will
then send the applicable questionnaires to the applicant after the
application has been received.
Issue 5: Some commenters believe that DEA's consideration of an
applicant's compliance with Federal marihuana law would exclude
qualified applicants, specifically those who operate in compliance with
State laws that are inconsistent with Federal law.
Response 5: Congress has established by statute the factors that
DEA must consider when evaluating whether to grant an application for
registration. For an applicant to manufacture a schedule I or II
controlled substance, DEA must consider, among other factors, the
applicant's ``compliance with applicable State and local law;'' ``prior
conviction record . . . under Federal and State laws relating to the
manufacture, distribution, or dispensing of such substances;'' ``past
experience in the manufacture of controlled substances, and the
existence in the establishment of effective control against
diversion;'' and ``such other factors as may be relevant to and
consistent with the public health and safety.'' 21 U.S.C. 823(a). An
applicant that has manufactured marijuana without obtaining a DEA
registration has violated Federal law, see 21 U.S.C. 841(a), regardless
of whether that manufacturer has violated the laws of the State in
which the applicant is located. Such activity is relevant to past
experience in the manufacture of a schedule I controlled substance,
past experience in preventing diversion of a controlled substance from
other than DEA-authorized sources, and the promotion and protection of
public health and safety. Moreover, prior conduct in violation of the
CSA is relevant to determining whether the applicant can be entrusted
with the responsibilities associated with being a DEA registrant.
Indeed, DEA registration is a fundamental component of the CSA, and it
is wholly appropriate to consider an applicant's past noncompliance
with the CSA when deciding whether to grant a registration under the
Act. DEA will consider all relevant factors for each individual
applicant, on a case-by-case basis, when determining whether to grant
registration, as provided for in 21 U.S.C. 823(a) and the regulatory
text at 21 CFR 1318.05. While the DEA Administrator has discretion to
weigh the statutory factors and any one factor need not be dispositive,
an applicant's prior compliance with Federal law is a relevant
consideration when determining whether to grant an application for
registration.
Issue 6: A commenter suggested that a notice of exemption for a new
drug application issued by the Food and Drug Administration (FDA) be an
alternative to obtaining a DEA registration.
Response 6: The CSA requires anyone seeking to manufacture or
distribute controlled substances to apply for and obtain a DEA
registration. 21 U.S.C. 822(a)(1). Using FDA's authorization of a
notice of exemption for a new drug application would not be in
compliance with the CSA and therefore cannot be considered an
alternative for obtaining a DEA registration.
Issue 7: A commenter opined that applicants should only be required
to submit proof of State-issued marihuana licenses to DEA, after DEA
approves the application.
Response 7: The CSA requires anyone seeking to manufacture or
distribute controlled substances to apply for and obtain a DEA
registration. 21 U.S.C. 822(a)(1). In assessing the application, DEA
also weighs the applicant's compliance with applicable State law. 21
U.S.C. 823(a)(2). DEA has always required applicants seeking to
manufacture a controlled substance to obtain and submit a valid State
pharmaceutical manufacturer's license to demonstrate compliance with
State law. Likewise, an applicant seeking to manufacture marihuana must
submit evidence that it possesses a valid State manufacturer's license
as part of its application, or explain why no such license is required
by the State to manufacture marihuana for use in research. This
evidence must be submitted to DEA as part of the determination of
whether to grant a registration.
Issue 8: Some commenters suggested that the registration
requirement be waived for marihuana growers (manufacturers) who will be
supplying
[[Page 82336]]
marihuana to researchers under 21 U.S.C. 822(d).
Response 8: DEA-registered researchers are not currently allowed to
obtain marihuana from entities that are not registered with DEA. DEA is
permitted to waive the registration requirement if it finds that doing
so is ``consistent with the public health and safety,'' pursuant to 21
U.S.C. 822(d), and acting under authority delegated by the Attorney
General. However, DEA has never previously waived the registration
requirement to allow controlled substances to be manufactured outside
the closed system of distribution, and doing so would be incompatible
with the framework of the CSA, which is predicated on registration,
recordkeeping, and other measures of accountability throughout the
distribution chain. In addition, waiving the requirement of
registration for marihuana growers who supply researchers would be
inconsistent with U.S. obligations under the Single Convention.\8\ It
should also be noted that supplying marihuana to researchers does not
demonstrate that the material being supplied has been produced in
accordance with other Federal laws. As a result, DEA does not consider
such a waiver of registration for a bulk manufacturer to be a legally
viable option.
---------------------------------------------------------------------------
\8\ See OLC Op., supra note 5, at 7.
---------------------------------------------------------------------------
The scope of this rule addresses the registration of manufacturers
of marihuana, not researchers of marihuana. To the degree that the
commenters were seeking to exempt marihuana researchers, rather than
manufacturers, from registration, in addition to the foregoing concerns
about adherence to treaty obligations, DEA does not at this time
conclude that there is a public health need to exempt schedule I
researchers from DEA registration. DEA notes that over the last several
years, there has been a 149 percent increase in the number of active
researchers registered with DEA to perform bona fide research with
marihuana, marihuana extracts, and marihuana derivatives (from 237 in
November 2014 to 589 in June 2020). At present, more researchers are
registered to conduct research in the United States on marihuana,
marihuana extracts, and marihuana derivatives than on any other
schedule I substance, and more than 72 percent of DEA's total schedule
I research registrant population (589 of 808 as of June 2020) is
registered to conduct research on these substances. As a result, DEA
concludes that there is not currently a public health need to exempt
researchers from the registration requirement.
Issue 9: Other commenters suggested that DEA-registered researchers
should be exempt from applying for DEA manufacturer registrations if
the researchers are growing marihuana for their own studies and not for
distribution.
Response 9: As reflected in this rule, any person lawfully growing
marihuana must be registered with DEA to allow DEA to fulfill its
obligations under the CSA. For the reasons discussed above, DEA has
concluded that this requirement cannot be waived for researchers. Thus,
under this final rule, when an applicant, including a researcher
growing for his or her own use, is approved to grow marihuana, the
applicant is registered as a bulk manufacturer. After the applicant is
approved as a bulk manufacturer, the registrant must apply for and be
issued an individual manufacturing quota (IMQ) for the amount of
marihuana it needs to manufacture to meet the legitimate research and
scientific needs of its customers. If the manufacturer plans to use the
marihuana grown in bulk for its own research, it will also need to
apply for a procurement quota. Under this rule, the DEA registrant must
sell their harvest to DEA and then purchase from DEA the amount that
they are allowed to procure based on the procurement quota issued to
them. As such, DEA cannot exempt a researcher from the requirement of a
DEA manufacturing registration even if they plan to use the marihuana
grown for their own studies.
Issue 10: A few commenters suggested applicants who applied to be
registered to grow marihuana soon after DEA published its 2016
marihuana growers policy should receive priority over more recent
applicants. On the other hand, some commenters suggested that DEA
should not delay consideration of new marihuana grower applications
submitted after this rule is promulgated, as 21 CFR 1318.05(c)
provides. In particular, some commenters expressed confusion about the
``limited exception'' to this delay noted in the NPRM and suggested
that the limited exception should apply to all applicants.
Response 10: As previously stated in the NPRM, applications
received after the date the final rule becomes effective will not be
considered until all of the applications currently pending have been
approved or denied, unless an application requires action under 21
U.S.C. 823(i). Applications already submitted will receive priority,
and as a result, DEA will not have to restart its consideration of the
pool of pending applications whenever a new application is submitted.
As described in the NPRM, the ``limited exception'' refers to the
review of applications claiming the benefit of the statutory timeline
of 21 U.S.C. 823(i). Congress has set the timeline for review of such
applications by statute. That timeline will apply in lieu of the
provision at 21 CFR 1318.05(c) for applicants that clearly identify
themselves as 823(i) applicants in their original application, and for
which DEA determines that the applicant qualifies for review under
823(i).
Issue 11: Another commenter suggested that the number of applicants
selected to bulk manufacture marihuana should be unlimited and that DEA
should consider the bulk manufacture of marihuana as a coincident
activity to a researcher registration.
Response 11: The CSA mandates that DEA consider the maintenance of
effective controls against diversion by limiting the bulk manufacture
to a number of establishments which can produce an adequate and
uninterrupted supply of marihuana under adequately competitive
conditions for legitimate medical, scientific, research, and industrial
purposes. 21 U.S.C. 823(a)(1). By statute, DEA is not allowed to
register an unlimited amount of manufacturers, and DEA must perform an
analysis of each application to determine whether the addition of the
applicant is necessary to provide the adequate and uninterrupted supply
of marihuana for research needs or whether the legitimate need will be
met by the registration of others.
Currently, researchers are only permitted to manufacture as a
coincident activity in limited quantities as set forth in a protocol
approved by DEA in the researcher's registration application (or re-
registration application), and to the extent that manufacture is not
for the purposes of dosage form development. 21 CFR 1301.13(e)(1). A
researcher's planting, cultivating, growing, or harvesting of marihuana
does not constitute such a coincident activity to research. Rather, the
planting, cultivating, growing, or harvesting of marihuana requires a
manufacturer registration obtained under 21 U.S.C. 823(a), even when
the researcher is growing the marihuana for his or her own research
use. See 21 CFR 1301.33(d). As described in response to Issue 9, and in
the section on quota that follows, international treaties require that
DEA control manufacturing of marijuana and other schedule I and II
controlled substances by means of quota. Although regulatory provisions
allow for the approval of certain small-
[[Page 82337]]
scale manufacturing pursuant to a DEA-approved protocol, significant
manufacturing, including for research purposes, must be performed
pursuant to a quota to maintain effective controls against diversion.
As a result, researchers must register with DEA as manufacturers to
engage in significant manufacture of controlled substances, even if the
manufactured substances will exclusively be used in the grower's own
research.
In addition, the Single Convention obligates a single government
agency of the United States to purchase and take possession of all
marihuana manufactured, and DEA has concluded this includes marihuana
manufactured for research even when manufactured for use in research by
the grower. By requiring all planting, cultivating, growing, and
harvesting of marihuana be performed by DEA registered manufacturers,
DEA can ensure that the controls set forth in the Single Convention are
properly applied to all registrations to manufacture marihuana for
research.
Issue 12: Other commenters suggested that the criteria for
applicants should include the applicant's ability to produce high
quality marihuana while another commenter suggested that applicants
should have prior experience producing quality cannabis or hemp.
Response 12: The CSA provides that two conditions must be satisfied
for an applicant to become a registrant: (1) The registration must be
consistent with the public interest, and (2) the registration must be
consistent with U.S. obligations under the Single Convention on
Narcotic Drugs. Congress defined the factors for DEA to evaluate
whether granting a registration is consistent with the public interest
in 21 U.S.C. 823(a), and the burden lies with the applicant to
demonstrate that the application meets those factors. Under those
factors, DEA will consider the applicant's ``past experience in the
manufacture of controlled substances'' and its ``promotion of technical
advances in the art of manufacturing these substances,'' including the
applicant's ability to consistently produce and supply cannabis of a
high quality and defined chemical composition. Sec. 1318.05(b)(2). DEA
must also consider the applicant's overall past experience with
controlled substances in relation to preventing diversion.
Issue 13: Some commenters suggested DEA establish application
requirements or committees that ensure diversity and inclusion of
minority applicants. Other commenters suggested DEA provide regulatory
provisions that afford economic opportunities to communities that have
been disproportionately impacted by substance abuse and illicit drug
markets and make application selection inclusive to include rural
farmers, racial minorities, and disabled persons.
Response 13: DEA gives all applicants equal treatment regardless of
the gender, race, socioeconomic status, or disabled status of the
applicant. The only criteria used to evaluate the application for
registration are those factors defined by Congress at 21 U.S.C. 823(a).
See 21 CFR 1318.05.
Issue 14: Another commenter inquired whether manufacturers would be
permitted to develop contracts, partnerships, or cooperative agreements
with international research and development firms.
Response 14: Registrants are permitted to import and export
controlled substances, including marihuana, in accordance with the
criteria defined at 21 U.S.C. 952(a) (import) and 21 U.S.C. 953(a)
(export), and after obtaining registration in accordance with 21 U.S.C.
958. After obtaining a registration to manufacture marihuana, the
applicant may form agreements with international firms, but, if the
importation or exportation of marihuana or another controlled substance
will be involved as part of the agreement, it must ensure that any such
importation or exportation complies with 21 U.S.C. 952, 953, and 958,
and the relevant implementing regulations. Moreover, in addition to
these general regulatory requirements, Sec. 1318.04(b) of this rule
specifically requires prior written notice to DEA of each proposed
importation or exportation of marihuana, and DEA's express written
authorization for the importation or exportation.
Quality of Marihuana
DEA received a number of comments that expressed concerns about the
quality of marihuana that will be produced under this rule.
Issue 1: Some commenters stated that the current quality of
marihuana produced for Federal research is of poor quality.
Response 1: The purpose of this rule is to increase the number and
variety of marihuana growers in order to diversify the supply available
to researchers. As proposed in the NPRM and finalized in this rule, one
of the selection criteria for marijuana grower applicants is the
``applicant's ability to consistently produce and supply cannabis of a
high quality and defined chemical composition.'' 21 CFR 1318.05(b)(2).
Issue 2: A few commenters suggested that samples of marihuana
should be tested to determine the quality prior to sales transactions
and that manufacturers should be allowed to send samples of crops
before and after harvest to analytical labs for testing, prior to DEA
taking possession.
Response 2: DEA has no objection to DEA-registered marihuana
growers and buyers exchanging samples or sending such samples to
analytical labs for testing so long as this exchange occurs in a manner
consistent with the CSA, and is amending the rule to make this clear.
DEA understands that it is necessary for registered growers to engage
in sampling and testing prior to harvest or DEA taking possession of
the crop for growers to demonstrate compliance with contractual
specifications to their researcher customers. Prior to the agency
taking possession of the marihuana harvest, a registered grower may
collect samples and distribute those samples to a DEA-registered
analytical laboratory for analysis. It is consistent with the Single
Convention to permit growers to conduct sampling and exclude the
samples from the total crop that DEA is required to purchase and
possess because the Single Convention plainly contemplates that growers
will be able to harvest and sell their marijuana crops, and without
sampling, sales would be practically impossible because the final
intended purchaser could not know whether the marijuana is acceptable
for purchase.
DEA is thus modifying the regulations proposed in the NPRM to add a
new section at 21 CFR 1318.04(d). This new section explicitly permits
DEA-registered manufacturers of marihuana to collect samples and
distribute them to DEA-registered analytical laboratories for chemical
analysis prior to DEA taking possession of the marihuana grown.
However, to limit the risk of diversion and keep the distribution
within the legitimate purposes permitted by the CSA, the quantity of
samples collected and distributed must be small.
Issue 3: Some commenters stated that the time it takes DEA to take
possession of the marihuana could negatively impact the quality of
marihuana.
Response 3: To minimize the risk of diversion and delays that may
impact the quality of the crop, DEA intends to take physical possession
of the crop after harvest and distribute marihuana to the purchaser as
soon as practicable.
Issue 4: Many commenters expressed concerns that DEA is excluded
from liability for any damage to crops that may occur while in DEA's
possession, and that there are no regulations to ensure the quality of
marihuana while
[[Page 82338]]
in DEA's possession. Other commenters stated that there is no process
or remedy for the damage or loss of crops that could occur while in
DEA's possession.
Response 4: DEA assesses the risk of marihuana crops being lost or
damaged while in DEA's possession to be low. DEA does not anticipate
retaining possession of marihuana crops for long periods of time; in
most instances, they will be transferred quickly from the seller to the
buyer, with DEA's possession being as brief as possible to effectuate
its role in transferring the marihuana from buyer to seller. In
addition, crops in DEA's possession are largely expected to be
maintained at the manufacturer's registered location, in a secure
location designated by DEA. Accordingly, crops are highly unlikely to
be damaged or lost in DEA's possession. To avoid costly and unnecessary
disputes related to any loss or damage of crops, Sec. 1318.07 makes
clear that DEA has no liability with regard to the performance of any
of the terms agreed to by a grower and buyer of marihuana, including
but not limited to the quality of the marihuana. In effect, this rule
makes clear that buyers and sellers should structure their marihuana
transactions to minimize the risk of damage or disputes over quality,
rather than expecting DEA to mediate or bear the costs of such
disputes.
DEA recognizes that some growers and buyers may wish the DEA to
assume a greater role in assuring the quality of marihuana supplied to
researchers. Doing so, however, could significantly increase DEA's
costs for operating the marihuana grower program, which would then be
transferred to growers and buyers in the form of increased
administrative fees. Thus, given the relatively low risk that crops
will be lost or damaged in DEA's possession, DEA has concluded that the
program will provide marihuana to researchers most efficiently if DEA
does not assume any role in quality assurance and accordingly does not
assume liability for such risks.
Issue 5: One commenter inquired how DEA will ensure availability of
different strains of marihuana for research.
Response 5: DEA does not have the authority to dictate the strains
of marihuana to be produced by growers. Rather, DEA believes that
market forces will drive the strains of marihuana materials that
growers will produce, and the purchasers will be able to choose which
DEA-registered grower they believe will best produce the strains or
quality of marihuana that will meet their needs. The factors that the
Administrator will consider in granting a registration to grow
marihuana will be consistent with the public interest factors set forth
in section 21 U.S.C. 823(a), including the applicant's ability to
consistently produce and supply high quality marihuana and defined
chemical composition and other criteria as specified in 21 CFR 1318.05.
Issue 6: Some commenters suggested that DEA-registered researchers
be allowed to obtain marihuana and marihuana products from State-
authorized sources for the purpose of Federal research.
Response 6: The CSA requires anyone seeking to manufacture or
distribute controlled substances to apply for and obtain a DEA
registration. 21 U.S.C. 822(a)(1). State licenses to manufacture
marijuana do not satisfy the requirements of Federal law. See id.; 21
U.S.C. 841(a)(1). Therefore, possession of a license to manufacture
marijuana issued by a State government or agency does not meet the
requirements of the CSA and cannot be accepted in lieu of DEA
registration to manufacture or distribute. Registrants, including
researchers, are only authorized to possess, manufacture, distribute,
or dispense controlled substances ``to the extent authorized by their
registration and in conformity with the other provisions'' of the CSA.
21 U.S.C. 822(b).
DEA does not view the receipt of a schedule I substance from a non-
registrant, distributed in violation of Sec. 841(a), to be ``in
conformity with the other provisions'' of CSA as required of
registrants by Sec. 822(b). The receipt of controlled substances from
outside the CSA's closed system of distribution is incompatible with
the framework of the CSA, which is predicated on registration,
recordkeeping, and other measures of accountability throughout the
distribution chain. In addition, as discussed above, the CSA--including
a provision that requires consistency with the Single Convention--
requires DEA to, among other things, register marihuana growers and
take possession of all marihuana crops. Thus, authorizing researchers
to obtain marihuana from unregistered sources is inconsistent with the
Single Convention, and with DEA's CSA enforcement duties. Authorizing
such research using marihuana from unregistered sources may also be
inconsistent with the requirements of other Federal laws, as well as
DEA's broader obligation to authorize controlled substances research in
a manner consistent with the public safety.
Moreover, such a change is unnecessary. By registering additional
marihuana growers pursuant to this rule, DEA will expand researchers'
access to marihuana in accordance with the CSA, and in a manner that
supports the public health.
Issue 7: Some commenters suggested that growers should be allowed
to perform marihuana-related activities that are State-sanctioned but
violate Federal law, such as distributing marihuana to recreational
users, in the same facilities as DEA-authorized marihuana-related
activities to save costs.
Response 7: As previously explained, DEA cannot authorize marihuana
growers to violate the CSA or other Federal laws. Endorsing the
production of marihuana outside the CSA's closed system of distribution
would be incompatible with the framework of the CSA, which is
predicated on registration, recordkeeping, and other measures of
accountability throughout the distribution chain. Authorizing such
activities would also be inconsistent with the Single Convention, and
with DEA's CSA enforcement duties, as well as contrary to other Federal
laws.
Federal Agency Obligations Pertaining to Cannabis Controls
DEA received several comments regarding the division of authority
between agencies in regulating the growing of marijuana for scientific
research.
Issue 1: DEA received comments asserting that scientific or public
health-based agencies such as the Department of Health and Human
Services (HHS), National Institutes of Health (NIH), FDA, or Department
of Agriculture should oversee the marihuana grower program. Some of
these commenters also suggested that the CSA be amended by Congress to
allow a health-related agency to be in charge of this program.
Similarly, a commenter suggested that DEA contract with a private third
party and authorize that contractor to carry out the functions
described in this rule.
Response 1: DEA agrees that HHS and other Federal agencies can
offer valuable insights into how the Federal government can best
oversee the provision of marihuana for legitimate scientific research.
DEA is committed to collaborating with HHS and other Federal agencies
to ensure marihuana is available to meet the research and scientific
needs of the United States, and that this rule is implemented with
minimal disruption of the National Institute on Drug Abuse (NIDA) Drug
Supply Program (DSP). That said, as a matter of current law, any
registration and coordination of legitimate marihuana growing in the
United States will be overseen solely by DEA, not
[[Page 82339]]
other Federal agencies. In other words, even if DEA preferred other
Federal agencies to carry out these functions, as DOJ has interpreted
the CSA, including a provision requiring that registrations be
consistent with U.S. obligations under the Single Convention, it would
be unlawful for DEA to transfer these functions to another Federal
agency. Commenters' suggestions that the law should be changed are
beyond the scope of this rulemaking: This rulemaking must follow the
law, as enacted by Congress.\9\
---------------------------------------------------------------------------
\9\ The relevant law is briefly summarized here but is discussed
in greater depth in the aforementioned OLC Opinion.
---------------------------------------------------------------------------
As discussed above and in the NPRM, under the CSA, DEA may only
grant a person a registration to grow marihuana if: (1) The
registration is consistent with the public interest, and (2) the
registration is consistent with U.S. obligations under the Single
Convention. See 21 U.S.C. 823(a). Accordingly, DEA may only grant
marihuana grower registrations which are consistent with U.S.
obligations under the Single Convention. Article 23(2) of the Single
Convention, which is applicable to the cultivation of marihuana through
Article 28, describes five functions related to the distribution,
supervision, and licensing of marihuana cultivation \10\ that the
United States is obligated to fulfill as part of a regulatory scheme
that authorizes the growing of marihuana.
---------------------------------------------------------------------------
\10\ The five functions of Article 23(2) of the Single
Convention are as follows: (1) Designate the areas in which, and the
plots of land on which, cultivation of the cannabis plant for the
purpose of producing cannabis or cannabis resin shall be permitted;
(2) ensure that only cultivators licensed by the agency shall be
authorized to engage in such cultivation; (3) ensure that each
license shall specify the extent of the land on which the
cultivation is permitted; (4) require all cultivators of the
cannabis plant to deliver their total crops of cannabis and cannabis
resin to the agency and ensure that the agency purchases and takes
physical possession of such crops as soon as possible, but not later
than four months after the end of the harvest; and (5) have the
exclusive right of importing, exporting, wholesale trading, and
maintaining stocks of cannabis and cannabis resin, except that this
exclusive right need not extend to medicinal cannabis, cannabis
preparations, or the stocks of cannabis and cannabis resin held by
manufacturers of such medicinal cannabis and cannabis preparations.
---------------------------------------------------------------------------
The Single Convention requires that these five functions ``be
discharged by a single government agency if the constitution of the
Party concerned permits it.'' Single Convention art. 23(3).\11\ Nothing
in the U.S. Constitution precludes the United States from discharging
all five of those controls through one government agency, so a single
U.S. Federal agency must perform all five of the controls. Further, by
requiring that the functions be discharged by a government agency, the
Single Convention prohibits the United States from assigning them to a
private government contractor.
---------------------------------------------------------------------------
\11\ The Commentary to the Single Convention notes that this is
in order to facilitate national planning and coordinated management
of the various tasks imposed upon a country by Article 23, and that
in countries where more than one agency is needed to perform these
tasks on constitutional grounds, administrative arrangements should
be made to ensure the required coordination.
---------------------------------------------------------------------------
Through the CSA, Congress assigned the first three of the Single
Convention functions to DEA by authorizing DEA--and, at least at the
Federal level, DEA alone--to register and regulate marihuana growers:
Under the CSA, DEA effectively designates the area in which the
marihuana cultivation is permitted, limits marihuana growers to those
it licenses, and specifies the extent of the land on which marihuana
cultivation is permitted as required by the Single Convention. Thus, to
fully comply with the CSA provision requiring consistency with the
Single Convention, DEA also must perform the remaining two functions of
Article 23: Taking possession of marihuana crops after harvest and
maintaining the exclusive right of importing, exporting, wholesale
trading, and maintaining stocks of marihuana and its resin. Congress
granted DEA the power to enforce these provisions by directing DEA to
grant registrations if the registrations are consistent with U.S.
obligations under the Single Convention. 21 U.S.C. 823(a).\12\
---------------------------------------------------------------------------
\12\ These issues are discussed further in the OLC Opinion.
---------------------------------------------------------------------------
Therefore, Congress has assigned DEA the duty and authority to
carry out the five functions the Federal government is required to
perform under the Single Convention if it authorizes the production of
marihuana. DEA has no authority to assign these functions to another
agency or a private contractor outside the government. Rather, DEA must
perform the functions itself, and this rule will enable DEA to do so
more effectively.
Issue 2: Another commenter suggested that NIDA be completely
removed from any role in supplying marihuana to researchers.
Response 2: Marihuana research can be enhanced by allowing other
growers to supply marihuana to researchers. However, scientific and
medical research is likely to benefit from the NIDA DSP's continued
involvement in these efforts. As discussed in the NPRM and further
discussed below, the NIDA DSP has long played a fundamental role in
supplying marihuana to researchers. In doing so, the NIDA DSP has
acquired valuable experience and expertise in the production of
marihuana. Moreover, because researchers currently obtain their
marihuana though the NIDA DSP, the continued operation of the NIDA DSP
will allow researchers who wish to continue to receive such NIDA DSP
marihuana to do so with minimal disruption. Ultimately, the purpose of
this rule is to expand researchers' options for obtaining marihuana,
not eliminate them, a result best achieved by allowing the NIDA DSP to
continue to operate, while also registering additional marihuana
growers.
Issue 3: Some commenters suggested that DEA and DOJ misinterpreted
the Single Convention. Some commenters stated that DEA is
inappropriately using the Single Convention requirements as a
justification to maintain exclusive control over marihuana sales/
purchases. Another commenter suggested that DEA's view of the Single
Convention is too narrow and not aligned with other parties to the
Single Convention with respect to Article 23. This same commenter
suggested that the United States withdraw from the Single Convention
and rejoin with a formal reservation opting out of the cannabis related
provisions of the Single Convention. Some other commenters suggested
DEA initiate the process to amend the treaty to accomplish its intent
of allowing robust research to be performed.
Response 3: As a matter of law, the CSA requires that registrations
to manufacture schedule I and II controlled substances be consistent
with U.S. obligations under the Single Convention, which requires a
single government agency to regulate the cultivation of and certain
trading in marihuana, including taking possession of marihuana after
harvest.\13\ The CSA assigns this function to the Attorney General, who
has delegated this statutory authority to the DEA Administrator. The
CSA therefore requires DEA to grant registrations that are consistent
with U.S. obligations under the Single Convention, which includes
regulating the cultivation of and certain trading in marihuana. DEA
acknowledges some may disagree with these legal conclusions, but DEA is
bound by the law as DOJ and DEA understand it. Whether the Single
Convention's or the CSA's controls of marihuana should be amended and
whether the United States should withdraw from the Single Convention
[[Page 82340]]
are beyond the scope of this rulemaking and DEA's authority. This
rulemaking must be consistent with DEA's obligations under the CSA,
including granting registrations which are consistent with the Single
Convention as it currently stands.
---------------------------------------------------------------------------
\13\ As noted, the relevant legal considerations are explored in
greater detail in the aforementioned OLC Opinion.
---------------------------------------------------------------------------
Issue 4: Some commenters believe that DEA's increased involvement
in the provision of marihuana to researchers would have an adverse
impact on clinical research, clinical trials, and the creation of
cannabis preparations.
Response 4: As explained elsewhere in this rulemaking, DEA
anticipates this rule will increase researchers' access to marihuana
for medical and scientific research. At present, researchers must
obtain marihuana for researchers through the NIDA DSP, and researchers
who wish can continue to do so with minimal disruption. However, this
rule will also allow researchers to legally obtain marihuana from other
DEA-registered growers. DEA's involvement in that process will be
limited, as set forth in these regulations, to those activities
required by the CSA.
Issue 5: Another commenter suggested that DEA allow researchers to
possess marihuana without restriction and that DEA's role in regulating
the growing of marihuana be completely eliminated.
Response 5: As explained above, the CSA requires any person seeking
to manufacture or distribute controlled substances to apply for and
obtain a DEA registration. 21 U.S.C. 822(a)(1). More broadly, marihuana
remains a schedule I controlled substance, and as such has a high
potential for abuse and no currently accepted medical use in treatment
in the United States. See, e.g., Denial of Petition to Initiate
Proceedings to Reschedule Marijuana, 81 FR 53687 (Aug. 12, 2016).
Allowing the cultivation of marihuana for research without a DEA
registration or otherwise regulating this activity would be
incompatible with the CSA and its requirement of consistency with the
Single Convention; it would also fail to protect public health and
safety from the danger of that marihuana being diverted and abused.
Issue 6: One commenter suggested that the NPRM is incompatible with
the Administrative Procedure Act (APA) on the grounds that DEA did not
sufficiently explain the reasoning underlying the proposed rule.
Response 6: The NPRM satisfied the requirements of the APA, as does
this final rule. The NRPM and this rule both set out the legal and
practical reasons why DEA is promulgating this rule to increase the
availability of marihuana for research consistent with the legal
requirements of the CSA, as well as with DEA's duty to protect the
public interest by preventing its diversion and abuse.
Issue 7: Two commenters requested that DEA extend the comment
period given the current coronavirus disease 2019 public health
emergency.
Response 7: DEA recognizes the challenges applicants and
registrants may be facing during the public health emergency. However,
DEA has decided not to extend the comment period beyond the 60 days
generally required under Executive Order 12866 to avoid any further
delays in registering additional marihuana growers. DEA, therefore,
decided that extending the comment period would have unnecessarily
delayed the registering of additional marihuana growers without
meaningfully enhancing the rulemaking process.
The Meaning of ``Medicinal Cannabis''
Issue 1: Some commenters expressed concern about the definition of
medicinal cannabis. Specifically, they argued that ``medicinal
cannabis'' should include any cannabis that State law authorized for
use as ``medical marijuana.'' One commenter requested DEA amend the
definition of medicinal cannabis to include investigational marihuana
for an investigational new drug.
Response 1: Under this rule, DEA will have the exclusive right of
importing, exporting, wholesale trading and maintaining stocks of
marihuana other than those held by registered manufacturers and
distributors of medicinal cannabis or cannabis preparations.\14\ The
term ``medicinal cannabis'' in this rule is limited to ``a drug product
made from the cannabis plant, or derivatives thereof, that can be
legally marketed under the Federal Food, Drug, and Cosmetic Act,'' and
DEA continues to believe this is the most appropriate definition for
the term.
---------------------------------------------------------------------------
\14\ The exception that allows DEA registered manufacturers of
medicinal cannabis and cannabis preparations to maintain stocks of
cannabis materials for the purpose of producing such drugs or
preparations only applies where the raw cannabis material was
previously delivered to DEA.
---------------------------------------------------------------------------
Through this rule, DEA is asserting an exclusive right of
importing, exporting, wholesale trading and maintaining stocks of
marihuana so as to ensure compliance with the CSA, including a
provision requiring registrations to be consistent with the Single
Convention. The exclusion of medicinal cannabis from this function is
based on Single Convention Article 23's exclusion of medicinal opium
from parties' obligation to maintain an exclusive right over opium
trading (as applied to cannabis through Article 28). The Single
Convention does not define medicinal cannabis, but its definition of
``medicinal opium'' is limited to opium that ``has undergone the
processes necessary to adapt it for medicinal use.'' Single Convention
art. 1(o).
Thus, DEA understands ``medicinal cannabis'' to mean drug products
derived from cannabis in a form that the United States has approved for
medical use, which is most effectively captured in this rule by
requiring that the product be able to be legally marketed under the
Food Drug and Cosmetic (FD&C Act). The United States, not State
governments, is the relevant party to the Single Convention, and thus
``medicinal cannabis'' should only include cannabis-derived products
that the United States has approved for medical use, not products
States may have approved.
For similar reasons, this definition excludes an investigational
new drug containing cannabis; such products may eventually become
approved for full medical use in the United States (as opposed to
research), but have not yet obtained such approval. The finished dosage
form of such a substance may qualify as a ``cannabis preparation,''
which is outside of DEA's exclusive right to engage in the wholesale
trade in cannabis, but remains subject to control under the CSA. It
should be emphasized, however, that the bulk material from which any
cannabis preparation is manufactured must be obtained from DEA.
Security Costs and Requirements Applicable to the Manufacture of
Marihuana
Issue 1: Some commenters inquired about the packaging requirements
necessary prior to the transport of purchased marihuana and once that
marihuana is sent from a grower to a seller. Many commenters suggested
DEA use tracking technology, similar to that used by some States, to
monitor the movement of marihuana seeds, marihuana plants, and other
marihuana products. Some commenters suggested that the use of such
tracking technology would eliminate the need for the security measures
proposed in the NPRM and required by DEA regulations more generally.
Response 1: DEA registrants are required to maintain effective
controls against diversion. DEA registered manufacturers are
responsible for providing proper security during the growing process.
The crops must either be delivered and stored in a secure storage
mechanism at the manufacturer's registered location, if one is
designated by DEA, or delivered
[[Page 82341]]
to a location designated by DEA. In either case, the registrant must
comply with security requirements specified in 21 CFR part 1301. A DEA
registrant is also required to adhere to the recordkeeping and
reporting requirements set forth in 21 U.S.C. 827 and 21 CFR part 1304,
including the requirement to maintain records of all controlled
substances which it manufactures, sells, and delivers. Although this
regulation does not specify any special measures imposed on a grower
for the packaging of a marihuana crop for purchase by DEA, DEA may
develop packaging requirements as part of separate agreements between
DEA and individual manufacturers; \15\ but in all cases, DEA's general
security regulations shall apply.
---------------------------------------------------------------------------
\15\ DEA routinely enters into memoranda of agreement with
certain registrants.
---------------------------------------------------------------------------
With regard to tracking technology, DEA recognizes that security
technology is always evolving, and that in some circumstances tracking
technology may present a useful means of protecting against diversion.
In addition to security measures specifically required by DEA
regulations, registrants should take the appropriate measures to guard
against diversion of their crops, which may include the use of new
technologies. At this time, however, DEA has concluded that it is not
necessary to update its security regulations in this regard, and has
not yet seen evidence that tracking technology can adequately replace
security measures required by current regulations.
Issue 2: Other commenters suggested that the procedures for
inspection of crops and harvests, and physical security requirements
are expensive and would discourage applicants.
Response 2: As noted, DEA requires all applicants and registrants
to maintain effective controls against the diversion of controlled
substances as set forth in 21 CFR part 1301. The proposed rule and this
final rule do not impose new or amended regulations for the security
requirements set forth in 21 CFR part 1301. Furthermore, DEA
registrants are subject to routine scheduled investigations conducted
by DEA diversion investigators and other administrative requirements
such as those specified in 21 CFR part 1304. DEA understands there will
be costs incurred in meeting these administrative requirements;
however, these requirements and costs are comparable to those
applicable to bulk manufacturers of other controlled substances.
Requiring such security controls is a critical part of DEA's efforts to
fulfill its duties under the CSA to reduce the diversion and abuse of
controlled substances, including marihuana.
Harvest
Issue: One commenter suggested that DEA expand the amount of time
to deliver a harvest to DEA. This commenter also suggested DEA change
the time period for providing notice of a harvest to five days, instead
of 15 days beforehand, and suggested that the amount of harvests per
year should be changed from three to five. Other commenters suggested
manufacturers provide DEA with notice more than 15 days prior to
harvest. Another commenter agreed that DEA should take possession of
the crop no later than four months after harvest to maintain chemical
composition of the crop.
Response: DEA understands the importance of taking possession of
harvested crops in a timely manner to expedite the re-distribution of
those crops to researchers and to reduce any potential for changes in
the crops' chemical composition. As stated in the NPRM, and to comply
with a CSA provision requiring consistency with the Single Convention,
DEA must take physical possession of the crops within four months after
the end of harvest. The requirement that a grower notify DEA at least
15 days prior to the commencement of a harvest is intended to provide
DEA with sufficient time to make the necessary arrangements for
traveling to the grower's registered location and to take possession of
the crops. DEA has concluded that a five-day notice period will not
provide sufficient time to make the arrangements needed to travel to a
grower and attend a harvest.
With respect to this commenter's statement that DEA should change
the number of harvests per year from three to five, DEA is not
regulating the number of growing cycles that a registered grower may
conduct. A grower may conduct as many growing cycles as is necessary to
meet customer demand, so long as it does not exceed its IMQ for the
year. The NPRM used three harvests per year as the estimated average
number of harvests only for the purpose of conducting its regulatory
analysis.
Quotas
Issue 1: A commenter stated there is a significant lag time from
when quota is issued to harvest time. This same commenter inquired as
to whether the cultivation of marihuana can begin prior to the issuance
of quota. Another commenter suggested that DEA provide a deadline by
which DEA must review or approve bona fide supply agreements and make
quota determinations based upon them. A commenter also suggested that
each manufacturer should be issued IMQ. One commenter suggested that
DEA issue a multi-year license for new bulk manufacturers to meet quota
needs.
Response 1: Pursuant to 21 U.S.C. 826, DEA is required to
``determine the total quantity and establish production quotas for each
basic class of controlled substance in schedules I and II . . . to be
manufactured each calendar year to provide for the estimated medical,
scientific, research, and industrial needs of the United States [and]
for lawful export requirements.'' This figure, which is known as the
aggregate production quota (APQ), is then allocated to individual
registered manufacturers based on each manufacturer's application for
an IMQ as set forth in 21 U.S.C. 826(c). Pursuant to section 826(c),
DEA is required to issue IMQ ``[o]n or before December 1 of each year''
for the following year.
While there may be significant lead time between the date on which
an IMQ is issued and the date of harvest, a grower's lead time is
dependent upon the growing techniques it uses. It should also be noted
that non-botanical manufacturers of controlled substances frequently
deal with significant lead times and have been able to manage them. In
any event, Federal law prohibits the manufacturing of a controlled
substance by a registrant which ``is not expressly authorized . . . by
a quota assigned to him pursuant to'' 21 U.S.C. 826. 21 U.S.C. 842(b).
Thus, a registered manufacturer cannot commence growing marihuana
until it has been granted its IMQ. Furthermore, because the CSA
expressly requires that both the APQ and an IMQ be determined on a
calendar year basis; DEA is not authorized to issue an IMQ other than
on a single year basis.
As stated above, the CSA requires that DEA issue IMQ ``[o]n or
before December 1 of each year'' for the following year. Thus, the CSA
already sets the deadline by which DEA must review a bona fide supply
agreement and make a quota determination. Each registered manufacturer
of marijuana who produces evidence that it has entered into a bona fide
supply agreement with a researcher will be issued an IMQ. In the event
a registered manufacturer enters into additional bona fide supply
agreements after receiving its IMQ, which would result in an increase
in its estimated net disposal for the calendar year, it may apply for
an increase in its IMQ for that calendar year. 21 CFR 1303.25.
[[Page 82342]]
Issue 2: A commenter suggested that the price and quantity of
extracts is not based on dried flower weight and that different strains
of marihuana will yield different extract weights from the same weight
of marihuana. Thus, this commenter argued, DEA should set marihuana
quotas based on the amount of marihuana extract produced from a
harvested marihuana crop, not the weight of the harvested marihuana
itself.
Response 2: Under the CSA, IMQ limits the quantity of controlled
substances a manufacturer may produce. See, e.g., 21 U.S.C. 826(c).
Marihuana itself, not just its extract, is a schedule I controlled
substance. Accordingly, when a marihuana grower cultivates a marihuana
crop, that grower has produced a schedule I controlled substance. Thus,
under the CSA, marihuana growers require an IMQ for the entire
marihuana crop, regardless of the value or quantities of other
controlled substances produced from that crop. Setting marihuana quota
based solely on the amount of extract eventually produced would also
inhibit quota enforcement, as DEA may not be able to determine if a
marihuana grower was complying with its IMQ until the grower processed
the marihuana into an extract. Finally, not all marihuana grown will
necessarily be used to produce extracts--some marihuana research makes
use of the plant material itself. Thus, not all marihuana production
quotas could be tied to the quantity of extract produced from it,
because not all marihuana grown for research is converted into an
extract.
Costs, Pricing, and Fees of Marihuana for DEA Registrants
Issue 1: A commenter inquired how the purchase price is established
when DEA purchases cannabis from a registrant that the registrant
intends to use for his/her own research.
Response 1: This scenario was addressed in the NPRM by proposed 21
CFR 1318.06(b)(4), which this rule promulgates without change.
Normally, under the rule, the seller and buyer may negotiate their own
purchase price, to which DEA will add its administrative fee. When a
registrant grows marihuana for its own use, the purchase price is
irrelevant, given that the grower is effectively negotiating the price
with itself. Thus, the rule will allow the grower to set any ``nominal
price'' it chooses, given that the grower will purchase the marihuana
back from DEA at the same price at which it is sold to DEA. In this
scenario, the only net cost of the transaction is the per-kilogram
administrative fee that grower must pay to DEA.
Issue 2: Several commenters suggested the purchase price of
cannabis should be the registrant's average purchase price of the last
six months or the average U.S. price for high grade commercial
cannabis, plus 20 percent due to its research grade. Another commenter
suggested a cap on the wholesale value of cannabis.
Response 2: DEA recognizes that supply and demand for the
cultivation of marihuana for research and other licit purposes may
fluctuate based on the lawful needs of the U.S. market. As such, DEA
believes that allowing the buyer and seller to negotiate the purchase
price of the marihuana provides more flexibility in determining
appropriate prices driven by market forces. Attempting to set a
universal price--or schedule of prices--for cannabis, or limiting a
registrants' ability to change its prices in response to new
circumstances, would unduly restrict the varieties of marihuana grown
and may unduly limit growers' ability to produce marihuana to satisfy
new research needs. Similarly, setting a price cap may prevent growers
from meeting researchers' need for cannabis that is unusually expensive
given its strain or the conditions in which it must be grown.
Issue 3: A commenter inquired whether the administrative fees are
paid by the purchasing researchers or the selling growers.
Response 3: Under the rule, the administrative fee is considered
part of the price of the cannabis DEA sells to the purchasing
researcher. That said, the rule requires the ``parties'' to pay the fee
to DEA upon entering into a contract for the provision of cannabis, but
before the cannabis is actually delivered to the researcher. In other
words, DEA is not charging the administrative fee to either party in
particular, but to the parties jointly as part of the transaction. The
parties are free to apportion the fee among themselves in any way they
choose.
Issue 4: Some commenters suggested that the administrative fee be
waived for DEA-registered manufacturers who cultivate and research
their own marihuana, and do not sell their marihuana. Similarly, some
commenters suggested that the administrative fee would discourage
research and thus suggested that the administrative fee be waived for
researchers in general.
Response 4: As explained in the NPRM, the purpose of the
administrative fee is to allow DEA to recover the operational costs of
administering the program, as required under 21 U.S.C. 886a(1)(C).
Because DEA anticipates the vast majority of marihuana will be sold to
researchers, a waiver of the administrative fee in transactions
involving researchers would not allow DEA to properly recover its costs
of administering the marihuana growers program under 21 U.S.C.
886a(1)(C).
DEA nonetheless continues to encourage lawful cultivation of
marihuana for research and other licit purposes through the
administration of this program. As discussed in the NPRM and below, DEA
does not expect this administrative fee to be a barrier to research.
Nothing in this rule prohibits NIH--or any other third-party funder of
research grants--from funding marihuana research by covering the cost
of marihuana materials used in research, including these administrative
fees, via grants to researchers.
DEA also cannot waive the administrative fee for researchers
growing marihuana for their own use because that too would prevent DEA
from recovering its operational costs. The provisions of this rule--and
the CSA and DEA regulations more broadly--apply not only when a grower
is selling to a third party, but also when a grower is producing
marihuana for its own use. DEA must still register the grower, and
purchase and take possession of the marihuana, even if the marihuana is
being used for the grower's own research. Thus, DEA does not anticipate
its operational costs to be significantly less when it is regulating a
grower's cultivation of marihuana for its own research or for another
party's use. Accordingly, DEA will charge the same fees in both
situations.
Issue 5: One commenter requested that DEA clarify administrative
fees.
Response 5: The nature and purpose of the administrative fee, as
well as how it is set, are explained both in the rule itself and
throughout the NPRM. In sum, an administrative fee for each transaction
will be added to the sales price of the marihuana. The administrative
fee is a variable fee based on the quantities, in kilogram (not
quality, grade, potency, etc.) of bulk marihuana distributed. The
parties to the transaction will pay DEA the administrative fee upon
entering into a contract for the provision of the marihuana and prior
to the delivery of the marihuana. DEA will set the administrative fee
rate at least annually at a level adequate to allow DEA to recover the
costs of administrating the marihuana growers program under 21 U.S.C.
886a(1)(C).
Issue 6: One commenter suggested that DEA waive the administrative
fee
[[Page 82343]]
for any crops that are damaged or lost while in DEA's possession.
Response 6: Such a fee waiver is unnecessary and inconsistent with
DEA's obligations under the CSA and this rule. As explained elsewhere,
DEA generally does not anticipate retaining possession of crops for
significant periods of time; in most instances, they should be
transferred quickly to the buyer. Accordingly, crops are unlikely to be
damaged or lost in DEA's possession. Moreover, as explained above, the
administrative fee must be set at a rate that allows DEA to recover the
costs of operating the marihuana growers program under 21 U.S.C.
886a(1)(C). Every marihuana transaction under this rule will impose
costs on DEA. Thus, if DEA waived fees for some marihuana buyers and
sellers, it would have to increase fees on other buyers and sellers to
compensate for the amounts lost due to the waiver. DEA has concluded
that it is most equitable to base the administrative fee on the weight
of marihuana produced, and not other factors.
Out of Scope
Issue: DEA received comments that are outside the scope of this
final rule. Some comments raised general concerns regarding the
treatment of marihuana under Federal law. Others raised specific issues
regarding, among other things, medical illnesses, medical treatments,
the scheduled class of marihuana, marihuana-related activities
permitted and prohibited in specific States, and the status of previous
congressional inquiries.
DEA Response: DEA acknowledges receipt of these comments; however,
such comments are outside the scope of the NPRM and the final rule.
These comments ultimately have no bearing on the rule under
consideration, or on the regulatory decisions DEA is making as part of
this rulemaking.
Section-by-Section Summary of the Final Rule
The purposes and functions of this rule were discussed in the NPRM.
Aside from a minor amendment to 21 CFR 1318.04, this rule adopts the
proposed rule without change. DEA's reasoning was fully explained in
the NPRM. However, in addition to describing the amendment--in
particular, the added section at Sec. 1318.04(d)--DEA will summarize
this rule's various changes to DEA regulations and the reasoning behind
these changes for the sake of clarity and convenience.
Sec. 1301.33: Applying the Marihuana Grower Regulations to All
Marihuana Growers
This rule makes two technical changes to 21 CFR 1301.33 to account
for the addition of part 1318, which in turn provides regulations
specific to the growing of marihuana in accordance with the CSA.
As discussed above, part 1301 of DEA's regulations governs the
registration of manufacturers, distributors, and dispensers of
controlled substances. It also includes various sections governing how
entities are to apply to become registered with DEA. See, e.g., 21 CFR
1301.13-17. These sections include Sec. 1301.33, which contains
certain provisions unique to applications to become registered to
manufacture schedule I and II substances in bulk. For example, Sec.
1301.33(a) requires that DEA publish a notice of application after
receiving a schedule I and II bulk manufacturer application.
Previously, Sec. 1301.33(c) provided that the other provisions of
Sec. 1301.33 do not apply when the manufacturing at issue is ``as an
incident to research or chemical analysis as authorized in Sec.
1301.13(e)(1),'' i.e., when the bulk manufacture is a coincident
activity of a DEA-registered researcher or chemical analyst.
This rule amends Sec. 1301.33(c) to modify this exception in the
case of marihuana growing. Specifically, under this rule, Sec.
1301.33(c)'s exclusion applies to manufacturing as an incident to
research and chemical analysis, except as provided in the newly added
Sec. 1301.33(d). And the new Sec. 1301.33(d) provides that an
application to manufacture marihuana ``that involves the planting,
cultivating, growing, or harvesting of marihuana'' (as opposed to, for
example, marihuana manufacturing that merely involves processing
marihuana grown by another party into a new marihuana product) shall be
subject both to the general requirements of Sec. 1301.33 as well to
the newly added requirements of part 1318.
This change serves two purposes. First, by cross-referencing part
1318 in part 1301, this change ensures that marihuana grower applicants
reviewing the general registration and application requirements in part
1301 are made aware of the regulations specific to marihuana growers in
part 1318. Second, the Single Convention does not distinguish marihuana
grown by a researcher or chemical analyst from that grown by other
manufacturers; under the Single Convention, a government agency is
required to purchase and take possession of that marihuana and then
oversee its distribution. Thus, both to ensure that DEA complies with
the CSA, including a provision requiring consistency with obligations
under international treaties such as the Single Convention, and to
ensure that these applications are treated as equitably as possible,
DEA is amending its regulations to ensure that all marihuana growers
are subject to the requirements of both Sec. 1301.33 and part 1318.
Sec. 1318.01: The Scope of the New Marihuana Grower Regulations
New 21 CFR part 1318 adds a series of new provisions to ensure that
DEA can register additional marihuana growers in a way consistent with
its obligations under the CSA, including a provision requiring
consistency with the Single Convention. New Sec. 1318.01 clarifies the
scope of these new provisions, stating that they govern ``the
registration of manufacturers seeking to plant, grow, cultivate, or
harvest marihuana.''
Among other things, this serves to make clear that part 1318 only
applies to those manufacturers involved in activities related to the
cultivation of marihuana, not all forms of marihuana manufacturing. The
CSA defines ``manufacturing'' broadly as ``the production, preparation,
propagation, compounding, or processing of a drug or other substance,''
including extraction from plant products and certain forms of
packaging. 21 U.S.C. 802(15). Thus, under the CSA, entities involved in
a variety of marihuana-related activities, not just marihuana growers,
are required to register with DEA as marihuana manufacturers.
Section 1318.01 emphasizes that part 1318 does not apply to all
marihuana manufactures, but only to those involved in the planting,
growing, cultivating, or harvesting of marihuana.\16\ Part 1318 limits
itself to marihuana growers, rather than all manufacturers, given the
unique obligations the Single Convention places on the United States
with regard to the growing of marihuana and the unique diversion risks
growing presents.
---------------------------------------------------------------------------
\16\ The rule refers to those ``seeking to plant, grow,
cultivate, or harvest marihuana'' rather than just to ``grow'' or
``cultivate,'' to ensure that all activities related to growth and
cultivation are included.
---------------------------------------------------------------------------
Sec. 1318.02: Definitions
Part 1318 contains a number of terms that are not used elsewhere in
DEA regulations or have a unique meaning when used in the context of
part 1318. Thus, to avoid any ambiguity about the meaning of those
terms and the regulations in which they are used,
[[Page 82344]]
Sec. 1318.02 specifically defines those terms for the purposes of part
1318.
Most of the definitions in Sec. 1318.02 are self-explanatory. For
example, ``cannabis'' means any plant of the genus Cannabis (unless
otherwise excepted, as discussed below), and ``cannabis resin'' (with
one exception discussed below) means the separated resin, whether crude
or purified, obtained from the cannabis plant. Similarly, the
definition of ``Single Convention'' includes a citation to eliminate
any possible confusion about the Single Convention at issue, and the
definition of ``bona fide purchase agreement'' specifies the broad type
of agreements DEA is seeking to encompass by this term.
Several provisions of Sec. 1318.02, however, warrant further
discussion. First, as discussed in the NPRM and above, the Single
Convention exempts ``medicinal cannabis'' and ``cannabis preparations''
from certain of its requirements. Following suit, part 1318 likewise
exempts these substances from certain of its provisions, and, to
facilitate this exemption, Sec. 1318.02 defines ``medicinal cannabis''
and ``cannabis preparations.'' Under Sec. 1318.02, ``medicinal
cannabis'' means a drug product made from the cannabis plant, or
derivatives thereof that can be legally marketed under the FD&C Act.
``Cannabis preparation'' means cannabis that was delivered to DEA and
subsequently converted by a registered manufacturer into a mixture
(solid or liquid) containing cannabis or cannabis resin. These
definitions track those of the Single Convention, as adapted to account
for Federal law.\17\
---------------------------------------------------------------------------
\17\ Article 1 of the Single Convention defines ``medicinal
opium'' and ``opium preparations.'' These definitions apply to
cannabis through Article 28, which, with limited exception, subjects
the cultivation of cannabis to the system of controls set forth in
Article 23 with regard to the cultivation of opium. DEA adapted the
Single Convention's definitions to reflect governing Federal law,
including the FD&C Act and the CSA.
---------------------------------------------------------------------------
Finally, Sec. 1301.02(e) clarifies that, when used in part 1318,
none of these cannabis-related terms--cannabis, cannabis preparation,
cannabis resin, or medicinal cannabis--include substances that fall
outside the CSA's definition of marihuana. Among other things, Sec.
1301.02(e) is intended to reflect the CSA amendments made by the
Agriculture Improvement Act of 2018 (AIA), Public Law 115-334. The AIA
amended the definition of marihuana to exclude ``hemp,'' defined as the
plant Cannabis sativa L. and any part of that plant, including the
seeds thereof and all derivatives, extracts, cannabinoids, isomers,
acids, salts, and salts of isomers, whether growing or not, with a
delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent
on a dry weight basis. 7 U.S.C. 1639o(1). Thus, under the AIA, anything
that meets this definition of hemp is no longer a controlled substance,
and the CSA's requirements no longer apply to it. This rule is designed
to regulate marihuana growers, not hemp growers; and thus Sec.
1301.02(e) ensures that part 1318 does not apply to the cultivation of
substances do not meet the definition of marihuana under the CSA, such
as hemp.
Sec. 1318.03: Implementation of the CSA's Requirements
This section reiterates the requirements of certain other
provisions of the CSA and DEA regulations, both to make clear that
these requirements apply to marihuana grower applications and as
background for other provisions of part 1318. Specifically, Sec.
1318.03(a) reiterates the requirement of 21 U.S.C. 823(a) that the DEA
Administrator may only grant an application to cultivate marihuana if
he determines that such registration is both consistent with the public
interest and with U.S. obligations under the Single Convention. Section
1318.03(b) states that, in accordance with both 21 U.S.C. 823(a) and 21
CFR 1301.44, the applicant has the burden of demonstrating that these
requirements are satisfied.
Sec. 1318.04: Specific Control Measures Applicable to the Cultivation
of Marihuana
This section adds a series of control measures designed to ensure
that, once DEA registers additional marihuana growers, their marihuana
cultivation occurs in accordance with the CSA, including the provision
that requires registrations be granted consistent with the Single
Convention. In particular, this section adds regulations that will
ensure that DEA is able to purchase and take possession of marihuana
crops within four months of harvest, and also that DEA has the
exclusive right of importing, exporting, wholesale trading, and
maintaining stocks of marihuana (other than medicinal cannabis or
cannabis preparations)--both functions that the Single Convention
expressly requires a single agency of the Federal government to
perform. This section also contains provisions describing how DEA will
perform these functions, provisions that are designed both to guide
DEA's performance of these duties (and growers' expectations) as well
as to ensure that these functions are performed in a way that protects
against diversion of marihuana without placing an undue burden on
growers. These provisions--and how they apply to particular scenarios--
are discussed in greater depth both above and in the NPRM.
Finally, this section adds a provision that explicitly provides an
allowance for registered bulk manufacturers of marihuana to distribute
samples to registered analytical laboratories. Because these samples
are small, distributed to the laboratory solely for the purpose of
analysis, and consumed in the course of the analysis or destroyed upon
completion of the testing, DEA has determined that DEA is not required
to take possession of these samples to satisfy U.S. obligations under
the Single Convention. This allowance permits registered bulk
manufacturers to monitor the cannabinoid content of their crop in order
to properly time their harvest and demonstrate compliance with contract
specifications to their customers.
Sec. 1318.05: Applying the CSA's Public Interest Factors to Marihuana
Grower Applicants
As indicated above, in addition to ensuring registration is
consistent with its Single Convention obligations, DEA may grant a
registration to manufacture a schedule I or II controlled substance
only where the Administrator determines that the registration is
consistent with the public interest, based on the factors listed in 21
U.S.C. 823(a).
This section both reiterates these public interest factors and
explains how DEA will evaluate whether a particular marihuana grower
application is consistent with them. For example, under 21 U.S.C.
823(a)(1), DEA must weigh, as one of the registration factors, the need
to maintain effective controls against diversion by limiting the number
of registered bulk marihuana growers to that which can produce an
adequate and uninterrupted supply of marihuana under adequately
competitive conditions. Section 1318.05 states that, for the purpose of
assessing this factor, a bona fide supply agreement between a marihuana
grower and a duly registered schedule I researcher or manufacturer
provides evidence that an applicant's registration is necessary to
produce an adequate and uninterrupted supply of marihuana under
adequately competitive conditions. An applicant proposing to grow
marihuana to supply its own research may also be deemed to have
satisfied this aspect of public interest factor 823(a)(1) upon the
presentation of evidence that it possesses a registration to conduct
[[Page 82345]]
research with marihuana under 21 CFR 1301.32.
The rule also provides that, when selecting marihuana grower
registrants, the DEA Administrator will place particular emphasis on an
applicant's ability to consistently produce and supply marihuana of a
high quality and defined chemical composition, and whether the
applicant has demonstrated prior compliance with the CSA and DEA
regulations. These factors are designed to result in registration of
those manufacturers of marihuana that can most efficiently supply the
lawful needs of the U.S. market in terms of quantity and quality. These
factors are further aimed at selecting applicants that can be entrusted
with the responsibility of a DEA registration and complying with the
corresponding obligations under the CSA and DEA regulations.
Section 1318.05(c) provides that, aside from any applications
governed by 21 U.S.C. 823(i), applications DEA accepts for filing after
the date this rule becomes effective will not be considered pending
until all applications accepted for filing on or before this effective
date have been granted or denied by the Administrator. This is because,
as explained above, the CSA requires DEA to consider the need to
maintain effective controls against diversion by limiting the total
number of registered marihuana growers to that necessary to produce an
adequate and uninterrupted supply of marihuana under adequately
competitive conditions. Thus, DEA must consider all pending applicants
together when deciding which applications to grant. Given this
requirement, DEA is including this provision to avoid a situation in
which the agency is in the midst of evaluating these applications and
has to begin its evaluation anew each time it accepts a new marihuana
grower application for filing.
Sec. 1318.06: Factors Affecting Marihuana Prices
As discussed in the NPRM and above, to ensure compliance with the
CSA, including a provision requiring consistency with the Single
Convention (and as specified in Sec. 1301.04 of this rule), DEA will
purchase all lawfully grown marihuana crops within four months of
harvest and then sell the marihuana to DEA registrants who seek to
acquire it for research, product development, or other lawful purposes
under the CSA. To do so, DEA will establish purchasing and selling
prices: Sec. 1318.06 describes how DEA will do this--and more broadly
explains how certain aspects of these transactions will work, as well
as how DEA will fund its expenses from carrying out these duties.
As explained elsewhere in the NPRM and this rule, in purchasing
such marihuana, DEA will use the Diversion Control Fee Account
established in 21 U.S.C. 886a. Thus, DEA must take into account its
obligation under 21 U.S.C. 886a(1)(C) to charge fees under its
diversion control program ``at a level that ensures the recovery of the
full costs of operating the various aspects of that program.'' There
are two potential categories of fees that could be used to recover the
costs of carrying out the new aspects of the diversion control program
relating to marihuana: (1) Fees charged to persons who apply for, and
seek to renew, a DEA registration to manufacture marihuana, and (2)
fees charged for the sale of marihuana by DEA. Under this rule, DEA
intends to recover its basic operating costs primarily through the
latter means, by recovering these costs through an administrative fee
set based on these costs. Section 1318.06 describes how this will
occur.
Under Sec. 1318.06, DEA will allow market forces to direct prices
for marihuana grown by the manufacturer and purchased by DEA, allowing
the marihuana grower and ultimate purchaser to negotiate a sales price.
Where the grower and the buyer are the same entity (or related
entities), Sec. 1318.06 allows the entity to set a nominal price.
In addition to that negotiated price, Sec. 1318.06 provides that
DEA will add an administrative fee (per kilogram (kg)) to the sales
price of the marihuana it sells to end users. As provided in Sec.
1318.06(a), DEA will calculate this administrative fee no less than
annually by taking the preceding fiscal year's cost to operate the
program and dividing it by the quantity in kg of the total of the IMQs
for marihuana issued during the current quota year. Section 1318.06(c)
requires DEA to make the updated administrative fee available on DEA's
website.
As discussed elsewhere, DEA does not intend for this rule to
interfere with HHS's funding of marihuana for use in research. Thus, to
avoid any possibility of confusion, Sec. 1318.06(d) notes that this
section does not prohibit HHS from funding the purchase cost or
associated administrative fees for marihuana purchased for research.
Sec. 1318.07: DEA's Disclaimer of Liability
As explained above, DEA generally does not anticipate retaining
possession of marihuana crops for significant periods of time: In most
instances, they should be transferred quickly from the seller to the
buyer, with DEA's possession being as brief as possible to effectuate
its role in transferring the marihuana from buyer to seller.
Accordingly, crops are highly unlikely to be damaged or lost in DEA's
possession. That said, if a buyer concludes that a crop is
unacceptable, it is conceivable that a grower could claim that the
damage is attributable to DEA, leading to costly and unnecessary
disputes. To avoid disputes, Sec. 1318.07 makes clear that DEA has no
liability with regard to the performance of any of the terms agreed to
by a grower and buyer of marihuana, including but not limited to the
quality of the marihuana. In effect, this puts buyers and sellers on
notice that it is their obligation to structure their marihuana
transactions in such a way as to minimize the risk of damage or
disputes over quality, rather than looking to DEA to mediate or bear
the costs of such disputes.
Regulatory Analyses
Executive Orders 12866 (Regulatory Planning and Review), 13563
(Improving Regulation and Regulatory Review), and 13771 (Reducing
Regulation and Controlling Regulatory Costs)
This rule was developed in accordance with the principles of
Executive Orders 12866, 13563, and 13771. Executive Order 12866 directs
agencies to assess all costs and benefits of available regulatory
alternatives and, if regulation is necessary, to select regulatory
approaches that maximize net benefits (including potential economic,
environmental, public health, and safety, and other advantages;
distributive impacts; and equity). Executive Order 13563 is
supplemental to and reaffirms the principles, structures, and
definitions governing regulatory review established in Executive Order
12866. Section 3(f) of Executive Order 12866 classifies a ``significant
regulatory action,'' requiring review by the Office of Management and
Budget (OMB), as any regulatory action that is likely to result in a
rule that may: (1) Have an annual effect on the economy of $100 million
or more or adversely affect in a material way the economy, a sector of
the economy, productivity, competition, jobs, the environment, public
health or safety, or State, local, or tribal governments or
communities; (2) create a serious inconsistency or otherwise interfere
with an action taken or planned by another agency; (3) materially alter
the budgetary impact of entitlements, grants, user fees, or loan
programs or the rights and obligations of
[[Page 82346]]
recipients thereof; or (4) raise novel legal or policy issues arising
out of legal mandates, the President's priorities, or the principles
set forth in the Executive Order.
OMB's Office of Information and Regulatory Affairs (OIRA) has
determined that, although this rule is not economically significant, it
is a significant regulatory action under section 3(f) of Executive
Order 12866, and it therefore has been reviewed by OMB.
I. Need for the Rule
This rule is needed to ensure that DEA complies with the CSA and
grants registrations that are consistent with relevant treaty
provisions as DEA seeks to increase the number of registered growers of
marihuana. Specifically, this rule amends the provisions of the
regulations governing applications by persons seeking to become
registered with DEA to grow marihuana as bulk manufacturers and adds
provisions related to the purchase and sale of this marihuana by DEA.
These amendments will ensure that DEA carries out all five functions
under Article 23 and Article 28 of the Single Convention pertaining to
marihuana, thus facilitating the planning and coordinated management of
marihuana production necessary as the number of registered marihuana
manufacturers increases.
II. Alternative Approaches
This rule amends DEA regulations only to the extent necessary to
comply with the CSA and to ensure DEA grants registrations that are
consistent with the Single Convention as it pertains to marihuana. In
areas where DEA has discretion, such as in setting a fee structure to
recover the cost of this rule, alternative approaches normally would be
discussed. However, because DEA does not have sufficient information at
this time to discuss alternatives for either the future registration
fees or the fees for the sale of marihuana, the alternative approaches
for such provisions are not included in this rule. Consistent with past
agency practice, any changes to registration fees will be the subject
of a separate rulemaking proceeding, including a discussion of
alternative approaches.
III. Analysis of Benefits and Costs
There are two key benefits associated with this rule. First, DEA
believes it is possible that the approval of new growers may increase
the variety (quality, potency, etc.) of bulk marihuana for research,
leading to more effective research and potentially resulting in the
development of FDA-approved drug products. Second, this rule ensures
that DEA's regulations comply with the requirements of the CSA by
granting registrations that are consistent with the Single Convention
relating to marihuana. DEA is unable to quantify these benefits at this
time.
DEA analyzed the costs of this rule and estimates an annual cost of
$651,318.\18\ The details of the analysis are below.
---------------------------------------------------------------------------
\18\ This is an increase from the estimated cost of $607,644 in
the NPRM. The increase is due to change in estimated personnel
requirements as described below.
---------------------------------------------------------------------------
This rule amends the provisions of the regulations governing
applications by persons seeking to become registered with DEA to grow
marihuana as bulk manufacturers and adds provisions related to the
purchase and sale of this marihuana by DEA. Upon promulgation of this
rule, the following key changes are anticipated: More persons will be
authorized to grow marihuana, DEA will purchase and take title to the
crops of marihuana, and DEA will, with respect to marihuana, have the
exclusive right of importing, exporting, wholesale trading, and
maintaining stocks. These changes mean that authorized purchasers of
bulk marihuana to be used for research, product development, and other
purposes permitted by the CSA may only purchase from DEA, except that
DEA's exclusive rights do not extend to medicinal cannabis or cannabis
preparations. The changes described above affect three primary groups
of entities: Growers and prospective growers, the authorizing
agencies,\19\ and purchasers (generally medical and scientific
researchers). To examine the impact of the rule, DEA first reviewed the
current system for growing and distributing bulk marihuana, then
examined the impact on each of the three affected groups.
---------------------------------------------------------------------------
\19\ The ``authorizing agency'' refers to federal government
agencies, including NIDA and DEA.
---------------------------------------------------------------------------
Current System
To date, DEA has authorized one grower, the National Center for
Natural Products Research (National Center), to cultivate marihuana for
research. NIDA contracts with the National Center to grow marihuana
from seeds supplied initially by NIDA for use in research studies.\20\
The National Center has designated a secure plot of land or indoor grow
facility where marihuana crops are grown every few years, based on
current and expected demand. The marihuana is grown, harvested, stored,
and made available as bulk marihuana or other purified elements of
marihuana to use for research.\21\ NIDA obligated approximately $1.5
million in Fiscal Year 2015 under this contract.\22\ This amount
included costs unrelated to growing and cultivating marihuana, such as
extracting chemical components and producing marihuana cigarettes and
other marihuana-related material. However, based on recent discussion
with NIDA,\23\ DEA estimates NIDA's expenses under the contract with
the National Center (and any related subcontracts) for the bulk
marihuana for 2019 were approximately $2.9 million.\24\ The $2.9
million includes compensation for the cultivating and the 2019
manufacturing quota (MQ) of 2,000 kgs for NIDA (National Center) as
well as all other duties required in the contract.\25\
---------------------------------------------------------------------------
\20\ Production, Analysis, and Distribution of Cannabis and
Related Materials, Federal Business Opportunities (Apr. 12, 2015),
https://www.fbo.gov/spg/HHS/NIH/NIDA-01/N01DA-15-7793/listing.html.
\21\ NIDA's Role in Providing Marijuana for Research, National
Institute on Drug Abuse, https://www.drugabuse.gov/drugs-abuse/marijuana/nidas-role-in-providing-marijuana-research.
\22\ Information on Marijuana Farm Contract, National Institute
on Drug Abuse, https://www.drugabuse.gov/drugs-abuse/marijuana/nidas-role-in-providing-marijuana-research/information-marijuana-farm-contract.
\23\ Conference call between DEA Regulatory Drafting and Policy
Support section and members of NIDA's Marijuana Drug Supply Program,
July 30, 2019.
\24\ Estimated spending for the marihuana DSP for 2019 was $3.3
million to $3.4 million, of which 10%-15% meet the definition of
``hemp'' under the provisions of the AIA. Using the midpoint of
these ranges, the estimated spending is $2.9 million for marihuana,
excluding hemp. The figures are based on a general discussion, and
actual figures may differ.
\25\ The 2019 APQ for all marihuana is 2,450 kgs. 2,000 of the
2,450 kgs are for the NIDA (National Center) cultivating and
manufacturing quota of bulk marihuana. See 83 FR 67348.
---------------------------------------------------------------------------
Researchers may obtain marihuana for use in research through NIDA's
DSP. Bulk marihuana plant material produced under the NIDA DSP is
currently available at no cost to research investigators supported by a
NIH grant. Marihuana is also available to research investigators who
are funded through non-Federal sources. Although NIDA considered
charging for marihuana on a ``cost-reimbursement basis,'' \26\ the
current policy is to provide the marihuana at no charge.\27\
---------------------------------------------------------------------------
\26\ Marijuana Plant Material Available from the NIDA Drug
Supply Program, National Institute on Drug Abuse, https://www.drugabuse.gov/research/research-data-measures-resources/nida-drug-supply-program/marijuana-plant-material-available-nida-drug-supply-program.
\27\ Conference call between DEA Regulatory Drafting and Policy
Support section and members of NIDA's Marijuana Drug Supply Program,
July 30, 2019.
---------------------------------------------------------------------------
Changes to Growers
Upon promulgation of this rule, DEA anticipates approving more than
one
[[Page 82347]]
entity to cultivate and harvest bulk marihuana. As explained earlier in
this document, the CSA imposes limitations on the number of
registrations that DEA may issue to bulk manufacturers of a given
schedule I or II controlled substance. In addition, in deciding whether
to grant an application for any such registration, the CSA requires DEA
to consider the other public interest factors of 21 U.S.C. 823(a),
which must be evaluated on an applicant-by-applicant basis. Further,
DEA cannot accurately predict in advance which particular applications
will be granted, or how many. Accordingly, DEA is unable to accurately
estimate the number of registered bulk marihuana growers. As a result,
to allow for this analysis, DEA estimated the economic impact of this
rule under two different hypothetical scenarios, the first in which the
number of growers expands to three growers, and the second in which the
number of growers expands to 15 growers. It should be understood that
this range of potential registrants is not necessarily reflective of
the actual number of applications that DEA will grant.
In 2016, DEA issued a policy statement regarding applications to
become registered to manufacture marihuana to supply research.\28\
Since the publication of the 2016 policy statement, DEA has received
approximately 38 pending applications for registration as bulk
manufacturer of marihuana for research. As indicated above, the CSA
requires DEA to limit the total number of registered bulk manufacturers
of a given schedule I or II controlled substance to that necessary to
produce an adequate and uninterrupted supply under adequately
competitive conditions. Therefore, DEA believes a range of three to 15
growers is a reasonable estimate for purposes of this economic
analysis, with the understanding that the actual number could vary
considerably.
---------------------------------------------------------------------------
\28\ Applications to Become Registered Under the Controlled
Substances Act to Manufacture Marijuana to Supply Researchers in the
United States, 81 FR 53846 (Aug. 12, 2016). This rule supersedes the
2016 policy statement.
---------------------------------------------------------------------------
The APQ, which includes the MQ, represents the annual quantity of
marihuana that is necessary for the estimated medical, scientific,
research and industrial needs of the United States, for lawful export
requirements, and for the establishment and maintenance of reserve
stocks.\29\ Therefore, given a constant MQ, if more growers are
approved to produce bulk marihuana, the quantities of bulk marihuana
produced and the cost of production (and the reimbursement of
production cost through sales) is transferred from the single incumbent
grower to new growers. This means that there is only a transfer of
economic activity rather than any new cost. The estimated economic
activity of $2.9 million is transferred from the existing single grower
to multiple growers.\30\
---------------------------------------------------------------------------
\29\ 21 CFR 1303.11(a).
\30\ The phrase ``multiple growers'' includes the possibility
that the current grower is one of ``multiple growers.''
---------------------------------------------------------------------------
Transitioning from one large grower to multiple growers may
introduce inefficiencies, driving up production or facility costs. Some
growers may introduce more costly growing techniques to produce certain
traits. Alternatively, some growers may introduce more efficient
growing methods, driving down costs. Additionally, having more growers
may spur more demand in bulk marihuana for research, pushing up the MQ.
In particular, one of the goals of this new rule is to enhance
marijuana availability for product development, which may have the
effect of increasing the MQ. However, DEA does not have a basis to
estimate the impact of these possibilities. Therefore, for the purposes
of this analysis, DEA estimates that an increase in the number of
approved growers does not impact the MQ. In summary, there is no new
cost to growers.
Changes to Authorizing Agencies--Cost to DEA
DEA anticipates that there will be a transfer of economic activity
from NIDA to DEA as well as several new costs as a result of this rule.
This analysis should not be construed as a proposal to modify agency
funding or funding sources.
As discussed above, assuming a constant MQ for bulk marihuana of
2,000 kgs, DEA estimates the cost of all the activities the National
Center performs under its contract with NIDA and the purchase of the
entire aggregate crop, regardless of the number of growers, is $2.9
million. This $2.9 million is not a new cost; it is a transfer. Rather
than NIDA paying the current single grower, DEA will pay the multiple
new growers. In practice, DEA anticipates crops from multiple growers
will be purchased at different times of the year, allowing funds from
sales of earlier purchases to pay for subsequent purchases. Therefore,
to purchase and distribute $2.9 million in bulk marihuana, a working
capital of a lesser amount is likely needed. However, due to many
unknowns and to be conservative, for the purposes of this analysis, the
estimated transfer and working capital requirement is assumed to be
$2.9 million.
DEA anticipates incurring new costs associated with the following
activities: Taking title to the crops and employing personnel to
administer the program. The growers, purchasers, and DEA will already
understand, prior to growing and harvesting, the quantities of
marihuana to be distributed and to whom the distribution will be made,
because the bona fide supply agreements presented during the
registration application process will provide such information. In most
instances, DEA is expected to purchase and take title to the crop, then
sell and distribute the crop to the purchaser on the same day at the
grower's registered location. For the purposes of this analysis, DEA
assumes the following process:
1. After marihuana is harvested and prepared for delivery to DEA,
the registered manufacturer will contact DEA to inform it that the
marihuana is ready for collection.
2. Within a reasonable timeframe, but in no event later than four
months after the harvest, DEA will purchase and take title to the
marihuana. Two DEA Special Agents from the nearest local DEA field
office will drive an estimated 100 miles (200 miles roundtrip) to the
registered manufacturer to take title. Any marihuana that is not
immediately distributed is stored in a designated secure storage
mechanism at the grower's registered location for later distribution.
The number of trips by the two DEA Special Agents equals the number of
harvests.
3. For marihuana distributed from storage at the grower's
registered location, the grower distributes marihuana on DEA's behalf.
If DEA deems it necessary to be present at such distribution, the
distribution is scheduled to coincide with DEA's visit to take title to
the next crop, requiring no additional trips by DEA to the grower.
4. Each grower has three harvests, requiring DEA to collect three
times per year per grower.
For each collection, DEA estimates $2,071 of labor cost \31\ and
$116 of vehicle cost \32\ for a total of $2,187 per
[[Page 82348]]
collection. DEA understands that some growers, employing certain
growing methods, may have more harvests per year. However, DEA does not
have a basis to estimate these growers' methods or the number of
harvests per year. Therefore, DEA believes three harvests per year is a
reasonable estimate. Assuming three collections per year per grower,
there would be nine collections with three approved growers and 45
collections with 15 approved growers. Applying the estimated cost of
$2,187 per collection, DEA estimates a transport cost of $19,683 and
$98,415 for scenarios with three and 15 growers, respectively.
---------------------------------------------------------------------------
\31\ DEA's loaded hourly rate of a Special Agent is $103.54.
Assuming 10 hours each (full work-day) for two agents, the total
labor cost associated with collection from a registered manufacturer
is $2,071. ``Loaded hourly rate'' includes wages, benefits, and
``loading'' of ``non-productive'' hours, i.e., leave, training,
travel, etc.
\32\ $116 is based on Internal Revenue Service standard mileage
rates for 2019 of $0.58 per mile multiplied by the estimated 200
miles driven, roundtrip.
---------------------------------------------------------------------------
Additionally, DEA anticipates it will need additional personnel
resources to operate this program. There are many unknowns and no
decisions have been made on hiring. However, for the purposes of this
analysis, DEA estimates three full-time-equivalent (FTE) professional
staff in the Diversion Control Division will be needed, consisting of
two FTE diversion investigator (DI), and one FTE professional/
administrative (PA) resources.
Applying the fully loaded annual cost of $211,981 per DI and
$168,307 per PA, the estimated total cost of the three FTE employees is
$592,269. For the purposes of this analysis, this cost does not vary
with the number of growers. Table 1 below summarizes the costs
associated with increased staffing.
Table 1--Cost of Personnel Resources
----------------------------------------------------------------------------------------------------------------
Modular cost/unit
Position Job category cost ($) Number of FTEs Cost ($)
----------------------------------------------------------------------------------------------------------------
Staff Coordinator................. DI................... 211,981.............. 2 423,962
Program Analyst................... PA................... 168,307.............. 1 168,307
-----------------------------------------------------------------------------
Total......................... N/A.................. N/A.................. 3 592,269
----------------------------------------------------------------------------------------------------------------
In summary the estimated cost to DEA is:
$19,683 or $98,415 per year to purchase and take title to
the bulk marihuana for scenarios with 3 or 15 authorized growers,
respectively;
$592,269 per year for three DEA FTE employees;
The estimated total annual cost is $611,952 with three
growers and $690,684 with 15 growers and no offsetting cost savings at
NIDA. Using the average of the two values, the estimated cost to DEA is
$651,318. Table 2 summarizes the costs.
Table 2--DEA Cost Summary
----------------------------------------------------------------------------------------------------------------
Low ($) High ($) Average ($)
----------------------------------------------------------------------------------------------------------------
Transport Cost.................................................. 19,683 98,415 N/A
Personnel Cost.................................................. 592,269 592,269 N/A
-----------------------------------------------
Total Cost.................................................. 611,952 690,684 651,318
----------------------------------------------------------------------------------------------------------------
Changes Affecting Researchers
DEA anticipates minimal procedural change for authorized
researchers who plan to acquire bulk marihuana for research. The only
anticipated procedural change is that some researchers will acquire the
bulk marihuana from DEA, rather than from NIDA. As discussed earlier,
the only new cost associated with this regulation is the cost to DEA of
$651,318, an average of high and low scenarios, which will be recovered
by adding an administrative fee of $326 per kg. The administrative fee
was updated from $304 per kg in the NPRM to $326 per kg in this final
rule because there is a change in the personnel required to administer
the program.\33\ As discussed earlier, the administrative fee will be
adjusted annually.
---------------------------------------------------------------------------
\33\ In the NPRM, DEA estimated personnel requirements to
administer the program was one DEA Diversion Investigator and two
Professional/Administrative personnel. After further review, DEA has
estimated in this final rule that two DEA Diversion Investigators
and one Professional/Administrative personnel are needed to
administer the program. The two Diversion Investigators are needed
to provide adequate oversight of reporting and recordkeeping
requirements associated with distribution.
---------------------------------------------------------------------------
While the purchaser will purchase marihuana from DEA, this rule
does not in any way affect the purchaser's source of funds to purchase
from DEA. If marihuana for research is funded by a third party, the
researcher may not experience any cost increase. In particular, NIH has
long served as a third-party funder for research through grants,
including grants to researchers studying marihuana. Nothing in this
rule prohibits NIH from continuing to fund such research by continuing
to cover the cost of marihuana materials used in research, via grants
to researchers.
Cost Summary
DEA estimates the cost of producing the 2019 MQ for bulk marihuana
of 2,000 kgs and operating NIDA's marihuana DSP is $2.9 million per
year. Under the rule, DEA anticipates more bulk marihuana producers
will be approved. DEA estimates the $2.9 million in economic activity
will be transferred across multiple growers, without introducing new
costs.
DEA's purchase of bulk marihuana is not a new cost (to the
economy); it is a transfer from NIDA to DEA. However, $611,952 to
$690,684 in operating costs will be incurred by DEA. DEA will recover
the costs of carrying out the new aspects of the diversion control
program relating to marihuana by selling the marihuana to the buyer at
the negotiated
[[Page 82349]]
sale price, between the grower and the buyer, plus the administrative
fee assessed on a per kg basis.
The net present values (NPV) of the low cost estimate of $611,952
per year over 10 years are $5.2 million and $4.3 million at a three
percent discount rate and seven percent discount rate, respectively.
The NPVs of the high cost estimate of $690,684 over 10 years are $5.9
million and $4.9 million at a three percent discount rate and seven
percent discount rate, respectively. The average of the estimated low
and high costs is $651,318. The NPVs of the average of $651,318 over 10
years are $5.6 million and $4.6 million at three percent and seven
percent discount rates, respectively. Table 3 summarizes the estimated
annual effect and NPVs calculation for each of the transfers and the
three scenarios.
Table 3--Summary of Annual Effect and NPVs
----------------------------------------------------------------------------------------------------------------
Annual effect NPVs at 3% NPVs at 7%
($) ($M) ($M)
----------------------------------------------------------------------------------------------------------------
Cost (Low)...................................................... 611,952 5.2 4.3
Cost (Average).................................................. 651,318 5.6 4.6
Cost (High)..................................................... 690,684 5.9 4.9
----------------------------------------------------------------------------------------------------------------
Executive Order 13771 (Reducing Regulation and Controlling Regulatory
Costs)
This rule is a deregulatory action for the purposes of Executive
Order 13771. The rule is an enabling rule which, coincidentally with
other provisions, expands the number of authorized bulk marihuana
growers.
Executive Order 12988 (Civil Justice Reform)
This rule meets the applicable standards set forth in sections 3(a)
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to
eliminate ambiguity, minimize litigation, establish clear legal
standards, and reduce burdens on regulated parties and the court
system.
Executive Order 13132 (Federalism)
This rule does not have federalism implications warranting the
application of Executive Order 13132. The rule does not have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government.
Executive Order 13175 (Consultation and Coordination With Indian Tribal
Governments)
This rule does not have tribal implications warranting the
application of Executive Order 13175. It does not have substantial
direct effects on one or more Indian tribes, on the relationship
between the Federal government and Indian tribes, or on the
distribution of power and responsibilities between the Federal
government and Indian tribes.
Regulatory Flexibility Act
In accordance with the Regulatory Flexibility Act (RFA), DEA
evaluated the impact of this rule on small entities. DEA's evaluation
of economic impact by size category indicates that the rule will not,
if promulgated, have a significant economic impact on a substantial
number of these small entities.
The RFA requires agencies to analyze options for regulatory relief
of small entities unless the agency can certify that the rule will not
have a significant impact on a substantial number of small entities.
For purposes of the RFA, small entities include small businesses,
nonprofit organizations, and small governmental jurisdictions. DEA
evaluated the impact of this rule on small entities and a discussion of
its findings is below.
As discussed in the section of this rulemaking relating to
Executive Orders 12866, 13565, and 13771, this rule amends the
provisions of the regulations governing applications by persons seeking
to become registered with DEA to grow marihuana as bulk manufacturers,
and adds provisions related to the purchase and sale of this marihuana
by DEA. Upon promulgation of this rule, the following key changes are
anticipated: More persons will be authorized to grow marihuana; DEA
will purchase and take physical possession of crops; and DEA will, with
respect to marihuana, have the exclusive right of importing, exporting,
wholesale trading, and maintaining stocks. These changes, as explained
above, mean that authorized purchasers of bulk marihuana may only
purchase from DEA, except that DEA's exclusive right will not extend to
medicinal cannabis or cannabis preparations as these terms are defined
in paragraphs (b) and (c), respectively, of Sec. 1318.02 of this rule.
The changes described above affect three primary groups of
entities: Growers and prospective growers, the authorizing agencies
(including NIDA and DEA), and purchasers (generally researchers).
Because any economic impact on Federal agencies is outside the scope of
the RFA, the transfer of economic activity between the agencies is
excluded from this discussion. To examine the impact of the rule, DEA
first reviewed the current system for growing and distributing bulk
marihuana, then examined the impact on each of the two affected non-
Federal groups: Growers (bulk manufacturers of marihuana) and
researchers.
Current System
To date, DEA has authorized one grower, the National Center, to
cultivate marihuana for research. NIDA contracts with the National
Center to grow marihuana for use in research studies.\34\ The National
Center designates a secure plot of land where marihuana crops are grown
every few years, based on current and expected demand. The marihuana is
grown, harvested, stored, and made available as bulk marihuana or other
purified elements of marihuana to use for research.\35\ As explained
previously, DEA estimates NIDA's expenses under the contract with the
National Center (and any related subcontracts) for the bulk marihuana
for 2019 were approximately $2.9 million.\36\ The $2.9 million includes
compensation for the cultivating and the 2019 MQ of 2,000 kgs for NIDA
as well as all other duties required in the contract.\37\
---------------------------------------------------------------------------
\34\ Production, Analysis, and Distribution of Cannabis and
Related Materials, Federal Business Opportunities (Apr. 12, 2015),
https://www.fbo.gov/spg/HHS/NIH/NIDA-01/N01DA-15-7793/listing.html.
\35\ NIDA's Role in Providing Marijuana for Research, National
Institute on Drug Abuse, https://www.drugabuse.gov/drugs-abuse/marijuana/nidas-role-in-providing-marijuana-research.
\36\ Estimated spending for the marihuana DSP for 2019 was $3.3
million to $3.4 million, of which 10 percent to 15 percent meet the
definition of ``hemp'' under the provisions of the AIA. Using the
midpoint of these ranges, the estimated spending is $2.9 million.
The figures are based on a general discussion, and actual figures
may differ.
\37\ The 2019 APQ for all manufacturers of marihuana is 2,450
kgs. 2,000 kgs are for cultivating and manufacturing of bulk
marihuana. See 83 FR 67348.
---------------------------------------------------------------------------
[[Page 82350]]
Researchers may obtain marihuana for use in research through NIDA's
DSP. Bulk marihuana plant material produced under the NIDA DSP is
available at no cost to research investigators who are supported by an
NIH grant. Marihuana is also available to research investigators who
are funded through non-Federal sources. Although NIDA considered
charging for marihuana on a ``cost-reimbursement basis,'' \38\ the
current policy is to provide the marihuana at no charge.\39\
---------------------------------------------------------------------------
\38\ Marijuana Plant Material Available from the NIDA Drug
Supply Program, National Institute on Drug Abuse, https://www.drugabuse.gov/research/research-data-measures-resources/nida-drug-supply-program/marijuana-plant-material-available-nida-drug-supply-program.
\39\ See note 23.
---------------------------------------------------------------------------
Impact on Growers
Upon promulgation of this rule, DEA anticipates approving more than
one person to cultivate and harvest bulk marihuana. In 2016, DEA issued
a policy statement regarding applications to become registered to
manufacture marihuana to supply research.\40\ Since the publication of
the 2016 policy statement, there are approximately 38 pending
applications for registration as bulk manufacturer of marihuana for
research. Additionally, some applicants may not meet the statutory and
regulatory criteria for holding a registration as a bulk manufacture
and will be denied. Therefore, for the purposes of this analysis, DEA
will estimate the economic impact of this rule at three and 15 growers
with the understanding that the actual number could vary considerably.
---------------------------------------------------------------------------
\40\ Applications to Become Registered under the Controlled
Substances Act to Manufacture Marijuana to Supply Researchers in the
United States, 81 FR 53846 (2016). This rule supersedes the 2016
policy statement.
---------------------------------------------------------------------------
The APQ, which includes the MQ, represents the annual quantity of
marihuana that is necessary for the estimated medical, scientific,
research and industrial needs of the United States, for lawful export
requirements, and for the establishment and maintenance of reserve
stocks.\41\ Therefore, given a constant MQ, if more growers are
approved to produce bulk marihuana, the quantities of bulk marihuana
produced and the cost of production (and reimbursement of their
production cost through sales) is transferred from the incumbent grower
to new growers. This means that there is no new cost; instead, there is
only a transfer of economic activity. The estimated economic activity
of $2.9 million is transferred from the existing single grower to
multiple growers.\42\
---------------------------------------------------------------------------
\41\ 21 U.S.C. 826(a).
\42\ The phrase ``multiple growers'' includes the possibility
that the current grower is one of the ``multiple growers.''
---------------------------------------------------------------------------
Transitioning from one large grower to multiple smaller growers may
reduce production efficiency, driving up cost. Some growers may
introduce more costly growing techniques in order to produce certain
traits. Alternatively, some growers may introduce more efficient
growing methods, driving down cost. Additionally, having more growers
may spur more demand in bulk marihuana for research, pushing up the MQ.
However, DEA does not have a basis to estimate the impact of these
possibilities.
Impact on Researchers
DEA anticipates minimal procedural change for authorized
researchers who plan to acquire bulk marihuana for research. The only
anticipated procedural change is that the researcher will acquire the
bulk marihuana from DEA, rather than from NIDA or the National Center.
As discussed earlier, the only new cost associated with this regulation
is the cost to DEA of $651,318, which will be recovered by adding an
administrative fee of $326 per kg. As discussed earlier, the
administrative fee will be adjusted annually. While purchasers will
purchase marihuana from DEA, this rule does not in any way affect the
purchasers' source of funds to purchase from DEA. If marihuana for
research is funded by a third party, the researcher may not experience
any cost increase.
Affected Number of Small Entities
This rule affects the current and prospective bulk manufacturers of
marihuana for research and researchers. Based on the discussion above,
DEA anticipates up to 15 bulk manufacturers are affected by this rule.
Additionally, based on a discussion with NIDA,\43\ DEA estimates 40
researchers are affected by this rule. The 40 researchers represent the
approximate number of researchers that receive marihuana from NIDA's
marihuana DSP.
---------------------------------------------------------------------------
\43\ Conference call between DEA Regulatory Drafting and Policy
Support section and members of NIDA's Marijuana Drug Supply Program,
July 30, 2019.
---------------------------------------------------------------------------
Based on a review of representative North American Industry
Classification System (NAICS) codes for bulk manufacturers and
researchers, the following number of firms may be affected: \44\
---------------------------------------------------------------------------
\44\ For the purposes of this analysis, the term ``firms'' is
synonymous with ``entities.''
421 firms related to `Medicinal and Botanical
Manufacturing' (325411) \45\
---------------------------------------------------------------------------
\45\ 2015 SUSB Annual Datasets by Establishment Industry, U.S. &
States, NAICS, Detailed Employment Sizes (U.S., 6-digit and States,
NAICS Sectors), United States Census Bureau, https://www.census.gov/data/datasets/2015/econ/susb/2015-susb.html.
---------------------------------------------------------------------------
9,634 firms related to `Research and Development in the
Physical, Engineering, and Life Sciences (except Biotechnology)'
(541712) \46\
---------------------------------------------------------------------------
\46\ Ibid.
The United States Small Business Administration (SBA) sets size
standards that determine how large an entity can be and still qualify
as a small business for Federal government programs. For the most part,
size standards are based on the average annual receipts or the average
number of employees of a firm. The SBA size standard for both
industries identified by the NAICS codes above is 1,000 employees.\47\
---------------------------------------------------------------------------
\47\ Table of Small Business Size Standards Matched to North
American Industry Classification System Codes, United States Small
Business Association (Oct. 1, 2017). The NAICS code was updated for
`Research and Development in the Physical, Engineering, and Life
Sciences (except Biotechnology)' from 541712 to 541715. The 2015
SUSB data uses 541712 and the 2017 SBA size standard uses 541715 for
the same industry.
---------------------------------------------------------------------------
Comparing the SBA size standards to the U.S. Census Bureau,
Statistics of U.S. Businesses (SUSB) detailed data on establishment
size by NAICS code for each affected industry, DEA estimates the
following number of small entities and percent of firms that are small
entities by industry:
392 (93.1 percent of total) firms in the area of
`Medicinal and Botanical Manufacturing' (325411)
9,090 (94.4 percent of total) firms in the area of
`Research and Development in the Physical, Engineering, and Life
Sciences (except Biotechnology)' (541712)
Table 4 details the calculation for the number of small entities by
industry.
[[Page 82351]]
Table 4--Number of Small Entities by Industry
----------------------------------------------------------------------------------------------------------------
Firm size by average SBA size Small % small
NAICS description employees Firms standard entities entities
----------------------------------------------------------------------------------------------------------------
325411--Medicinal and Botanical <500.................... 384 1,000 384 100
Manufacturing.
500-749................. 3 3 100
750-999................. 5 5 100
1,000-1,499............. 6 ........... 0
1,500-1,999............. 2 ........... 0
2,000-2,499............. 1 ........... 0
2,500-4,999............. 7 ........... 0
5,000+.................. 13 ........... 0
-------------------------------------------------------------------------------
Total................ 421 392 93.1
----------------------------------------------------------------------------------------------------------------
541712--Research and Development <500.................... 8,972 1,000 8,972 100
in the Physical, Engineering, 500-749................. 68 ............ 68 100
and Life Sciences (except
Biotechnology).
750-999................. 50 50 100
1,000-1,499............. 70 ........... 0
1,500-1,999............. 40 ........... 0
2,000-2,499............. 35 ........... 0
2,500-4,999............. 132 ........... 0
5,000+.................. 267 ........... 0
-------------------------------------------------------------------------------
Total................ 9,634 9,090 94.4
----------------------------------------------------------------------------------------------------------------
Applying the calculated respective percentage for small entities to
the number of affected bulk manufacturers and researchers, DEA
estimates 14 (15 x 93.1 percent) bulk manufacturers and 38 (40 x 94.4
percent) researchers, for a total of 52 small entities, will be
affected by this rule. The 14 affected small entity bulk manufacturers
represent four percent of the estimated 392 small entities in the
`Medicinal and Botanical Manufacturing' (325412) industry, and the 38
affected small entity researchers represent 0.4 percent of the
estimated 9,090 small entities in the `Research and Development in the
Physical, Engineering, and Life Sciences (except Biotechnology)'
(541712) industry. Table 5 summarizes the calculations for the
percentage of small entities that are affected by the rule.
Table 5--Percent of Small Entities Affected by Industry
----------------------------------------------------------------------------------------------------------------
Estimated
Number of SBA size Estimated number of Percentage of
NAICS description firms standard number of small affected small small entities
entities entities affected
----------------------------------------------------------------------------------------------------------------
325411--Medicinal and 421 1,000 392 14 4
Botanical Manufacturing.....
541712--Research and 9,634 1,000 9,090 38 0.4
Development in the Physical,
Engineering, and Life
Sciences (except
Biotechnology)..............
----------------------------------------------------------------------------------
Total.................... 10,055 N/A 9,482 52 N/A
----------------------------------------------------------------------------------------------------------------
DEA generally uses a threshold of 30 percent as a ``substantial''
number of affected small entities. Thus, the above analysis reveals
that a non-substantial amount of small bulk manufacturer entities (4
percent) and of small researcher entities (0.4 percent) will be
affected by this rule.
DEA generally considers impacts that are greater than three percent
of annual revenue to be a ``significant economic impact'' on an entity.
As discussed earlier, DEA estimates that there will be a new cost to
DEA of $611,952 to $690,684 per year, or the average of the high and
low estimates of $651,318 per year. DEA will recover the costs of
carrying out the new aspects of the diversion control program relating
to marihuana by selling the marihuana to the buyer at the negotiated
sale price, between the grower and the buyer, plus the administrative
fee assessed on a per kg basis. Based on the average of the high and
low estimates of $651,318 and MQ of 2,000 kgs, the administrative fee
is $326 per kg, adjusted annually.
Furthermore, NIH-funded or other third-party funded researchers are
likely to request and receive enough funding for the full price of
marihuana, including the administrative fee. There will be no impact to
these researchers. However, DEA does not have sufficient information to
estimate the number of small entity researchers that will fall under
this category. Although DEA is unable to quantify the economic impact
for the estimated 14 small entity bulk manufacturers and 38 small
entity researchers, the number of affected small entity manufacturers
and researchers is not a substantial number of small entities in their
respective industries.
Based on the analysis above, and because of these facts, DEA
believes this rule, if promulgated, will not have a significant
economic impact on a substantial number of small entities.
Unfunded Mandates Reform Act of 1995
In accordance with the Unfunded Mandates Reform Act of 1995 (UMRA),
2 U.S.C. 1501 et seq., DEA has determined that this action will not
result in any Federal mandate that may result ``in the expenditure by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100,000,000 or more (adjusted annually for
inflation) in any 1 year.'' See 2 U.S.C. 1532(a). Therefore, neither
[[Page 82352]]
a Small Government Agency Plan nor any other action is required under
the UMRA.
Paperwork Reduction Act of 1995
Pursuant to the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C.
3501-3521, DEA is revising existing information collection 1117-0012. A
person is not required to respond to a collection of information unless
it displays a valid OMB control number. Copies of existing information
collections approved by OMB may be obtained at https://www.reginfo.gov/.
A. Collections of Information Associated With the Rule
Title: Application for Registration (DEA Form 225); Renewal
Application for Registration (DEA Form 225A); Affidavit for Chain
Renewal (DEA Form 225B).
OMB control number: 1117-0012.
Form numbers: DEA-225, DEA-225A, DEA-225B.
Type of information collection: Revision of a currently approved
collection.
Applicable component of the department sponsoring the collection:
Department of Justice/Drug Enforcement Administration, Diversion
Control Division.
Affected public who will be asked or required to respond: Business
or other for-profit.
Abstract: The Controlled Substances Act requires all businesses and
individuals who manufacture, distribute, import, export, or conduct
research and laboratory analysis with controlled substances to register
with DEA. 21 U.S.C. 822; 21 CFR 1301.11, 1301.13. Registration is a
necessary control measure that helps to detect and prevent diversion by
ensuring that the closed system of distribution of controlled
substances can be monitored by DEA, and that the businesses and
individuals handling controlled substances are accountable.
This rule amends the regulations governing applications by persons
seeking to become registered with DEA to grow marihuana as bulk
manufacturers and adds provisions related to the purchase and sale of
this marihuana by DEA. Persons seeking to become registered with DEA to
grow marihuana as bulk manufacturers will still apply for registration
using the same DEA Form 225 as other bulk manufacturers, but there will
be a new supplemental questionnaire unique to marihuana manufacturers
in order to gather additional information about applicants. There will
also be new questionnaires used for importer applicants and non-
marihuana bulk manufacturer applicants. Forms 225, 225A, and 225B will
all receive minor revisions to improve clarity and usability for
registrants.
DEA estimates the following number of respondents and burden
associated with this collection of information:
Number of respondents: 15,919.
Frequency of response: 1 per respondent per year.
Number of responses: 15,919.
Burden per response: 0.1304 hours.
Total annual burden in hours: 2,076.
If you need a copy of the proposed information collection
instruments with instructions or additional information, please contact
the Regulatory Drafting and Policy Support Section (DPW), Diversion
Control Division, Drug Enforcement Administration; Mailing Address:
8701 Morrissette Drive, Springfield, Virginia 22152-2639; Telephone:
(571) 362-3261.
At this point, any comments related to this collection of
information may be sent in writing to the Office of Information and
Regulatory Affairs, OMB, Attention: Desk Officer for DOJ, Washington,
DC 20503. Please state that your comment refers to RIN 1117-AB54/Docket
No. DEA-506.
Congressional Review Act
This final rule is not a major rule as defined by the Congressional
Review Act (CRA), 5 U.S.C. 804. This final rule will not result in an
annual effect on the economy of $100,000,000 or more; a major increase
in costs or prices; or significant adverse effects on competition,
employment, investment, productivity, innovation, or on the ability of
United States-based companies to compete with foreign-based companies
in domestic and export markets. DEA submitted a copy of the final rule
to both Houses of Congress and to the Comptroller General.
National Environmental Policy Act
DEA has analyzed the impacts of this Final Rule on the human
environment pursuant to the National Environmental Policy Act (NEPA),
42 U.S.C. 4321 et seq., and has determined that it is categorically
excluded under 28 CFR part 61, Appendix B. Categorical exclusions are
actions identified in an agency's NEPA implementing procedures that
normally do not have a significant impact on the environment and
therefore do not require either an environmental assessment (EA) or
environmental impact statement (EIS). See 40 CFR 1508.4. In analyzing
the applicability of a categorical exclusion, the agency must also
consider whether extraordinary circumstances are present that would
warrant preparation of an EA or EIS. This action is covered by the
categorical exclusion for registration of persons authorized to handle
controlled substances listed in 28 CFR part 61, Appendix B.
List of Subjects
21 CFR Part 1301
Administrative practice and procedure, Drug traffic control,
Security measures.
21 CFR Part 1318
Administrative practice and procedure, Drug traffic control.
For the reasons stated in the preamble, DEA amends 21 CFR chapter
II as follows:
PART 1301--REGISTRATION OF MANUFACTURERS, DISTRIBUTORS, AND
DISPENSERS OF CONTROLLED SUBSTANCES
0
1. The authority citation for part 1301 continues to read as follows:
Authority: 21 U.S.C. 821, 822, 823, 824, 831, 871(b), 875, 877,
886a, 951, 952, 956, 957, 958, 965 unless otherwise noted.
0
2. In Sec. 1301.33, revise paragraph (c) and add paragraph (d) to read
as follows:
Sec. 1301.33 Application for bulk manufacture of Schedule I and II
substances.
* * * * *
(c) Except as provided in paragraph (d) of this section, this
section shall not apply to the manufacture of basic classes of
controlled substances listed in Schedule I or II as an incident to
research or chemical analysis as authorized in Sec. 1301.13(e)(1).
(d) An application for registration to manufacture marihuana that
involves the planting, cultivating, growing, or harvesting of marihuana
shall be subject to the requirements of this section and the additional
requirements set forth in part 1318 of this chapter.
0
3. Add part 1318 to read as follows:
PART 1318--CONTROLS TO SATISFY THE REQUIREMENTS OF THE ACT
APPLICABLE TO THE MANUFACTURING OF MARIHUANA
Sec.
1318.01 Scope of this part.
1318.02 Definitions.
1318.03 Implementation of statutory requirements.
1318.04 Specific control measures applicable to the bulk manufacture
of marihuana.
[[Page 82353]]
1318.05 Application of the public interest factors.
1318.06 Factors affecting prices for the purchase and sale by the
Administration of cannabis.
1318.07 Non-liability of the Drug Enforcement Administration.
Authority: 21 U.S.C. 801(7), 821, 822(a)(1), (b), 823(a),
871(b), 886a.
Sec. 1318.01 Scope of this part.
Procedures governing the registration of manufacturers seeking to
plant, grow, cultivate, or harvest marihuana are set forth by this
part.
Sec. 1318.02 Definitions.
(a) Except as provided in paragraph (e) of this section, the term
cannabis means any plant of the genus Cannabis.
(b) Except as provided in paragraph (e) of this section, the term
medicinal cannabis means a drug product made from the cannabis plant,
or derivatives thereof, that can be legally marketed under the Federal
Food, Drug, and Cosmetic Act.
(c) Except as provided in paragraph (e) of this section, the term
cannabis preparation means cannabis that was delivered to the
Administration and subsequently converted by a registered manufacturer
into a mixture (solid or liquid) containing cannabis, cannabis resin,
or extracts of cannabis.
(d) Except as provided in paragraph (e) of this section, the term
cannabis resin means the separated resin, whether crude or purified,
obtained from the cannabis plant.
(e) As used in this part, the terms cannabis, medicinal cannabis,
and cannabis preparation do not include any material, compound,
mixture, or preparation that falls outside the definition of marihuana
in section 102(16) of the Controlled Substances Act (the Act) (21
U.S.C. 802(16)).
(f) The term Single Convention means the Single Convention on
Narcotic Drugs, 1961 (18 U.S.T. 1407).
(g) The term bona fide supply agreement means a letter of intent,
purchase order or contract between an applicant and a researcher or
manufacturer registered under the Act.
(h) The term registered researcher or manufacturer means a person
registered under the Act to perform research or manufacture of
marihuana in Schedule I.
Sec. 1318.03 Implementation of statutory requirements.
(a) As provided in section 303(a) of the Act (21 U.S.C. 823(a)),
the Administrator may grant an application for a registration to
manufacture marihuana, including the cultivation of cannabis, only if
he determines that such registration is consistent with the public
interest and with United States obligations under the Single
Convention.
(b) In accordance with section 303(a) of the Act and Sec.
1301.44(a) of this chapter, the burden shall be on the applicant to
demonstrate that the requirements for such registration have been
satisfied.
Sec. 1318.04 Specific control measures applicable to the bulk
manufacture of marihuana.
For a registration to manufacture marihuana that involves the
cultivation of cannabis, the following provisions must be satisfied:
(a) All registered manufacturers who cultivate cannabis shall
deliver their total crops of cannabis to the Administration, except as
provided in paragraph (d). The Administration shall purchase and take
physical possession of such crops as soon as possible, but not later
than four months after the end of the harvest. The Administration may
accept delivery and maintain possession of such crops at the registered
location of the registered manufacturer authorized to cultivate
cannabis consistent with the maintenance of effective controls against
diversion. In such cases, the Administration shall designate a secure
storage mechanism at the registered location in which the
Administration may maintain possession of the cannabis, and the
Administration will control access to the stored cannabis. If the
Administration determines that no suitable location exists at the
registered location of the registered manufacturer authorized to
cultivate cannabis, then the Administration shall designate a location
for the authorized grower to deliver the crop as soon as possible, but
not later than four months after the end of the harvest. However, in
all cases the registrant must comply with the security requirements
specified in part 1301 of this chapter.
(b) The Administration shall, with respect to cannabis, have the
exclusive right of importing, exporting, wholesale trading, and
maintaining stocks other than those held by registered manufacturers
and distributors of medicinal cannabis or cannabis preparations. Such
exclusive right shall not extend to medicinal cannabis or cannabis
preparations. The Administration may exercise its exclusive right by
authorizing the performance of such activities by appropriately
registered persons. The Administration shall require prior written
notice of each proposed importation, exportation, or distribution of
cannabis that specifies the quantity of cannabis to be imported,
exported, or distributed and the name, address, and registration number
of the registered manufacturer or researcher to receive the cannabis
before authorizing the importation, exportation, or distribution. All
importation and exportation shall be performed in compliance with part
1312 of this chapter, as applicable. Under no circumstance shall a
registered manufacturer authorized to grow cannabis import, export, or
distribute cannabis without the express written authorization of the
Administration.
(c) A registered manufacturer authorized to grow cannabis shall
notify in writing the Administration of its proposed date of harvest at
least 15 days before the commencement of the harvest.
(d) A registered manufacturer authorized to grow cannabis may
distribute small quantities of cannabis to a registered analytical lab
for chemical analysis by such analytical lab prior to the
Administration purchasing and taking physical possession of the crop.
The cannabis delivered to the analytical lab under such circumstances
need not be delivered to the Administration pursuant to paragraph (a),
provided such cannabis is destroyed by the analytical lab upon
completion of the testing. Any such distribution of cannabis by a
registered manufacturer to a registered analytical lab must comply with
all applicable requirements of the Act and this subchapter, including
but not limited to security and recordkeeping requirements.
Sec. 1318.05 Application of the public interest factors.
(a) In accordance with section 303(a) of the Act (21 U.S.C.
823(a)), the Administrator shall consider the public interest factors
set forth in paragraphs (a)(1) through (6) of this section:
(1) Maintenance of effective controls against diversion of
particular controlled substances and any controlled substance in
schedule I or II compounded therefrom into other than legitimate
medical, scientific, research, or industrial channels, by limiting the
importation and bulk manufacture of such controlled substances to a
number of establishments which can produce an adequate and
uninterrupted supply of these substances under adequately competitive
conditions for legitimate medical, scientific, research, and industrial
purposes;
(2) Compliance with applicable State and local law;
(3) Promotion of technical advances in the art of manufacturing
these
[[Page 82354]]
substances and the development of new substances;
(4) Prior conviction record of applicant under Federal and State
laws relating to the manufacture, distribution, or dispensing of such
substances;
(5) Past experience in the manufacture of controlled substances,
and the existence in the establishment of effective control against
diversion; and
(6) Such other factors as may be relevant to and consistent with
the public health and safety.
(b) The Administrator's determination of which applicants to select
will be consistent with the public interest factors set forth in
section 303(a), with particular emphasis on the following criteria:
(1) Whether the applicant has demonstrated prior compliance with
the Act and this chapter;
(2) The applicant's ability to consistently produce and supply
cannabis of a high quality and defined chemical composition; and
(3)(i) In determining under section 303(a)(1) of the Act (21 U.S.C.
823(a)(1)) the number of qualified applicants necessary to produce an
adequate and uninterrupted supply of cannabis under adequately
competitive conditions, the Administrator shall place particular
emphasis on the extent to which any applicant is able to supply
cannabis or its derivatives in quantities and varieties that will
satisfy the anticipated demand of researchers and other registrants in
the United States who wish to obtain cannabis to conduct activities
permissible under the Act, as demonstrated through a bona fide supply
agreement with a registered researcher or manufacturer as defined in
this subpart.
(ii) If an applicant seeks registration to grow cannabis for its
own research or product development, the applicant must possess
registration as a schedule I researcher with respect to marihuana under
Sec. 1301.32 of this chapter. As specified in Sec. 1301.13 of this
chapter, chemical analysis and preclinical research (including quality
control analysis) are not coincident activities of a manufacturing
registration for schedule I substances, including cannabis. In
determining under section 303(a)(1) of the Act (21 U.S.C. 823(a)(1))
the number of qualified applicants necessary to produce an adequate and
uninterrupted supply of cannabis under adequately competitive
conditions, the Administrator shall consider the holding of an approved
marihuana research protocol by a registered schedule I researcher
seeking to grow cannabis for its own research or product development as
evidence of the necessity of the applicant's registration under this
factor.
(c) Applications accepted for filing after January 19, 2021 will
not be considered pending for purposes of paragraph (a) of this section
until all applications accepted for filing on or before January 19,
2021 have been granted or denied by the Administrator. Where an
application is subject to section 303(i) of the Act (21 U.S.C. 823(i)),
that section shall apply in lieu of this paragraph (c).
(d) In determining the legitimate demand for cannabis and its
derivatives in the United States, the Administrator shall consult with
the U.S. Department of Health and Human Services, including its
components.
Sec. 1318.06 Factors affecting prices for the purchase and sale by
the Administration of cannabis.
(a) In accordance with section 111(b)(3) of Public Law 102-395 (21
U.S.C. 886a(1)(C)), seeking to recover the full costs of operating the
aspects of the diversion control program that are related to issuing
registrations that comply with the Controlled Substances Act, the
Administration shall assess an administrative fee. To set the
administrative fee, the Administration shall annually determine the
preceding fiscal year's cost of operating the program to cultivate
cannabis and shall divide the prior fiscal year's cost by the number of
kgs of cannabis authorized to be manufactured in the current year's
quota to arrive at the administrative fee per kg. The administrative
fee per kg shall be added to the sale price of cannabis purchased from
the Administration. The administrative fee shall be paid to the
Diversion Control Fee Account.
(b) As set forth in Sec. 1318.04, the Administration shall have
the exclusive right of, among other things, wholesale trading in
cannabis that it purchases from registered manufacturers. The
Administration will, therefore, buy from such manufacturer, sell
cannabis to registered researchers and manufacturers, and establish
prices for such purchase and sale. The Administration will set such
prices in the following manner:
(1) Bulk growers of cannabis shall negotiate directly with
registered researchers and manufacturers authorized to handle cannabis
to determine a sale price for their cannabis. Upon entering into a
contract for the provision of bulk cannabis and prior to the exchange
of cannabis, the parties shall pay to the Administration an
administrative fee assessed based on the number of kgs to be supplied.
The administrative fee shall not be recoverable in the event that
delivery is rejected by the buyer.
(2) The Administration shall sell the cannabis to the buyer at the
negotiated sale price plus the administrative fee assessed on a per kg
basis. Prior to the purchase of the cannabis by the Administration, the
buyer shall pay the negotiated purchase price and administrative fee to
the Administration. The Administration shall hold funds equal to the
purchase price in escrow until the delivery of the cannabis by the
grower to the Administration. The administrative fee shall not be
recoverable in the event that delivery is rejected by the buyer.
(3) After receiving the purchase price and administrative fee from
the buyer, the Administration shall purchase the cannabis from the
grower, on behalf of the buyer, at the negotiated sale price. The
Administration shall retain the administrative fee. In the event the
buyer fails to pay the purchase price and the administrative fee, the
Administration shall have no obligation to purchase the crop and may
order the grower to destroy the crop if the grower cannot find an
alternative buyer within four months of harvest.
(4) In instances where the grower of the cannabis is the same
entity as the buyer of the cannabis, or a related or subsidiary entity,
the entity may establish a nominal price for the purchase of the
cannabis. The Administration shall then purchase the entity's cannabis
at that price and sell the cannabis back to the entity, or a related or
subsidiary entity, at the same price with the addition of the
administrative fee.
(c) Administrative fees set in accordance with this part will be
made available, on an updated basis, on the Administration's website,
no later than December 15th of the year preceding the year in which the
administrative fee will be collected.
(d) Nothing in this section shall prohibit the U.S. Department of
Health and Human Services from continuing to fund the acquisition of
cannabis for use in research by paying, directly or indirectly, the
purchase cost and administrative fee to the Administration.
Sec. 1318.07 Non-liability of Drug Enforcement Administration.
The Administration shall have no liability with respect to the
performance of any contractual terms agreed to by a grower and buyer of
bulk cannabis, including but not limited to the quality of any cannabis
delivered to a buyer. In
[[Page 82355]]
the event that a buyer deems the delivered cannabis to be defective,
the buyer's sole remedy for damages shall be against the grower and not
the Administration.
Timothy J. Shea,
Acting Administrator.
[FR Doc. 2020-27999 Filed 12-17-20; 8:45 am]
BILLING CODE 4410-09-P