Controls To Enhance the Cultivation of Marihuana for Research in the United States, 16292-16307 [2020-05796]
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Federal Register / Vol. 85, No. 56 / Monday, March 23, 2020 / Proposed Rules
Regulatory Notices and Analyses
The FAA has determined that this
proposed regulation only involves an
established body of technical
regulations for which frequent and
routine amendments are necessary to
keep them operationally current. It,
therefore: (1) Is not a ‘‘significant
regulatory action’’ under Executive
Order 12866; (2) is not a ‘‘significant
rule’’ under Department of
Transportation (DOT) Regulatory
Policies and Procedures (44 FR 11034;
February 26, 1979); and (3) does not
warrant preparation of a regulatory
evaluation as the anticipated impact is
so minimal. Since this is a routine
matter that will only affect air traffic
procedures and air navigation, it is
certified that this proposed rule, when
promulgated, will not have a significant
economic impact on a substantial
number of small entities under the
criteria of the Regulatory Flexibility Act.
Environmental Review
This proposal will be subject to an
environmental analysis in accordance
with FAA Order 1050.1F,
‘‘Environmental Impacts: Policies and
Procedures’’ prior to any FAA final
regulatory action.
List of Subjects in 14 CFR Part 71
Airspace, Incorporation by reference,
Navigation (air).
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From Panhandle, TX; via Will Rogers, OK;
Little Rock, AR; to Vulcan, AL.
Issued in Washington, DC, on March 11,
2020.
Scott M. Rosenbloom,
Acting Manager, Airspace Policy Group.
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From Myton, UT, to Hayden, CO. From
Hugo, CO, Hays, KS; via Salina, KS; Kansas
City, MO; St. Louis, MO; Brickyard, IN;
Falmouth, KY; Charleston, WV; to
Montebello, VA.
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From Hobby, TX, via INT of the Hobby
090° and Harvey, LA, 266° radials; Harvey;
Semmes, AL; to Montgomery, AL.
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From Montgomery, AL; Vulcan, AL,
Nashville, TN; Louisville, KY, to Rosewood,
OH.
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From Delicias, Mexico, via Fort Stockton,
TX; Abilene, TX; Ranger, TX; Texarkana, AR;
Memphis, TN; Nashville, TN; Beckley, WV;
Montebello, VA; to Gordonsville, VA.
J–52
From Vancouver, BC, Canada; via Spokane,
WA; Salmon, ID; Dubois, ID; Rock Springs,
WY; Falcon, CO; Hugo, CO; Lamar, CO;
Liberal, KS; INT Liberal 137° and Ardmor,
OK 309° radials; Ardmore; Texarkana, AR;
Sidon, MS; Bigbee, MS; to Vulcan, AL.
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From Westminster, MD; to Philipsburg, PA.
The Proposed Amendment
In consideration of the foregoing, the
Federal Aviation Administration
proposes to amend 14 CFR part 71 as
follows:
PART 71—DESIGNATION OF CLASS A,
B, C, D, AND E AIRSPACE AREAS; AIR
TRAFFIC SERVICE ROUTES; AND
REPORTING POINTS
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Dells, WI, 310° radials; Dells; Badger, WI;
INT Badger 086° and Flint, MI, 278° radials;
to Flint.
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1. The authority citation for part 71
continues to read as follows:
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Authority: 49 U.S.C. 106(f), 106(g); 40103,
40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR,
1959–1963 Comp., p. 389.
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§ 71.1
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Jet Routes
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From Mission Bay, CA; Imperial, CA; Bard,
AZ; INT Bard 089° and Gila Bend, AZ,
261°radials; Gila Bend; Tucson, AZ; El Paso,
TX; Fort Stockton, TX; Junction, TX; San
Antonio, TX; Humble, TX; Lake Charles, LA;
Fighting Tiger, LA; Semmes, AL; Crestview,
FL; to INT Crestview 091°and Seminole, FL,
290°radials.
Paragraph 2004
FAA Order 7400.11, Airspace
Designations and Reporting Points, is
published yearly and effective on
September 15.
[Amended]
2. The incorporation by reference in
14 CFR 71.1 of FAA Order 7400.11D,
Airspace Designations and Reporting
Points, dated August 8, 2019, and
effective September 15, 2019, is
amended as follows:
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Paragraph 2006 United States Area
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[FR Doc. 2020–05857 Filed 3–20–20; 8:45 am]
BILLING CODE 4910–13–P
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
Drug Enforcement
Administration, Department of Justice.
ACTION: Notice of proposed rulemaking.
AGENCY:
The Drug Enforcement
Administration is proposing to amend
its regulations to comply with the
requirements of the Controlled
Substances Act, including consistency
with treaty obligations, in order to
facilitate the cultivation of marihuana
for research purposes and other licit
purposes. Specifically, this proposed
rule would amend the provisions of the
regulations governing applications by
persons seeking to become registered
with DEA to grow marihuana as bulk
manufacturers and add provisions
related to the purchase and sale of this
marihuana by DEA.
DATES: Comments must be submitted
electronically or postmarked on or
before May 22, 2020.
ADDRESSES: To ensure proper handling
of comments, please reference ‘‘[RIN
1117–AB54/Docket No. DEA–506]’’ on
all electronic and written
correspondence, including any
attachments.
• Electronic Comments: DEA
encourages that all comments be
submitted electronically through the
Federal eRulemaking Portal, which
provides the ability to type short
comments directly into the comment
field on the web page or attach a file for
lengthier comments. Please go to https://
www.regulations.gov and follow the
SUMMARY:
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online instructions at that site for
submitting comments. Upon completion
of your submission, you will receive a
Comment Tracking Number for your
comment. Please be aware that
submitted comments are not
instantaneously available for public
view on Regulations.gov. If you have
received a Comment Tracking Number,
your comment has been successfully
submitted and there is no need to
resubmit the same comment.
Commenters should be aware that the
electronic Federal Docket Management
System will not accept any comments
after 11:59 p.m. Eastern Time on the last
day of the comment period.
• Paper Comments: Paper comments
that duplicate electronic submissions
are not necessary. Should you wish to
mail a paper comment in lieu of an
electronic comment, it should be sent
via regular or express mail to: Drug
Enforcement Administration, Attn: DEA
Federal Register Representative/DPW,
8701 Morrissette Drive, Springfield,
Virginia 22152–2639.
• Paperwork Reduction Act
Comments: All comments concerning
collections of information under the
Paperwork Reduction Act must be
submitted to the Office of Information
and Regulatory Affairs, Office of
Management and Budget, Attention:
Desk Officer for DOJ, Washington, DC
20503. Please state that your comment
refers to RIN 1117–AB54/Docket No.
DEA–506.
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:
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Posting of Public Comments
Please note that all comments
received in response to this docket are
considered part of the public record.
They will, unless reasonable cause is
given, be made available by DEA for
public inspection online at https://
www.regulations.gov. Such information
includes personal identifying
information (such as your name,
address, etc.) that you voluntarily
submit. The Freedom of Information Act
applies to all comments received. If you
want to submit personal identifying
information (such as your name,
address, etc.) as part of your comment,
but do not want it to be made publicly
available, you must include the phrase
‘‘PERSONAL IDENTIFYING
INFORMATION’’ in the first paragraph
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of your comment. You must also place
all of the personal identifying
information you do not want made
publicly available in the first paragraph
of your comment and identify what
information you want redacted.
If you want to submit confidential
business information as part of your
comment, but do not want it to be made
publicly available, you must include the
phrase ‘‘CONFIDENTIAL BUSINESS
INFORMATION’’ in the first paragraph
of your comment. You must also
prominently identify the confidential
business information to be redacted
within the comment.
Comments containing personal
identifying information or confidential
business information identified as
directed above will be made publicly
available in redacted form. If a comment
has so much confidential business
information that it cannot be effectively
redacted, all or part of that comment
may not be made publicly available.
Comments posted to https://
www.regulations.gov may include any
personal identifying information (such
as your name, address, etc.) included in
the text of your electronic submission
that is not identified as directed above
as confidential.
An electronic copy of this proposed
rule is available at https://
www.regulations.gov for ease of
reference.
Background and Purpose of This
Proposed Rule
Under the Controlled Substances Act
(CSA), all persons who seek to
manufacture a controlled substance
must apply for and 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 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
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
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.
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(1st Cir. 2013). Under section 823(a), for
DEA to grant a registration, the DEA
Administrator must determine that two
conditions are satisfied: (1) The
registration is consistent with the public
interest (based on the enumerated
criteria 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.
1407.3
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 provisions requiring
consistency with obligations under
international treaties such as the Single
Convention, and determined that certain
changes to its 2016 policy were needed.
The pertinent Treaty provisions are
found in articles 23 and 28 of the Single
Convention, which are summarized
below. Additionally, DEA believes that
these changes will enhance and improve
research with marihuana and facilitate
research that could result in the
development of marihuana-based
medicines approved by the Food and
Drug Administration (FDA).
This proposed rule is being issued
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).
A. Relevant Provisions of the Single
Convention
Because the terminology used in the
Single Convention is somewhat
different from that in the CSA, a brief
explanation is warranted. The Single
Convention uses the terms ‘‘cannabis,’’
‘‘cannabis plant,’’ and ‘‘cannabis
3 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.
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resin’’—all of which are generally
encompassed by the CSA definition of
‘‘marihuana’’ in 21 U.S.C. 802(16)).4 The
Single Convention defines ‘‘cannabis
plant’’ as ‘‘any plant of the genus
Cannabis.’’ Single Convention art.
1(1)(c). The Single Convention defines
‘‘cannabis’’ as the ‘‘flowering or fruiting
tops of the cannabis plant (excluding
the seeds and leaves when not
accompanied by the tops) from which
the resin has not been extracted.’’ Id. art.
1(1)(b). The Single Convention defines
‘‘cannabis resin’’ as the ‘‘separated
resin, whether crude or purified,
obtained from the cannabis plant.’’ Id.
art. 1(1)(d).
Article 28 of the Single Convention
states in paragraph 1: ‘‘If a Party permits
the cultivation of the cannabis plant for
the production of cannabis or cannabis
resin, it shall apply thereto the system
of controls as provided in article 23
respecting the control of the opium
poppy.’’ Paragraph 2 of that article
excludes from the Convention the
cultivation of cannabis for industrial or
horticultural purposes. Because the
United States permits the cultivation of
marihuana for the production of
cannabis and cannabis resin currently
only for research purposes, it is
obligated under the Treaty to apply to
the marihuana plant cultivated for these
purposes the ‘‘system of controls’’
provided in article 23 respecting the
control of the opium poppy.
The Commentary to the Single
Convention contains the following
explanation of articles 23 and 28 within
the overall framework of the Treaty:
The system of control over all stages of the
drug economy which the Single Convention
provides has two basic features: Limitation of
narcotic supplies of each country . . . to the
quantities that it needs for medical and
scientific purposes, and authorization of each
form of participation in the drug economy,
that is, licensing of producers, manufacturers
and traders . . . . In the case of the
production of opium, coca leaves, cannabis
and cannabis resin, this re´gime is
supplemented by the requirement of
maintaining government monopolies for the
wholesale and international trade in these
drugs in countries which produce them
. . . .
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Secretary-General of the United
Nations, Commentary on the Single
Convention on Narcotic Drugs, 1961,
263 (1973) (emphasis added) (footnotes
omitted).5
4 As discussed below, the Agriculture
Improvement Act of 2018, Public Law 115–334,
removed hemp from the CSA definition of
marihuana. This proposed rule applies only to
cannabis that is included in the CSA definition of
marihuana.
5 The United Nations’ Economic and Social
Council requested that the Secretary-General
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Article 23(2) of the Single
Convention, made applicable to
marijuana cultivation by Article 28,
contains five requirements for the
supervision, licensing, and distribution
of marijuana.6
(a) 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.
(b) Ensure that only cultivators
licensed by the agency shall be
authorized to engage in such
cultivation.
(c) Ensure that each license shall
specify the extent of the land on which
the cultivation is permitted.
(d) 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.
(e) 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.7
DEA already directly performs
functions (a), (b), and (c) by virtue of the
CSA registration system as applied to
manufacturers of marihuana. In order to
ensure that DEA complies with the CSA
and grants registrations that are
consistent with relevant treaty
prepare the Commentary ‘‘in the light of the
relevant conference proceedings and other
material’’ in order to aid governments in applying
the Single Convention. The Commentary (1973) is
not binding on Parties to the Convention. Economic
and Social Council Resolution 1962/914(XXXIV) D
(Aug. 3, 1962).
6 The Single Convention provides that the five
functions of article 23, paragraph 2 ‘‘shall be
discharged by a single government agency if the
constitution of the Party concerned permits it.’’
Single Convention art. 23(3). Nothing in the
Constitution would preclude the United States from
discharging all of those controls through one
government agency. 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 on constitutional grounds,
administrative arrangements should be made to
ensure the required coordination.
7 The meanings of the terms ‘‘medicinal
cannabis’’ and ‘‘cannabis preparations’’ are
addressed later in this document. Article 23,
paragraph 2(e) also refers to ‘‘opium alkaloids.’’
However, due to distinctions between the opiates
derived from the opium poppy and the
cannabinoids derived from the cannabis plant, the
notion of ‘‘cannabis alkaloids’’ is inapplicable.
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provisions, namely articles 23 and 28 of
the Single Convention, DEA proposes to
directly perform functions (d) and (e) as
well. This proposed rule would amend
DEA’s regulations so that DEA directly
carries out these remaining two
functions.
DEA also recognizes that the
Department of Health and Human
Services (HHS) has, for nearly 50 years,
maintained an essential program aimed
at ensuring that marihuana is available
to meet the research and scientific needs
of the United States. The regulations
proposed here, if finalized, will require
some changes to this program, but DEA
is committed to ensuring that the
National Institute on Drug Abuse
(NIDA) program continues with
minimal disruption and there is no
impact on the availability of marihuana
through the NIDA Drug Supply Program
(DSP).
After the publication of the 2016
policy statement, DOJ advised DEA that
it must adjust its policies and practices
to ensure compliance with the CSA,
including the CSA’s requirement that
registrations be consistent with the
Single Convention. Therefore, the
regulations being proposed herein, if
finalized, would ensure that DEA
regulations comply with applicable law.
Within that framework, DEA is
proposing changes to support using
marihuana (including extracts and
substances derived therefrom)
cultivated in the United States to
perform research which, among other
things, may lead to the approval of FDAapproved medicines. Thus, the
proposed rule, if adopted, would
supersede the 2016 policy statement.
To address the foregoing
considerations, the proposed rule would
add regulations stating:
(1) All registered manufacturers who
cultivate cannabis shall deliver their
total crops of cannabis to DEA. DEA
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. DEA 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, DEA shall designate a secure
storage mechanism at the registered
location in which DEA may maintain
possession of the cannabis, and DEA
will control access to the stored
cannabis. If DEA determines that no
suitable location exists at the registered
location of the registered manufacturer
authorized to cultivate cannabis, then
DEA shall designate a location for the
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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 21 CFR part 1301.
(2) DEA 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. DEA
may exercise its exclusive right by
authorizing the performance of such
activities by appropriately registered
persons. DEA will 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 21 CFR
part 1312, as applicable. Under no
circumstance shall a registered
manufacturer authorized to grow
cannabis import, export, or distribute
cannabis without the express written
authorization of DEA.
(3) A registered manufacturer
authorized to grow cannabis shall notify
DEA in writing of its proposed date of
harvest at least fifteen days before the
commencement of the harvest.
It should be noted that the timing of
when DEA would take physical
possession of the crops, if delayed,
would not only increase the risk of
diversion, but would also adversely
impact the quality of the crop. Whereas
DEA is proposing to take physical
possession not later than four months
from the time of harvest, it is DEA’s
intent to take physical possession as
soon as possible and to distribute
marihuana as soon as is practical to
those who are authorized to receive it.
The exceptions made for ‘‘medicinal
cannabis or cannabis preparations’’ also
warrant explanation. In view of the text
of the Single Convention, and taking
into account the current wording of
Federal law,8 the regulations being
proposed would define these terms as
follows:
8 Among other things, these definitions take into
account the current CSA definition of marihuana
(21 U.S.C. 802(16)), which was amended in 2018 to
exclude ‘‘hemp’’ as defined in section 297A of the
Agricultural Marketing Act of 1946 (7 U.S.C.
1639o(1)).
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• 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. However, such term
does not include any material,
compound, mixture, or preparation that
falls outside the CSA definition of
marihuana.
• Cannabis preparation means
cannabis that was delivered to DEA and
subsequently converted by a registered
manufacturer into a mixture (solid or
liquid) containing cannabis, cannabis
resin, or extracts of cannabis. However,
such term does not include any
material, compound, mixture, or
preparation that falls outside the CSA
definition of marihuana.
Thus, under the proposed rule, DEA
would have the exclusive right of
importing, exporting, wholesale trading,
and maintaining stocks of marihuana
other than those held by DEA-registered
manufacturers and distributors of
medicinal cannabis or cannabis
preparations. Further, this exclusive
right would not apply to medicinal
cannabis or cannabis preparations.
To summarize those provisions of the
proposed rule that are intended to
ensure that registrations are granted in
compliance with the CSA as the number
of registered manufacturers increases,
all marihuana grown by DEA-registered
manufacturers in the United States
would be delivered by such registrants
to DEA no later than four months after
the end of the harvest. Thereafter, DEA
would authorize exportation,
distribution, and maintenance of stocks
of such marihuana with two important
exceptions:
(1) DEA-registered manufacturers of
(a) an FDA-approved marihuana-derived
drug (i.e., ‘‘medicinal cannabis’’), and
(b) ‘‘cannabis preparations’’ would be
permitted to maintain stocks of cannabis
materials obtained from DEA for the
purpose of producing such drugs or
preparations; 9 and
(2) Once marihuana material that was
previously purchased by DEA is
subsequently converted by a DEAregistered manufacturer into (a) an FDAapproved drug (‘‘medicinal cannabis’’)
or (b) a ‘‘cannabis preparation,’’ the
material no longer would be subject to
9 As indicated above, the requirement that
registered growers deliver all cannabis to DEA no
later than four months after the end of the harvest
applies in all situations—even where the cannabis
will later be distributed by DEA back to the grower
for further use. Thus, the above 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.
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the foregoing exclusive right and could
be further distributed or dispensed by a
DEA registrant in any manner
authorized under the CSA. DEA is
committed to ensuring this new
requirement is implemented in a
manner that supports the policy goal of
facilitating research involving marijuana
and its chemical constituents.
B. Activities Performed by Bulk
Manufacturers of Marihuana and the
Application of These Proposed
Regulations on Those Activities
Based on approximately 35 pending
applications resulting from publication
of its 2016 policy statement, DEA
anticipates that those bulk
manufacturers who would obtain a
registration from DEA to grow
marihuana would be one (or more) of
three different types. In this section,
DEA describes each type and how the
proposed regulations, if finalized as
proposed, would impact those
registrants with regard to functions (1)
and (2) described in the previous
section.
(1) A Bulk Manufacturer Who Grows
Marihuana for Its Own Research or Drug
Development Purposes
A number of applicants seek to grow
marihuana for their own research
endeavors, including some who wish to
develop an FDA-approved medicine
from extracts or derivatives of the
marihuana plant. Based on the
accompanying information supplied by
the applicant to DEA in connection with
their application, these applicants
would list themselves as a ‘‘purchaser,’’
meaning that once their crop was
harvested, they would seek to use the
marihuana for their internal research
purposes. Applicants must obtain a
separate schedule I research registration
from DEA to perform research with
marihuana in accordance with 21 CFR
1301.13 and 1301.32. However, bulk
marihuana growers may manufacture
marihuana for use by other researchers
under a manufacturing registration (and
pursuant to a quota granted to them by
DEA for that purpose under 21 CFR
1303.21(a)).
For applicants within this category,
within four months of harvest, DEA
would travel to the DEA-registered
location, purchase, and take title to the
crop by issuing the grower a DEA Form
222.10 Once DEA has taken title to the
10 DEA would take title to an amount up to the
applicant’s manufacturing quota. Growing
marihuana in excess of a manufacturing quota is a
violation of federal law. 21 U.S.C. 842(b). Thus, any
marihuana grown in excess of a manufacturing
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crop, it would then distribute a quantity
of marihuana that does not exceed the
company’s DEA-issued procurement
quota back to that same manufacturer.
In this way, DEA would take physical
possession of the crop and control its
distribution. Additionally, the material
owned by the government will be
maintained at the DEA-registered
manufacturer’s location and DEA would
maintain its ability to access the storage
location at which such crops are located
as it deemed necessary.
the storage location at which such crops
are located as it deemed necessary.
(2) A Bulk manufacturer Who Supplies
Marihuana to Other DEA Registrants,
Including National Institutes of Health
Funded and Non-National Institutes of
Health Funded Researchers
Some applicants are seeking to grow
marihuana for use by other DEA
registrants including ‘‘non-bulk’’
manufacturers and schedule I
researchers, including National
Institutes of Health (NIH) funded and
non-NIH funded researchers. This subset of bulk manufacturers would be
required to obtain from each customer a
bona fide supply agreement, listing the
name and address of the end user, the
end user’s DEA registration number, the
quantity of marihuana to be supplied,
and the price that the end user and
grower have mutually agreed upon. DEA
will consider this information, along
with additional information, when
establishing an individual
manufacturing quota for the grower.
For applicants that fall within this
sub-set, within four months of harvest,
DEA would travel to the DEA-registered
location, purchase, and take title to the
crop by issuing the grower a DEA Form
222.11 For this reason, each grower must
provide written notice to DEA of its
proposed date of harvest at least fifteen
days prior to the commencement of the
harvest. Once DEA has purchased and
taken title to the crop, the material
would be maintained, under seal, in
DEA’s possession in the manufacturer’s
schedule I vault until such time that a
distribution is necessary. In this
scenario, DEA may distribute (or export)
the marihuana directly or may choose to
authorize the grower to distribute
marihuana on the government’s behalf.
Again, marihuana owned by the
government is maintained at the DEAregistered manufacturer’s site where
DEA would maintain its ability to access
(3) A Bulk Manufacturer Who Supplies
Marihuana To Support NIDA’s Drug
Supply Program
Over the last several decades, NIDA
has administered a contract to produce
high quality marihuana for use by
researchers who have obtained federal
funding (grants) for such research.12
This contract has been awarded to the
National Center for Natural Products
Research at the University of
Mississippi (National Center). In
accordance with that contract and DEA
regulations, NIDA assesses the quantity
of marihuana that is necessary to be
grown for research purposes in a given
year and communicates that information
to both the National Center and DEA.
The National Center applies for, and
must first obtain, a manufacturing quota
from DEA and is then authorized to
grow marihuana up to the limit
established by their DEA-issued quota.
At the time of harvest, a portion of that
material is held in inventory at the
National Center while other portions are
distributed to another DEA registrant,
Research Triangle Institute (RTI).
Currently, at the direction of NIDA, both
RTI and the National Center may
prepare marihuana in a manner which
is suitable for research studies and ship
it to researchers. In these instances,
marihuana held in inventory at the
National Center and RTI are the
property of NIDA. The regulations
proposed in this notice of proposed
rulemaking (NPRM) are intended to
enhance and improve upon existing
DEA regulations that supported the
NIDA DSP and will facilitate research
that may lead to the development of
FDA-approved medicines.
This regulation, if finalized, would
require changes to the current scheme
described above. Although NIDA can,
and would, continue to administer the
contract in support of its DSP and the
National Center (or other NIDA contract
holder) could continue to grow and
produce marihuana in support of
research pursuant to that contract (for as
long as that contract is renewed), within
four months of harvest, DEA would
travel to the National Center at the time
of harvest and take title and possession
to the crop by issuing the National
Center a DEA Form 222.13 Once DEA
quota would be subject to seizure and destruction.
See id. 881(g).
11 As in the first scenario, DEA only would take
title to an amount up to the applicant’s
manufacturing quota. Any marihuana grown in
excess of a manufacturing quota would be subject
to seizure and destruction. See 21 U.S.C. 842(b),
881(g).
12 The Department of Health and Human Services
maintains procedures for providing this same
marihuana to non-NIH funded researchers as well.
13 As above, DEA only would take title to an
amount up to the National Center’s manufacturing
quota, with amount grown in excess of the
manufacturing quota subject to seizure and
destruction. See 21 U.S.C. 842(b), 881(g).
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has taken title and possession of the
crop, the material would be maintained,
under seal, in DEA’s possession in the
National Center’s schedule I vault until
such time that a distribution to another
DEA registrant is authorized. In this
scenario, DEA may distribute (or export)
the marijuana directly or may choose to
authorize the National Center to
distribute marihuana on the
government’s behalf. In both situations,
DEA’s distributions would be in
accordance with NIDA’s
recommendation. And, as such, DEA
does not envision a scenario in which
it would deny or delay a distribution to
a duly registered schedule I researcher
authorized to handle marihuana.
Marihuana owned by DEA would be
maintained at the National Center,
where DEA would maintain its ability to
access the storage location at which its
crops are located.
C. Application of the Public Interest
Factors
As indicated, in addition to the
foregoing treaty considerations, 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 criteria listed in 21 U.S.C.
823(a). The first of those criteria, set
forth in subsection 823(a)(1), provides
that, for the purpose of maintaining
effective controls against diversion, the
number of registered bulk
manufacturers of a given schedule I or
II controlled substance should be
limited to that which can produce an
adequate and uninterrupted supply of
marihuana under adequately
competitive conditions.14
The proposed rule would explain how
DEA will evaluate whether a particular
application is consistent with the public
interest factors of 21 U.S.C. 823(a),
including factor 823(a)(1). As discussed
above, a bona fide supply agreement
between a 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 the public interest factor
of 823(a)(1) upon the presentation of
evidence that it possesses a registration
to conduct research with marihuana
under 21 CFR 1301.32. Such a
researcher will only be granted quota to
14 For a detailed explanation of subsection 823(a)
(1), see 74 FR at 2127–33.
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the extent authorized by its approved
research protocol.
The proposed rule further provides
that the Administrator’s determination
of which applicants to select will be
consistent with the public interest
factors in section 823(a), with particular
emphasis on the criteria discussed in
the preceding paragraph as well as the
following:
(1) The applicant’s ability to
consistently produce and supply
marihuana of a high quality and defined
chemical composition; and
(2) Whether the applicant has
demonstrated prior compliance with the
CSA and DEA regulations.
The preceding criteria 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.15 These criteria 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.
As indicated above, following the
publication of the 2016 policy
statement, DEA received numerous
applications by persons seeking to
become registered as bulk
manufacturers of marihuana. There are
approximately 35 such applications
currently pending. As explained 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. In consultation
with HHS, DEA wishes to avoid a
situation in which the agency is in the
midst of evaluating these applications
and has to begin an evaluation anew
each time it accepts a new marihuana
grower application for filing. Thus, the
proposed rule provides that, with a
limited exception, applications accepted
for filing after the date the final rule
becomes effective will not be considered
pending until all applications accepted
for filing on or before the date the final
rule becomes effective have been
granted or denied by the Administrator.
15 The proposed rule provides that, in
determining the legitimate demand for marihuana
and its derivatives in the United States, the
Administrator shall consult with the Department of
Health and Human Services, including its
components.
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D. Consideration of the Amendments to
the CSA Made by the Hemp Provisions
of the Agriculture Improvement Act of
2018
The Agriculture Improvement Act of
2018 (AIA), Public Law 115–334, which
became effective December 20, 2018,
contained various provisions regarding
the cultivation of hemp. The AIA
definitions hemp 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). The AIA amended the CSA
definition of marihuana to exclude
hemp. Thus, anything that falls within
the foregoing definition of hemp is no
longer a controlled substance, and the
CSA’s requirements no longer apply to
such substances. Accordingly, this
proposed rule would apply only to
persons seeking authorization under the
CSA (i.e., seeking a DEA registration) to
manufacture marihuana that involves
the planting, cultivation, growing, or
harvesting of marihuana as that term is
currently defined in the CSA (21 U.S.C.
802(16)).16
E. Factors Affecting Prices for the
Purchase and Sale of Marihuana by
DEA
As stated above, under articles 23 and
28 of the Single Convention, the
government agency must—in addition
to taking physical possession—purchase
all lawfully grown cannabis crops
within four months of harvest. Thus,
under the proposed rule, DEA will
purchase marihuana grown by DEAregistered manufacturers and
subsequently sell the marihuana to DEA
registrants who seek to acquire it for
research, product development, or other
lawful purposes under the CSA.
In purchasing such marihuana, DEA
intends to use the Diversion Control Fee
Account, as established in 21 U.S.C.
886a. Thus, DEA would, under the
proposed rule, need to 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
16 The United States Department of Agriculture
has issued regulations and guidance to implement
a program for the commercial production of
industrial hemp in the United States under the
framework of the AIA. See Establishment of a
Domestic Hemp Production Program, 84 FR 58522
(Oct. 31, 2019).
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16297
recover the costs of carrying out the
proposed new aspects of the diversion
control program relating to cannabis: (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.
DEA believes that economic forces
will not only drive the types, varieties
and strains of marihuana materials that
will be produced by growers, but that
such forces will also drive the fees that
DEA-registrants will be willing to pay
for marihuana used for research
purposes. Accordingly, DEA proposes to
allow market forces to direct prices for
marihuana grown by the manufacturer
and purchased by DEA. As we have
stated elsewhere in this proposal, DEA
will establish limits on individual
production based on bona fide supply
agreements between the grower and the
end user (a DEA registered manufacturer
or a schedule I researcher). Accordingly,
DEA will use these terms as the basis for
purchasing marijuana from the grower
and additionally, for the basis by which
it will sell that same marihuana to an
end user.
In addition to that negotiated fee, DEA
is proposing to add a variable
administrative cost (per kilogram (kg))
which it intends to add onto the sales
price of the marihuana it sells to end
users. The purpose of this
administrative fee is to ensure the full
recovery by DEA of the costs of
administering the program as required
by 21 U.S.C. 886a(1)(C). DEA will
calculate this variable cost annually by
taking the preceding fiscal year’s cost to
operate the program and dividing it by
the quantity in kg of the manufacturing
quota for marihuana issued during the
current quota year. For example, based
on the economic analysis provided
below, DEA would calculate an
administrative fee of $304 per kg for
marihuana distributed to end users. The
calculation below is illustrative:
Variable Administrative Fee = $607,644/
2,000 kg = $304 per kg 17
DEA proposes to establish this fee no
less than annually and proposes to
publish this rate on its website by
December 15th of the year preceding the
year in which the administrative fee
will be collected.
17 Rounded to nearest whole dollar. The cost of
$607,644 is explained below.
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Executive Orders 12866 (Regulatory
Planning and Review), 13563
(Improving Regulation and Regulatory
Review), and 13771 (Reducing
Regulation and Controlling Regulatory
Costs)
This proposed 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
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.
DEA has determined that, although
this proposed rule is not economically
significant, it is a significant regulatory
action under section 3(f) of Executive
Order 12866, thus subjecting it to
review 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
proposed rule would amend the
provisions of the regulations governing
applications by persons seeking to
become registered with DEA to grow
marihuana as bulk manufacturers and
add provisions related to the purchase
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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 proposed rule would amend
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 proposed rule,
alternative approaches 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 proposed rule.
Consistent with past agency practice,
any proposed 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 proposed 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 FDAapproved drug products. Second, this
rule would ensure 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
proposed rule and estimates an annual
cost of $607,644. The details of the
analysis are below.
This proposed rule would amend the
provisions of the regulations governing
applications by persons seeking to
become registered with DEA to grow
marihuana as bulk manufacturers and
add provisions related to the purchase
and sale of this marihuana by DEA. If
this proposed rule is promulgated, 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
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the exclusive right of importing,
exporting, wholesale trading, and
maintaining stocks. These changes
would 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 would not
extend to medicinal cannabis or
cannabis preparations. The changes
described above would affect three
primary groups of entities: Growers and
prospective growers, the authorizing
agencies,18 and purchasers (generally
medical and scientific researchers). To
examine the impact of the proposed
rule, DEA first reviewed the current
system for growing and distributing
bulk marihuana, then examined the
impact on each of the three affected
groups.
Current System
Under current regulations, DEA has
authorized one grower, the 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.19 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.20 NIDA obligated
approximately $1.5 million in Fiscal
Year 2015 under this contract.21 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,22 DEA estimates NIDA’s
expenses under the contract with the
National Center (and any related
18 The ‘‘authorizing agency’’ refers to federal
government agencies, including NIDA and DEA.
19 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.
20 NIDA’s Role in Providing Marijuana for
Research, National Institute on Drug Abuse, https://
www.drugabuse.gov/drugs-abuse/marijuana/nidasrole-in-providing-marijuana-research.
21 Information on Marijuana Farm Contract,
National Institute on Drug Abuse, https://
www.drugabuse.gov/drugs-abuse/marijuana/nidasrole-in-providing-marijuana-research/informationmarijuana-farm-contract.
22 Conference call between DEA Regulatory
Drafting and Policy Support section and members
of NIDA’s Marijuana Drug Supply Program, July 30,
2019.
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subcontracts) for the bulk marihuana for
2019 are approximately $2.9 million.23
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.24
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,’’ 25 the
current policy is to provide the
marihuana at no charge.26
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Changes to Growers
If this proposed rule is implemented,
DEA anticipates approving more than
one person 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-byapplicant 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 will estimate the
economic impact of this proposed 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
23 Anticipated spending for the marihuana DSP
for 2019 is $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.
24 The 2019 Aggregate Production Quota 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.
25 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-drugsupply-program/marijuana-plant-materialavailable-nida-drug-supply-program.
26 See note 22.
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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.27 Since
the publication of the 2016 policy
statement, DEA has received
approximately 35 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 3 to 15 growers is a
reasonable estimate for purposes of this
economic analysis, with the
understanding that the actual number
could vary considerably.
The Aggregate Production Quota
(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.28
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.29
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
27 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 proposed
rule, if adopted, would supersede the 2016 policy
statement.
28 21 CFR 1303.11(a).
29 The phrase ‘‘multiple growers’’ includes the
possibility that the current grower is one of
‘‘multiple growers.’’
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16299
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 in no way 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 would 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 $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
would already understand prior to
growing and harvesting, the quantities
of marihuana to be distributed and to
whom the distribution would be made
because the bona fide supply
agreements presented during the
registration application process would
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
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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 (or Deputized Task Force
Officers) 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 30 and $116 of
vehicle cost 31 for a total of $2,187 per
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.
Additionally, DEA anticipates it
would 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 would be needed,
consisting of one FTE diversion
investigator (DI), and two 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 $548,595. For the purposes
of this analysis, this cost does not vary
with the number of growers. Table 1
below summarizes the costs associated
with increased staffing.
TABLE 1—COST OF PERSONNEL RESOURCES
Modular cost/
unit cost
($)
Number of
FTEs
Cost
($)
Position
Job category
Staff Coordinator .............................................................................................
Program Analyst ..............................................................................................
DI ...................
PA ..................
211,981
168,307
1
2
211,981
336,614
Total ..........................................................................................................
N/A .................
N/A
3
548,595
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;
• $548,595 per year for three DEA
FTE employees;
• The estimated total annual cost is
$568,278 with three growers and
$647,010 with 15 growers and no
offsetting cost savings at NIDA. Using
the average of the two values, the
estimated cost to DEA is $607,644.
Table 2 summarizes the costs.
TABLE 2—DEA COST SUMMARY
Low
($)
Average
($)
Transport Cost .............................................................................................................................
Personnel Cost ............................................................................................................................
19,683
548,596
98,415
548,595
N/A
N/A
Total Cost .............................................................................................................................
568,278
647,010
607,644
Changes Affecting Researchers
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High
($)
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 would acquire the bulk
marihuana from DEA, rather than from
NIDA. As discussed earlier, the only
new cost associated with this proposed
30 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.
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regulation is the cost to DEA of
$607,644, an average of high and low
scenarios, which would be recovered by
adding an administrative fee of $304 per
kg. As discussed earlier, the
administrative fee would be adjusted
annually.
While the purchaser would 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
‘‘Loaded hourly rate’’ includes wages, benefits, and
‘‘loading’’ of ‘‘non-productive’’ hours, i.e., leave,
training, travel, etc.
31 $116 is based on IRS standard mileage rates for
2019 of $0.58 per mile multiplied by the estimated
200 miles driven, roundtrip.
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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 proposed rule, DEA
anticipates more bulk marihuana
producers would be approved. DEA
estimates the $2.9 million in economic
activity would 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,
$568,278 to $647,010 in operating costs
would be incurred by DEA. DEA will
recover the costs of carrying out the
proposed 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.
The net present values (NPVs) of the
low cost estimate of $568,278 per year
over 10 years are $4.8 million and $4.0
million at a three percent discount rate
and 7 percent discount rate,
respectively. The NPVs of the high cost
estimate of $647,010 over 10 years are
$5.5 million and $4.5 million at a three
percent discount rate and seven percent
discount rate, respectively. The average
of the estimated low and high costs is
$607,644. The NPVs of the average of
$607,644 over 10 years are $5.2 million
and $4.3 million at three percent and
seven percent discount rates,
respectively. Table 3 summarizes the
estimated annual effect and NPVs
calculation for each of the transfers and
the three scenarios.
TABLE 3—SUMMARY OF ANNUAL EFFECT AND NPVS
Annual effect
($)
Cost (Low) ...................................................................................................................................
Cost (Average) .............................................................................................................................
Cost (High) ...................................................................................................................................
Executive Order 13771 (Reducing
Regulation and Controlling Regulatory
Costs)
This proposed rule is expected to be
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 proposed 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.
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Executive Order 13132 (Federalism)
This proposed rule does not have
federalism implications warranting the
application of Executive Order 13132.
The proposed 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 proposed 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
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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 proposed
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
proposed rulemaking relating to
Executive Orders 12866, 13565, and
13771, this proposed rule would amend
the provisions of the regulations
governing applications by persons
seeking to become registered with DEA
to grow marihuana as bulk
manufacturers, and add provisions
related to the purchase and sale of this
marihuana by DEA. If this proposed rule
is promulgated, the following key
changes are anticipated: More persons
will be authorized to grow marihuana;
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NPVs at 3%
($M)
568,278
607,644
647,010
4.8
5.2
5.5
NPVs at 7%
($M)
4.0
4.3
4.5
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, would mean that authorized
purchasers of bulk marihuana may only
purchase from DEA, except that DEA’s
exclusive right would not extend to
medicinal cannabis or cannabis
preparations as these terms are defined
in paragraphs (b) and (c), respectively,
of proposed § 1318.02 of this proposed
rule.
The changes described above would
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 proposed
rule, DEA first reviewed the current
system for growing and distributing
bulk marihuana, then examined the
impact on each of the two affected nonfederal groups: Growers (bulk
manufacturers of marihuana) and
researchers.
Current System
Under current regulations, DEA has
authorized one grower, the National
Center, to cultivate marihuana for
research. NIDA contracts with the
National Center to grow marihuana for
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use in research studies.32 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.33 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 are
approximately $2.9 million.34 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.35
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,’’ 36 the current policy is to provide
the marihuana at no charge.37
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Impact on Growers
If this proposed rule is implemented,
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.38 Since
the publication of the 2016 policy
32 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.
33 NIDA’s Role in Providing Marijuana for
Research, National Institute on Drug Abuse, https://
www.drugabuse.gov/drugs-abuse/marijuana/nidasrole-in-providing-marijuana-research.
34 Anticipated spending for the marihuana DSP
for 2019 is $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.
35 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.
36 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-drugsupply-program/marijuana-plant-materialavailable-nida-drug-supply-program.
37 See note 22.
38 Applications to Become Registered under the
Controlled Substances Act to Manufacture
Marijuana to Supply Researchers in the United
States, 81 FR 53846 (2016). This proposed rule, if
adopted, would superseded the 2016 policy
statement.
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statement, there are approximately 35
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
proposed rule at three and 15 growers
with the understanding that the actual
number could vary considerably.
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.39
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.40
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
would acquire the bulk marihuana from
DEA, rather than from NIDA or the
National Center. As discussed earlier,
the only new cost associated with this
proposed regulation is the cost to DEA
of $607,644, which would be recovered
by adding an administrative fee of $304
per kg. As discussed earlier, the
administrative fee would be adjusted
39 21
U.S.C. 826(a).
phrase ‘‘multiple growers’’ includes the
possibility that the current grower is one of the
‘‘multiple growers.’’
40 The
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annually. While purchasers would
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 proposed 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 proposed rule.
Additionally, based on a discussion
with NIDA,41 DEA estimates 40
researchers are affected by this proposed
rule. The 40 researchers represent the
approximate number of researchers that
receive marihuana from NIDA’s
marihuana DSP.
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: 42
• 421 firms related to ‘Medicinal and
Botanical Manufacturing’
(325411) 43
• 9,634 firms related to ‘Research and
Development in the Physical,
Engineering, and Life Sciences
(except Biotechnology)’ (541712) 44
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.45
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
41 See
note 22.
the purposes of this analysis, the term
‘‘firms’’ is synonymous with ‘‘entities.’’
43 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.
44 Ibid.
45 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.
42 For
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• 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
the following number of small entities
and percent of firms that are small
entities by industry:
Development in the Physical,
Engineering, and Life Sciences
(except Biotechnology)’ (541712)
Table 4 details the calculation for the
number of small entities by industry.
TABLE 4—NUMBER OF SMALL ENTITIES BY INDUSTRY
Firm size by average
employees
NAICS description
325411—Medicinal and Botanical Manufacturing ..................................................
Total ....................................................
SBA size
standard
Small entities
% Small
entities
<500
500–749
750–999
1,000–1,499
1,500–1,999
2,000–2,499
2,500–4,999
5,000+
384
3
5
6
2
1
7
13
1,000
........................
........................
........................
........................
........................
........................
........................
384
3
5
........................
........................
........................
........................
........................
100
100
100
0
0
0
0
0
..................................................
421
........................
392
93.1
<500
500–749
750–999
1,000–1,499
1,500–1,999
2,000–2,499
2,500–4,999
5,000+
8,972
68
50
70
40
35
132
267
1,000
........................
........................
........................
........................
........................
........................
........................
8,972
68
50
........................
........................
........................
........................
........................
100
100
100
0
0
0
0
0
..................................................
9,634
........................
9,090
94.4
541712—Research and Development in
the Physical, Engineering, and Life
Sciences (except Biotechnology) ...........
Total ....................................................
Firms
Applying the calculated respective
percentage for small entities to the
number of affected bulk manufacturers
and researchers, DEA estimates 14 (15 ×
93.1 percent) bulk manufacturers and 38
(40 × 94.4 percent) researchers, for a
total of 52 small entities, will be affected
by this proposed 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 proposed
rule.
TABLE 5—PERCENT OF SMALL ENTITIES AFFECTED BY INDUSTRY
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NAICS description
SBA size
standard
Number of firms
Estimated
number of
small entities
Estimated
number of
affected
small entities
Percentage of
small entities
affected
325411—Medicinal and Botanical Manufacturing ..................................................
541712—Research and Development in
the Physical, Engineering, and Life
Sciences (except Biotechnology) ...........
421
1,000
392
14
4
9,634
1,000
9,090
38
0.4
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 proposed rule.
DEA generally considers impacts that
are greater than three percent of annual
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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 $568,278 to
$647,010 per year, or the average of the
high and low estimates of $607,644 per
year. DEA will recover the costs of
carrying out the proposed new aspects
of the diversion control program relating
to marihuana by selling the marihuana
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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 $607,644 and
MQ of 2,000 kgs, the administrative fee
is $304 per kg, adjusted annually.
Furthermore, NIH-funded or other
third-party funded researchers are likely
to request and receive enough funding
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A. Collections of Information Associated
With the Proposed Rule
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.
If adopted, this proposed rule would
amend the regulations governing
applications by persons seeking to
become registered with DEA to grow
marihuana as bulk manufacturers and
add 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 would still apply for
registration using the same DEA Form
225 as other bulk manufacturers, but
DEA would use a new supplemental
questionnaire unique to marihuana
manufacturers in order to gather
additional information about applicants.
There would also be new questionnaires
used for importer applicants and nonmarihuana bulk manufacturer
applicants. Forms 225, 225A, and 225B
would 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.
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.
B. Request for Comments Regarding the
Proposed Collections of Information
Written comments and suggestions
from the public and affected entities
concerning the proposed collections of
information are encouraged. Under the
PRA, DEA is required to provide a
notice regarding the proposed
collections of information in the Federal
Register with the notice of proposed
rulemaking and solicit public comment.
Pursuant to section 3506(c)(2) of the
PRA (44 U.S.C. 3506(c)(2)), DEA solicits
comment on the following issues:
• Whether the proposed collection of
information is necessary for the proper
performance of the functions of DEA,
for the full price of marihuana,
including the administrative fee. There
would be no impact to these
researchers. However, DEA does not
have sufficient information to estimate
the number of small entity researchers
that would 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
proposed 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 would 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
a Small Government Agency Plan nor
any other action is required under the
UMRA.
Paperwork Reduction Act of 1995
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Pursuant to the Paperwork Reduction
Act of 1995 (PRA), 44 U.S.C. 3501 et
seq., DEA has identified the following
collections of information related to this
proposed rule. 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/.
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including whether the information shall
have practical utility.
• The accuracy of DEA’s estimate of
the burden of the proposed collection of
information, including the validity of
the methodology and assumptions used.
• Recommendations to enhance the
quality, utility, and clarity of the
information to be collected.
• Recommendations to minimize the
burden of the collection of information
on those who are to respond, including
through the use of automated collection
techniques or other forms of information
technology.
Please send written comments to the
Office of Information and Regulatory
Affairs, OMB, Attention: Desk Officer
for DOJ, Washington, DC 20503. Please
state that your comments refer to RIN
1117–AB54/Docket No. DEA–506. All
comments must be submitted to OMB
on or before May 22, 2020. The final
rule will respond to any OMB or public
comments on the information collection
requirements contained in this proposed
rule.
If you need a copy of the proposed
information collection instrument(s)
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.
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 proposes to amend 21
CFR chapter II as follows:
PART 1301—REGISTRATION OF
MANUFACTURERS, DISTRIBUTORS,
AND DISPENSERS OF CONTROLLED
SUBSTANCES
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.
2. In § 1301.33, revise paragraph (c)
and add paragraph (d) to read as
follows:
■
§ 1301.33 Application for bulk manufacture
of Schedule I and II substances.
*
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(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 § 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.
■ 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.
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.
§ 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.
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§ 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
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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.
§ 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 § 1301.44(a) of this
chapter, the burden shall be on the
applicant to demonstrate that the
requirements for such registration have
been satisfied.
§ 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. 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
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16305
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.
§ 1318.05
factors.
Application of the public interest
(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
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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
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 § 1301.32 of this chapter. As
specified in § 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
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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 [EFFECTIVE DATE OF FINAL
RULE] will not be considered pending
for purposes of paragraph (a) of this
section until all applications accepted
for filing on or before [EFFECTIVE
DATE OF FINAL RULE] 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.
§ 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 (CSA), 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 § 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
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Sfmt 4702
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.
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§ 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
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.
Dated: March 16, 2020.
Uttam Dhillon,
Acting Administrator.
[FR Doc. 2020–05796 Filed 3–20–20; 8:45 am]
33 CFR Part 209
[COE–2016–0016]
RIN 0710–AA72
Use of U.S. Army Corps of Engineers
Reservoir Projects for Domestic,
Municipal & Industrial Water Supply;
Withdrawal
Army Corps of Engineers, DoD.
ACTION: Proposed rule; withdrawal.
AGENCY:
As a result of a policy
determination by the Assistant Secretary
of the Army (Civil Works), the U.S.
Army Corps of Engineers (Corps) is
withdrawing the proposed rule titled
‘‘Use of U.S. Army Corps of Engineers
Reservoir Projects for Domestic,
Municipal & Industrial Water Supply,’’
which was published on December 16,
2016.
DATES: The Corps is withdrawing the
proposed rule published December 16,
2016 (81 FR 91556) as of March 23,
2020.
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FOR FURTHER INFORMATION CONTACT:
Amy K. Frantz, Planning and Policy
(CECW–P); telephone number: (202)
761–0106; email address:
WSRULE2016@usace.army.mil; or
Daniel Inkelas, Chief Counsel’s Office
(CECC–L); phone number (202) 761–
0345; email address: WSRULE2016@
usace.army.mil.
SUPPLEMENTARY INFORMATION:
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None.
Jkt 250001
DEPARTMENT OF EDUCATION
34 CFR Chapter III
[Docket No. ED–2020–OPE–0044]
Proposed Waiver and Extension of the
Project Period for the Predominantly
Black Institutions Competitive Grant
Program
The Secretary proposes to
waive the requirements in the Education
Department General Administrative
Regulations that generally prohibit
project periods exceeding five years and
project period extensions involving the
obligation of additional Federal funds.
The proposed waiver and extension
would enable 23 projects under CFDA
number 84.382A to receive funding for
an additional period, not to exceed
September 30, 2021.
DATES: We must receive your comments
on or before April 22, 2020.
ADDRESSES: Submit your comments
through the Federal eRulemaking Portal
or via postal mail, commercial delivery,
or hand delivery. We will not accept
comments submitted by fax or by email
or those submitted after the comment
period. To ensure that we do not receive
duplicate copies, please submit your
comments only once. In addition, please
include the Docket ID at the top of your
comments.
If you are submitting comments
electronically, we strongly encourage
you to submit any comments or
attachments in Microsoft Word format.
If you must submit a comment in Adobe
Portable Document Format (PDF), we
strongly encourage you to convert the
PDF to print-to-PDF format or to use
some other commonly used searchable
text format. Please do not submit the
PDF in a scanned format. Using a printto-PDF format allows the Department to
electronically search and copy certain
portions of your submissions.
• Federal eRulemaking Portal: Go to
www.regulations.gov to submit your
comments electronically. Information
on using Regulations.gov, including
instructions for accessing agency
documents, submitting comments, and
SUMMARY:
Department of the Army, Corps of
Engineers
U.S. Army Corps of
Engineers, 441 G Street NW,
Washington, DC 20314.
BILLING CODE 3720–58–P
Office of Postsecondary
Education (OPE), Department of
Education.
ACTION: Proposed waiver and extension
of project period.
DEPARTMENT OF DEFENSE
ADDRESSES:
[FR Doc. 2020–05919 Filed 3–20–20; 8:45 am]
AGENCY:
BILLING CODE 4410–09–P
SUMMARY:
Dated: March 16, 2020.
R.D. James,
Assistant Secretary of the Army, (Civil Works).
PO 00000
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16307
viewing the docket, is available on the
site under ‘‘Help.’’
• Postal Mail, Commercial Delivery,
or Hand Delivery: The Department
strongly encourages commenters to
submit their comments electronically.
However, if you mail or deliver your
comments about the proposed waiver
and extension, address them to: The
Predominantly Black Institutions
Competitive Grant Program, CFDA
number 84.382A, Attention: Bernadette
Miles, U.S. Department of Education,
400 Maryland Avenue SW, Room 250–
22, Washington, DC 20202.
Privacy Note: The Department’s
policy is to make all comments received
from members of the public available for
public viewing in their entirety on the
Federal eRulemaking Portal at
www.regulations.gov. Therefore,
commenters should be careful to
include in their comments only
information that they wish to make
publicly available.
FOR FURTHER INFORMATION CONTACT:
Bernadette Miles, U.S. Department of
Education, 400 Maryland Avenue SW,
Room 250–22, Washington, DC 20202.
Telephone: 202–453–7892. Email:
Bernadette.Miles@ed.gov.
If you use a telecommunications
device for the deaf (TDD) or a text
telephone (TTY), call the Federal Relay
Service (FRS), toll free, at 1–800–877–
8339.
SUPPLEMENTARY INFORMATION:
Invitation to Comment: We invite you
to submit comments regarding this
proposed waiver and extension.
We invite you to assist us in
complying with the specific
requirements of Executive Orders
12866, 13563, and 13771 and their
overall requirement of reducing
regulatory burden that might result from
this proposed waiver and extension.
Please let us know of any further ways
we could reduce potential costs or
increase potential benefits while
preserving the effective and efficient
administration of the program.
During and after the comment period,
you may inspect all public comments
about this proposed waiver and
extension of the project period in Room
5059, 550 12th Street SW, Washington,
DC, between the hours of 8:30 a.m. and
4:00 p.m., Eastern time, Monday
through Friday of each week, except
Federal holidays.
Assistance to Individuals with
Disabilities in Reviewing the
Rulemaking Record: On request, we will
provide an appropriate accommodation
or auxiliary aid to an individual with a
disability who needs assistance to
review the comments or other
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[Federal Register Volume 85, Number 56 (Monday, March 23, 2020)]
[Proposed Rules]
[Pages 16292-16307]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-05796]
=======================================================================
-----------------------------------------------------------------------
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: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Drug Enforcement Administration is proposing to amend its
regulations to comply with the requirements of the Controlled
Substances Act, including consistency with treaty obligations, in order
to facilitate the cultivation of marihuana for research purposes and
other licit purposes. Specifically, this proposed rule would amend the
provisions of the regulations governing applications by persons seeking
to become registered with DEA to grow marihuana as bulk manufacturers
and add provisions related to the purchase and sale of this marihuana
by DEA.
DATES: Comments must be submitted electronically or postmarked on or
before May 22, 2020.
ADDRESSES: To ensure proper handling of comments, please reference
``[RIN 1117-AB54/Docket No. DEA-506]'' on all electronic and written
correspondence, including any attachments.
Electronic Comments: DEA encourages that all comments be
submitted electronically through the Federal eRulemaking Portal, which
provides the ability to type short comments directly into the comment
field on the web page or attach a file for lengthier comments. Please
go to https://www.regulations.gov and follow the
[[Page 16293]]
online instructions at that site for submitting comments. Upon
completion of your submission, you will receive a Comment Tracking
Number for your comment. Please be aware that submitted comments are
not instantaneously available for public view on Regulations.gov. If
you have received a Comment Tracking Number, your comment has been
successfully submitted and there is no need to resubmit the same
comment. Commenters should be aware that the electronic Federal Docket
Management System will not accept any comments after 11:59 p.m. Eastern
Time on the last day of the comment period.
Paper Comments: Paper comments that duplicate electronic
submissions are not necessary. Should you wish to mail a paper comment
in lieu of an electronic comment, it should be sent via regular or
express mail to: Drug Enforcement Administration, Attn: DEA Federal
Register Representative/DPW, 8701 Morrissette Drive, Springfield,
Virginia 22152-2639.
Paperwork Reduction Act Comments: All comments concerning
collections of information under the Paperwork Reduction Act must be
submitted to the Office of Information and Regulatory Affairs, Office
of Management and Budget, Attention: Desk Officer for DOJ, Washington,
DC 20503. Please state that your comment refers to RIN 1117-AB54/Docket
No. DEA-506.
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:
Posting of Public Comments
Please note that all comments received in response to this docket
are considered part of the public record. They will, unless reasonable
cause is given, be made available by DEA for public inspection online
at https://www.regulations.gov. Such information includes personal
identifying information (such as your name, address, etc.) that you
voluntarily submit. The Freedom of Information Act applies to all
comments received. If you want to submit personal identifying
information (such as your name, address, etc.) as part of your comment,
but do not want it to be made publicly available, you must include the
phrase ``PERSONAL IDENTIFYING INFORMATION'' in the first paragraph of
your comment. You must also place all of the personal identifying
information you do not want made publicly available in the first
paragraph of your comment and identify what information you want
redacted.
If you want to submit confidential business information as part of
your comment, but do not want it to be made publicly available, you
must include the phrase ``CONFIDENTIAL BUSINESS INFORMATION'' in the
first paragraph of your comment. You must also prominently identify the
confidential business information to be redacted within the comment.
Comments containing personal identifying information or
confidential business information identified as directed above will be
made publicly available in redacted form. If a comment has so much
confidential business information that it cannot be effectively
redacted, all or part of that comment may not be made publicly
available. Comments posted to https://www.regulations.gov may include
any personal identifying information (such as your name, address, etc.)
included in the text of your electronic submission that is not
identified as directed above as confidential.
An electronic copy of this proposed rule is available at https://www.regulations.gov for ease of reference.
Background and Purpose of This Proposed Rule
Under the Controlled Substances Act (CSA), all persons who seek to
manufacture a controlled substance must apply for and 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
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\ 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). Under section 823(a), for DEA to grant a
registration, the DEA Administrator must determine that two conditions
are satisfied: (1) The registration is consistent with the public
interest (based on the enumerated criteria 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.\3\
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\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\ 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.
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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 provisions requiring consistency with obligations under
international treaties such as the Single Convention, and determined
that certain changes to its 2016 policy were needed. The pertinent
Treaty provisions are found in articles 23 and 28 of the Single
Convention, which are summarized below. Additionally, DEA believes that
these changes will enhance and improve research with marihuana and
facilitate research that could result in the development of marihuana-
based medicines approved by the Food and Drug Administration (FDA).
This proposed rule is being issued 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).
A. Relevant Provisions of the Single Convention
Because the terminology used in the Single Convention is somewhat
different from that in the CSA, a brief explanation is warranted. The
Single Convention uses the terms ``cannabis,'' ``cannabis plant,'' and
``cannabis
[[Page 16294]]
resin''--all of which are generally encompassed by the CSA definition
of ``marihuana'' in 21 U.S.C. 802(16)).\4\ The Single Convention
defines ``cannabis plant'' as ``any plant of the genus Cannabis.''
Single Convention art. 1(1)(c). The Single Convention defines
``cannabis'' as the ``flowering or fruiting tops of the cannabis plant
(excluding the seeds and leaves when not accompanied by the tops) from
which the resin has not been extracted.'' Id. art. 1(1)(b). The Single
Convention defines ``cannabis resin'' as the ``separated resin, whether
crude or purified, obtained from the cannabis plant.'' Id. art.
1(1)(d).
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\4\ As discussed below, the Agriculture Improvement Act of 2018,
Public Law 115-334, removed hemp from the CSA definition of
marihuana. This proposed rule applies only to cannabis that is
included in the CSA definition of marihuana.
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Article 28 of the Single Convention states in paragraph 1: ``If a
Party permits the cultivation of the cannabis plant for the production
of cannabis or cannabis resin, it shall apply thereto the system of
controls as provided in article 23 respecting the control of the opium
poppy.'' Paragraph 2 of that article excludes from the Convention the
cultivation of cannabis for industrial or horticultural purposes.
Because the United States permits the cultivation of marihuana for the
production of cannabis and cannabis resin currently only for research
purposes, it is obligated under the Treaty to apply to the marihuana
plant cultivated for these purposes the ``system of controls'' provided
in article 23 respecting the control of the opium poppy.
The Commentary to the Single Convention contains the following
explanation of articles 23 and 28 within the overall framework of the
Treaty:
The system of control over all stages of the drug economy which
the Single Convention provides has two basic features: Limitation of
narcotic supplies of each country . . . to the quantities that it
needs for medical and scientific purposes, and authorization of each
form of participation in the drug economy, that is, licensing of
producers, manufacturers and traders . . . . In the case of the
production of opium, coca leaves, cannabis and cannabis resin, this
r[eacute]gime is supplemented by the requirement of maintaining
government monopolies for the wholesale and international trade in
these drugs in countries which produce them . . . .
Secretary-General of the United Nations, Commentary on the Single
Convention on Narcotic Drugs, 1961, 263 (1973) (emphasis added)
(footnotes omitted).\5\
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\5\ The United Nations' Economic and Social Council requested
that the Secretary-General prepare the Commentary ``in the light of
the relevant conference proceedings and other material'' in order to
aid governments in applying the Single Convention. The Commentary
(1973) is not binding on Parties to the Convention. Economic and
Social Council Resolution 1962/914(XXXIV) D (Aug. 3, 1962).
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Article 23(2) of the Single Convention, made applicable to
marijuana cultivation by Article 28, contains five requirements for the
supervision, licensing, and distribution of marijuana.\6\
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\6\ The Single Convention provides that the five functions of
article 23, paragraph 2 ``shall be discharged by a single government
agency if the constitution of the Party concerned permits it.''
Single Convention art. 23(3). Nothing in the Constitution would
preclude the United States from discharging all of those controls
through one government agency. 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 on constitutional grounds, administrative
arrangements should be made to ensure the required coordination.
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(a) 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.
(b) Ensure that only cultivators licensed by the agency shall be
authorized to engage in such cultivation.
(c) Ensure that each license shall specify the extent of the land
on which the cultivation is permitted.
(d) 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.
(e) 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.\7\
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\7\ The meanings of the terms ``medicinal cannabis'' and
``cannabis preparations'' are addressed later in this document.
Article 23, paragraph 2(e) also refers to ``opium alkaloids.''
However, due to distinctions between the opiates derived from the
opium poppy and the cannabinoids derived from the cannabis plant,
the notion of ``cannabis alkaloids'' is inapplicable.
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DEA already directly performs functions (a), (b), and (c) by virtue
of the CSA registration system as applied to manufacturers of
marihuana. In order to ensure that DEA complies with the CSA and grants
registrations that are consistent with relevant treaty provisions,
namely articles 23 and 28 of the Single Convention, DEA proposes to
directly perform functions (d) and (e) as well. This proposed rule
would amend DEA's regulations so that DEA directly carries out these
remaining two functions.
DEA also recognizes that the Department of Health and Human
Services (HHS) has, for nearly 50 years, maintained an essential
program aimed at ensuring that marihuana is available to meet the
research and scientific needs of the United States. The regulations
proposed here, if finalized, will require some changes to this program,
but DEA is committed to ensuring that the National Institute on Drug
Abuse (NIDA) program continues with minimal disruption and there is no
impact on the availability of marihuana through the NIDA Drug Supply
Program (DSP).
After the publication of the 2016 policy statement, DOJ advised DEA
that it must adjust its policies and practices to ensure compliance
with the CSA, including the CSA's requirement that registrations be
consistent with the Single Convention. Therefore, the regulations being
proposed herein, if finalized, would ensure that DEA regulations comply
with applicable law. Within that framework, DEA is proposing changes to
support using marihuana (including extracts and substances derived
therefrom) cultivated in the United States to perform research which,
among other things, may lead to the approval of FDA-approved medicines.
Thus, the proposed rule, if adopted, would supersede the 2016 policy
statement.
To address the foregoing considerations, the proposed rule would
add regulations stating:
(1) All registered manufacturers who cultivate cannabis shall
deliver their total crops of cannabis to DEA. DEA 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. DEA 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, DEA shall designate a secure storage
mechanism at the registered location in which DEA may maintain
possession of the cannabis, and DEA will control access to the stored
cannabis. If DEA determines that no suitable location exists at the
registered location of the registered manufacturer authorized to
cultivate cannabis, then DEA shall designate a location for the
[[Page 16295]]
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 21 CFR part 1301.
(2) DEA 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. DEA may
exercise its exclusive right by authorizing the performance of such
activities by appropriately registered persons. DEA will 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 21 CFR part 1312, as applicable. Under no circumstance
shall a registered manufacturer authorized to grow cannabis import,
export, or distribute cannabis without the express written
authorization of DEA.
(3) A registered manufacturer authorized to grow cannabis shall
notify DEA in writing of its proposed date of harvest at least fifteen
days before the commencement of the harvest.
It should be noted that the timing of when DEA would take physical
possession of the crops, if delayed, would not only increase the risk
of diversion, but would also adversely impact the quality of the crop.
Whereas DEA is proposing to take physical possession not later than
four months from the time of harvest, it is DEA's intent to take
physical possession as soon as possible and to distribute marihuana as
soon as is practical to those who are authorized to receive it.
The exceptions made for ``medicinal cannabis or cannabis
preparations'' also warrant explanation. In view of the text of the
Single Convention, and taking into account the current wording of
Federal law,\8\ the regulations being proposed would define these terms
as follows:
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\8\ Among other things, these definitions take into account the
current CSA definition of marihuana (21 U.S.C. 802(16)), which was
amended in 2018 to exclude ``hemp'' as defined in section 297A of
the Agricultural Marketing Act of 1946 (7 U.S.C. 1639o(1)).
---------------------------------------------------------------------------
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. However, such term does
not include any material, compound, mixture, or preparation that falls
outside the CSA definition of marihuana.
Cannabis preparation means cannabis that was delivered to
DEA and subsequently converted by a registered manufacturer into a
mixture (solid or liquid) containing cannabis, cannabis resin, or
extracts of cannabis. However, such term does not include any material,
compound, mixture, or preparation that falls outside the CSA definition
of marihuana.
Thus, under the proposed rule, DEA would have the exclusive right
of importing, exporting, wholesale trading, and maintaining stocks of
marihuana other than those held by DEA-registered manufacturers and
distributors of medicinal cannabis or cannabis preparations. Further,
this exclusive right would not apply to medicinal cannabis or cannabis
preparations.
To summarize those provisions of the proposed rule that are
intended to ensure that registrations are granted in compliance with
the CSA as the number of registered manufacturers increases, all
marihuana grown by DEA-registered manufacturers in the United States
would be delivered by such registrants to DEA no later than four months
after the end of the harvest. Thereafter, DEA would authorize
exportation, distribution, and maintenance of stocks of such marihuana
with two important exceptions:
(1) DEA-registered manufacturers of (a) an FDA-approved marihuana-
derived drug (i.e., ``medicinal cannabis''), and (b) ``cannabis
preparations'' would be permitted to maintain stocks of cannabis
materials obtained from DEA for the purpose of producing such drugs or
preparations; \9\ and
---------------------------------------------------------------------------
\9\ As indicated above, the requirement that registered growers
deliver all cannabis to DEA no later than four months after the end
of the harvest applies in all situations--even where the cannabis
will later be distributed by DEA back to the grower for further use.
Thus, the above 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.
---------------------------------------------------------------------------
(2) Once marihuana material that was previously purchased by DEA is
subsequently converted by a DEA-registered manufacturer into (a) an
FDA-approved drug (``medicinal cannabis'') or (b) a ``cannabis
preparation,'' the material no longer would be subject to the foregoing
exclusive right and could be further distributed or dispensed by a DEA
registrant in any manner authorized under the CSA. DEA is committed to
ensuring this new requirement is implemented in a manner that supports
the policy goal of facilitating research involving marijuana and its
chemical constituents.
B. Activities Performed by Bulk Manufacturers of Marihuana and the
Application of These Proposed Regulations on Those Activities
Based on approximately 35 pending applications resulting from
publication of its 2016 policy statement, DEA anticipates that those
bulk manufacturers who would obtain a registration from DEA to grow
marihuana would be one (or more) of three different types. In this
section, DEA describes each type and how the proposed regulations, if
finalized as proposed, would impact those registrants with regard to
functions (1) and (2) described in the previous section.
(1) A Bulk Manufacturer Who Grows Marihuana for Its Own Research or
Drug Development Purposes
A number of applicants seek to grow marihuana for their own
research endeavors, including some who wish to develop an FDA-approved
medicine from extracts or derivatives of the marihuana plant. Based on
the accompanying information supplied by the applicant to DEA in
connection with their application, these applicants would list
themselves as a ``purchaser,'' meaning that once their crop was
harvested, they would seek to use the marihuana for their internal
research purposes. Applicants must obtain a separate schedule I
research registration from DEA to perform research with marihuana in
accordance with 21 CFR 1301.13 and 1301.32. However, bulk marihuana
growers may manufacture marihuana for use by other researchers under a
manufacturing registration (and pursuant to a quota granted to them by
DEA for that purpose under 21 CFR 1303.21(a)).
For applicants within this category, within four months of harvest,
DEA would travel to the DEA-registered location, purchase, and take
title to the crop by issuing the grower a DEA Form 222.\10\ Once DEA
has taken title to the
[[Page 16296]]
crop, it would then distribute a quantity of marihuana that does not
exceed the company's DEA-issued procurement quota back to that same
manufacturer. In this way, DEA would take physical possession of the
crop and control its distribution. Additionally, the material owned by
the government will be maintained at the DEA-registered manufacturer's
location and DEA would maintain its ability to access the storage
location at which such crops are located as it deemed necessary.
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\10\ DEA would take title to an amount up to the applicant's
manufacturing quota. Growing marihuana in excess of a manufacturing
quota is a violation of federal law. 21 U.S.C. 842(b). Thus, any
marihuana grown in excess of a manufacturing quota would be subject
to seizure and destruction. See id. 881(g).
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(2) A Bulk manufacturer Who Supplies Marihuana to Other DEA
Registrants, Including National Institutes of Health Funded and Non-
National Institutes of Health Funded Researchers
Some applicants are seeking to grow marihuana for use by other DEA
registrants including ``non-bulk'' manufacturers and schedule I
researchers, including National Institutes of Health (NIH) funded and
non-NIH funded researchers. This sub-set of bulk manufacturers would be
required to obtain from each customer a bona fide supply agreement,
listing the name and address of the end user, the end user's DEA
registration number, the quantity of marihuana to be supplied, and the
price that the end user and grower have mutually agreed upon. DEA will
consider this information, along with additional information, when
establishing an individual manufacturing quota for the grower.
For applicants that fall within this sub-set, within four months of
harvest, DEA would travel to the DEA-registered location, purchase, and
take title to the crop by issuing the grower a DEA Form 222.\11\ For
this reason, each grower must provide written notice to DEA of its
proposed date of harvest at least fifteen days prior to the
commencement of the harvest. Once DEA has purchased and taken title to
the crop, the material would be maintained, under seal, in DEA's
possession in the manufacturer's schedule I vault until such time that
a distribution is necessary. In this scenario, DEA may distribute (or
export) the marihuana directly or may choose to authorize the grower to
distribute marihuana on the government's behalf. Again, marihuana owned
by the government is maintained at the DEA-registered manufacturer's
site where DEA would maintain its ability to access the storage
location at which such crops are located as it deemed necessary.
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\11\ As in the first scenario, DEA only would take title to an
amount up to the applicant's manufacturing quota. Any marihuana
grown in excess of a manufacturing quota would be subject to seizure
and destruction. See 21 U.S.C. 842(b), 881(g).
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(3) A Bulk Manufacturer Who Supplies Marihuana To Support NIDA's Drug
Supply Program
Over the last several decades, NIDA has administered a contract to
produce high quality marihuana for use by researchers who have obtained
federal funding (grants) for such research.\12\ This contract has been
awarded to the National Center for Natural Products Research at the
University of Mississippi (National Center). In accordance with that
contract and DEA regulations, NIDA assesses the quantity of marihuana
that is necessary to be grown for research purposes in a given year and
communicates that information to both the National Center and DEA. The
National Center applies for, and must first obtain, a manufacturing
quota from DEA and is then authorized to grow marihuana up to the limit
established by their DEA-issued quota. At the time of harvest, a
portion of that material is held in inventory at the National Center
while other portions are distributed to another DEA registrant,
Research Triangle Institute (RTI). Currently, at the direction of NIDA,
both RTI and the National Center may prepare marihuana in a manner
which is suitable for research studies and ship it to researchers. In
these instances, marihuana held in inventory at the National Center and
RTI are the property of NIDA. The regulations proposed in this notice
of proposed rulemaking (NPRM) are intended to enhance and improve upon
existing DEA regulations that supported the NIDA DSP and will
facilitate research that may lead to the development of FDA-approved
medicines.
---------------------------------------------------------------------------
\12\ The Department of Health and Human Services maintains
procedures for providing this same marihuana to non-NIH funded
researchers as well.
---------------------------------------------------------------------------
This regulation, if finalized, would require changes to the current
scheme described above. Although NIDA can, and would, continue to
administer the contract in support of its DSP and the National Center
(or other NIDA contract holder) could continue to grow and produce
marihuana in support of research pursuant to that contract (for as long
as that contract is renewed), within four months of harvest, DEA would
travel to the National Center at the time of harvest and take title and
possession to the crop by issuing the National Center a DEA Form
222.\13\ Once DEA has taken title and possession of the crop, the
material would be maintained, under seal, in DEA's possession in the
National Center's schedule I vault until such time that a distribution
to another DEA registrant is authorized. In this scenario, DEA may
distribute (or export) the marijuana directly or may choose to
authorize the National Center to distribute marihuana on the
government's behalf. In both situations, DEA's distributions would be
in accordance with NIDA's recommendation. And, as such, DEA does not
envision a scenario in which it would deny or delay a distribution to a
duly registered schedule I researcher authorized to handle marihuana.
Marihuana owned by DEA would be maintained at the National Center,
where DEA would maintain its ability to access the storage location at
which its crops are located.
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\13\ As above, DEA only would take title to an amount up to the
National Center's manufacturing quota, with amount grown in excess
of the manufacturing quota subject to seizure and destruction. See
21 U.S.C. 842(b), 881(g).
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C. Application of the Public Interest Factors
As indicated, in addition to the foregoing treaty considerations,
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
criteria listed in 21 U.S.C. 823(a). The first of those criteria, set
forth in subsection 823(a)(1), provides that, for the purpose of
maintaining effective controls against diversion, the number of
registered bulk manufacturers of a given schedule I or II controlled
substance should be limited to that which can produce an adequate and
uninterrupted supply of marihuana under adequately competitive
conditions.\14\
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\14\ For a detailed explanation of subsection 823(a) (1), see 74
FR at 2127-33.
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The proposed rule would explain how DEA will evaluate whether a
particular application is consistent with the public interest factors
of 21 U.S.C. 823(a), including factor 823(a)(1). As discussed above, a
bona fide supply agreement between a 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 the public interest
factor of 823(a)(1) upon the presentation of evidence that it possesses
a registration to conduct research with marihuana under 21 CFR 1301.32.
Such a researcher will only be granted quota to
[[Page 16297]]
the extent authorized by its approved research protocol.
The proposed rule further provides that the Administrator's
determination of which applicants to select will be consistent with the
public interest factors in section 823(a), with particular emphasis on
the criteria discussed in the preceding paragraph as well as the
following:
(1) The applicant's ability to consistently produce and supply
marihuana of a high quality and defined chemical composition; and
(2) Whether the applicant has demonstrated prior compliance with
the CSA and DEA regulations.
The preceding criteria 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.\15\
These criteria 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.
---------------------------------------------------------------------------
\15\ The proposed rule provides that, in determining the
legitimate demand for marihuana and its derivatives in the United
States, the Administrator shall consult with the Department of
Health and Human Services, including its components.
---------------------------------------------------------------------------
As indicated above, following the publication of the 2016 policy
statement, DEA received numerous applications by persons seeking to
become registered as bulk manufacturers of marihuana. There are
approximately 35 such applications currently pending. As explained
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. In consultation with HHS, DEA wishes
to avoid a situation in which the agency is in the midst of evaluating
these applications and has to begin an evaluation anew each time it
accepts a new marihuana grower application for filing. Thus, the
proposed rule provides that, with a limited exception, applications
accepted for filing after the date the final rule becomes effective
will not be considered pending until all applications accepted for
filing on or before the date the final rule becomes effective have been
granted or denied by the Administrator.
D. Consideration of the Amendments to the CSA Made by the Hemp
Provisions of the Agriculture Improvement Act of 2018
The Agriculture Improvement Act of 2018 (AIA), Public Law 115-334,
which became effective December 20, 2018, contained various provisions
regarding the cultivation of hemp. The AIA definitions hemp 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). The AIA amended the CSA
definition of marihuana to exclude hemp. Thus, anything that falls
within the foregoing definition of hemp is no longer a controlled
substance, and the CSA's requirements no longer apply to such
substances. Accordingly, this proposed rule would apply only to persons
seeking authorization under the CSA (i.e., seeking a DEA registration)
to manufacture marihuana that involves the planting, cultivation,
growing, or harvesting of marihuana as that term is currently defined
in the CSA (21 U.S.C. 802(16)).\16\
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\16\ The United States Department of Agriculture has issued
regulations and guidance to implement a program for the commercial
production of industrial hemp in the United States under the
framework of the AIA. See Establishment of a Domestic Hemp
Production Program, 84 FR 58522 (Oct. 31, 2019).
---------------------------------------------------------------------------
E. Factors Affecting Prices for the Purchase and Sale of Marihuana by
DEA
As stated above, under articles 23 and 28 of the Single Convention,
the government agency must--in addition to taking physical possession--
purchase all lawfully grown cannabis crops within four months of
harvest. Thus, under the proposed rule, DEA will purchase marihuana
grown by DEA-registered manufacturers and subsequently sell the
marihuana to DEA registrants who seek to acquire it for research,
product development, or other lawful purposes under the CSA.
In purchasing such marihuana, DEA intends to use the Diversion
Control Fee Account, as established in 21 U.S.C. 886a. Thus, DEA would,
under the proposed rule, need to 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 proposed new aspects of the diversion control program relating
to cannabis: (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.
DEA believes that economic forces will not only drive the types,
varieties and strains of marihuana materials that will be produced by
growers, but that such forces will also drive the fees that DEA-
registrants will be willing to pay for marihuana used for research
purposes. Accordingly, DEA proposes to allow market forces to direct
prices for marihuana grown by the manufacturer and purchased by DEA. As
we have stated elsewhere in this proposal, DEA will establish limits on
individual production based on bona fide supply agreements between the
grower and the end user (a DEA registered manufacturer or a schedule I
researcher). Accordingly, DEA will use these terms as the basis for
purchasing marijuana from the grower and additionally, for the basis by
which it will sell that same marihuana to an end user.
In addition to that negotiated fee, DEA is proposing to add a
variable administrative cost (per kilogram (kg)) which it intends to
add onto the sales price of the marihuana it sells to end users. The
purpose of this administrative fee is to ensure the full recovery by
DEA of the costs of administering the program as required by 21 U.S.C.
886a(1)(C). DEA will calculate this variable cost annually by taking
the preceding fiscal year's cost to operate the program and dividing it
by the quantity in kg of the manufacturing quota for marihuana issued
during the current quota year. For example, based on the economic
analysis provided below, DEA would calculate an administrative fee of
$304 per kg for marihuana distributed to end users. The calculation
below is illustrative:
Variable Administrative Fee = $607,644/2,000 kg = $304 per kg \17\
---------------------------------------------------------------------------
\17\ Rounded to nearest whole dollar. The cost of $607,644 is
explained below.
DEA proposes to establish this fee no less than annually and
proposes to publish this rate on its website by December 15th of the
year preceding the year in which the administrative fee will be
collected.
[[Page 16298]]
Regulatory Analyses
Executive Orders 12866 (Regulatory Planning and Review), 13563
(Improving Regulation and Regulatory Review), and 13771 (Reducing
Regulation and Controlling Regulatory Costs)
This proposed 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 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.
DEA has determined that, although this proposed rule is not
economically significant, it is a significant regulatory action under
section 3(f) of Executive Order 12866, thus subjecting it to review 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 proposed rule would amend the provisions
of the regulations governing applications by persons seeking to become
registered with DEA to grow marihuana as bulk manufacturers and add
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 proposed rule would amend 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 proposed rule, alternative
approaches 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
proposed rule. Consistent with past agency practice, any proposed
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 proposed 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
would ensure 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 proposed rule and estimates an
annual cost of $607,644. The details of the analysis are below.
This proposed rule would amend the provisions of the regulations
governing applications by persons seeking to become registered with DEA
to grow marihuana as bulk manufacturers and add provisions related to
the purchase and sale of this marihuana by DEA. If this proposed rule
is promulgated, 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 would 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 would not extend to
medicinal cannabis or cannabis preparations. The changes described
above would affect three primary groups of entities: Growers and
prospective growers, the authorizing agencies,\18\ and purchasers
(generally medical and scientific researchers). To examine the impact
of the proposed rule, DEA first reviewed the current system for growing
and distributing bulk marihuana, then examined the impact on each of
the three affected groups.
---------------------------------------------------------------------------
\18\ The ``authorizing agency'' refers to federal government
agencies, including NIDA and DEA.
---------------------------------------------------------------------------
Current System
Under current regulations, DEA has authorized one grower, the
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.\19\ 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.\20\ NIDA obligated approximately $1.5 million in
Fiscal Year 2015 under this contract.\21\ 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,\22\ DEA estimates NIDA's expenses under the contract with the
National Center (and any related
[[Page 16299]]
subcontracts) for the bulk marihuana for 2019 are approximately $2.9
million.\23\ 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.\24\
---------------------------------------------------------------------------
\19\ 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.
\20\ 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.
\21\ 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.
\22\ Conference call between DEA Regulatory Drafting and Policy
Support section and members of NIDA's Marijuana Drug Supply Program,
July 30, 2019.
\23\ Anticipated spending for the marihuana DSP for 2019 is $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.
\24\ The 2019 Aggregate Production Quota 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,'' \25\ the
current policy is to provide the marihuana at no charge.\26\
---------------------------------------------------------------------------
\25\ 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.
\26\ See note 22.
---------------------------------------------------------------------------
Changes to Growers
If this proposed rule is implemented, DEA anticipates approving
more than one person 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 will estimate the economic
impact of this proposed 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.\27\
Since the publication of the 2016 policy statement, DEA has received
approximately 35 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 3 to 15
growers is a reasonable estimate for purposes of this economic
analysis, with the understanding that the actual number could vary
considerably.
---------------------------------------------------------------------------
\27\ 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 proposed rule, if
adopted, would supersede the 2016 policy statement.
---------------------------------------------------------------------------
The Aggregate Production Quota (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.\28\ 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.\29\
---------------------------------------------------------------------------
\28\ 21 CFR 1303.11(a).
\29\ 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 in no way 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 would 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 $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 would already
understand prior to growing and harvesting, the quantities of marihuana
to be distributed and to whom the distribution would be made because
the bona fide supply agreements presented during the registration
application process would 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
[[Page 16300]]
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 (or Deputized Task Force Officers)
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 \30\ and
$116 of vehicle cost \31\ for a total of $2,187 per 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.
---------------------------------------------------------------------------
\30\ 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.
\31\ $116 is based on IRS standard mileage rates for 2019 of
$0.58 per mile multiplied by the estimated 200 miles driven,
roundtrip.
---------------------------------------------------------------------------
Additionally, DEA anticipates it would 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 would be needed, consisting of
one FTE diversion investigator (DI), and two 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
$548,595. For the purposes of this analysis, this cost does not vary
with the number of growers. Table 1 below summarizes the costs
associated with increased staffing.
Table 1--Cost of Personnel Resources
----------------------------------------------------------------------------------------------------------------
Modular cost/
Position Job category unit cost ($) Number of FTEs Cost ($)
----------------------------------------------------------------------------------------------------------------
Staff Coordinator................... DI........................ 211,981 1 211,981
Program Analyst..................... PA........................ 168,307 2 336,614
---------------------------------------------------------------------------
Total........................... N/A....................... N/A 3 548,595
----------------------------------------------------------------------------------------------------------------
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;
$548,595 per year for three DEA FTE employees;
The estimated total annual cost is $568,278 with three
growers and $647,010 with 15 growers and no offsetting cost savings at
NIDA. Using the average of the two values, the estimated cost to DEA is
$607,644. Table 2 summarizes the costs.
Table 2--DEA Cost Summary
----------------------------------------------------------------------------------------------------------------
Low ($) High ($) Average ($)
----------------------------------------------------------------------------------------------------------------
Transport Cost.................................................. 19,683 98,415 N/A
Personnel Cost.................................................. 548,596 548,595 N/A
-----------------------------------------------
Total Cost.................................................. 568,278 647,010 607,644
----------------------------------------------------------------------------------------------------------------
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 would acquire
the bulk marihuana from DEA, rather than from NIDA. As discussed
earlier, the only new cost associated with this proposed regulation is
the cost to DEA of $607,644, an average of high and low scenarios,
which would be recovered by adding an administrative fee of $304 per
kg. As discussed earlier, the administrative fee would be adjusted
annually.
While the purchaser would 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
[[Page 16301]]
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 proposed rule, DEA anticipates more bulk marihuana
producers would be approved. DEA estimates the $2.9 million in economic
activity would 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, $568,278 to
$647,010 in operating costs would be incurred by DEA. DEA will recover
the costs of carrying out the proposed 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.
The net present values (NPVs) of the low cost estimate of $568,278
per year over 10 years are $4.8 million and $4.0 million at a three
percent discount rate and 7 percent discount rate, respectively. The
NPVs of the high cost estimate of $647,010 over 10 years are $5.5
million and $4.5 million at a three percent discount rate and seven
percent discount rate, respectively. The average of the estimated low
and high costs is $607,644. The NPVs of the average of $607,644 over 10
years are $5.2 million and $4.3 million at three percent and seven
percent discount rates, respectively. Table 3 summarizes the estimated
annual effect and NPVs calculation for each of the transfers and the
three scenarios.
Table 3--Summary of Annual Effect and NPVs
----------------------------------------------------------------------------------------------------------------
Annual effect NPVs at 3% NPVs at 7%
($) ($M) ($M)
----------------------------------------------------------------------------------------------------------------
Cost (Low)...................................................... 568,278 4.8 4.0
Cost (Average).................................................. 607,644 5.2 4.3
Cost (High)..................................................... 647,010 5.5 4.5
----------------------------------------------------------------------------------------------------------------
Executive Order 13771 (Reducing Regulation and Controlling Regulatory
Costs)
This proposed rule is expected to be 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 proposed 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 proposed rule does not have federalism implications warranting
the application of Executive Order 13132. The proposed 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 proposed 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 proposed 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 proposed rulemaking relating to
Executive Orders 12866, 13565, and 13771, this proposed rule would
amend the provisions of the regulations governing applications by
persons seeking to become registered with DEA to grow marihuana as bulk
manufacturers, and add provisions related to the purchase and sale of
this marihuana by DEA. If this proposed rule is promulgated, 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, would mean that authorized
purchasers of bulk marihuana may only purchase from DEA, except that
DEA's exclusive right would not extend to medicinal cannabis or
cannabis preparations as these terms are defined in paragraphs (b) and
(c), respectively, of proposed Sec. 1318.02 of this proposed rule.
The changes described above would 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 proposed
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
Under current regulations, DEA has authorized one grower, the
National Center, to cultivate marihuana for research. NIDA contracts
with the National Center to grow marihuana for
[[Page 16302]]
use in research studies.\32\ 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.\33\ 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 are
approximately $2.9 million.\34\ 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.\35\
---------------------------------------------------------------------------
\32\ 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.
\33\ 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.
\34\ Anticipated spending for the marihuana DSP for 2019 is $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.
\35\ 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.
---------------------------------------------------------------------------
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,'' \36\ the
current policy is to provide the marihuana at no charge.\37\
---------------------------------------------------------------------------
\36\ 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.
\37\ See note 22.
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Impact on Growers
If this proposed rule is implemented, 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.\38\ Since the
publication of the 2016 policy statement, there are approximately 35
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 proposed rule
at three and 15 growers with the understanding that the actual number
could vary considerably.
---------------------------------------------------------------------------
\38\ Applications to Become Registered under the Controlled
Substances Act to Manufacture Marijuana to Supply Researchers in the
United States, 81 FR 53846 (2016). This proposed rule, if adopted,
would superseded 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.\39\ 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.\40\
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\39\ 21 U.S.C. 826(a).
\40\ 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 would acquire the
bulk marihuana from DEA, rather than from NIDA or the National Center.
As discussed earlier, the only new cost associated with this proposed
regulation is the cost to DEA of $607,644, which would be recovered by
adding an administrative fee of $304 per kg. As discussed earlier, the
administrative fee would be adjusted annually. While purchasers would
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 proposed 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 proposed rule. Additionally, based on a discussion
with NIDA,\41\ DEA estimates 40 researchers are affected by this
proposed rule. The 40 researchers represent the approximate number of
researchers that receive marihuana from NIDA's marihuana DSP.
---------------------------------------------------------------------------
\41\ See note 22.
---------------------------------------------------------------------------
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: \42\
---------------------------------------------------------------------------
\42\ For the purposes of this analysis, the term ``firms'' is
synonymous with ``entities.''
421 firms related to `Medicinal and Botanical Manufacturing'
(325411) \43\
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\43\ 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) \44\
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\44\ 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.\45\
---------------------------------------------------------------------------
\45\ 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
[[Page 16303]]
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.
Table 4--Number of Small Entities by Industry
--------------------------------------------------------------------------------------------------------------------------------------------------------
Firm size by average SBA size % Small
NAICS description employees Firms standard Small entities entities
--------------------------------------------------------------------------------------------------------------------------------------------------------
325411--Medicinal and Botanical Manufacturing............. <500 384 1,000 384 100
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 in the Physical, <500 8,972 1,000 8,972 100
Engineering, and Life Sciences (except Biotechnology)....
500-749 68 .............. 68 100
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 proposed 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 proposed
rule.
Table 5--Percent of Small Entities Affected by Industry
--------------------------------------------------------------------------------------------------------------------------------------------------------
Estimated
SBA size Estimated number of Percentage of
NAICS description Number of firms standard number of affected small entities
small entities small entities affected
--------------------------------------------------------------------------------------------------------------------------------------------------------
325411--Medicinal and Botanical Manufacturing............. 421 1,000 392 14 4
541712--Research and Development in the Physical, 9,634 1,000 9,090 38 0.4
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 proposed 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 $568,278 to $647,010 per year, or the average of the high and
low estimates of $607,644 per year. DEA will recover the costs of
carrying out the proposed 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 $607,644 and MQ of 2,000 kgs, the
administrative fee is $304 per kg, adjusted annually.
Furthermore, NIH-funded or other third-party funded researchers are
likely to request and receive enough funding
[[Page 16304]]
for the full price of marihuana, including the administrative fee.
There would be no impact to these researchers. However, DEA does not
have sufficient information to estimate the number of small entity
researchers that would 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 proposed 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 would 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 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 et seq., DEA has identified the following collections of
information related to this proposed rule. 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 Proposed 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.
If adopted, this proposed rule would amend the regulations
governing applications by persons seeking to become registered with DEA
to grow marihuana as bulk manufacturers and add 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
would still apply for registration using the same DEA Form 225 as other
bulk manufacturers, but DEA would use a new supplemental questionnaire
unique to marihuana manufacturers in order to gather additional
information about applicants. There would also be new questionnaires
used for importer applicants and non-marihuana bulk manufacturer
applicants. Forms 225, 225A, and 225B would 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.
B. Request for Comments Regarding the Proposed Collections of
Information
Written comments and suggestions from the public and affected
entities concerning the proposed collections of information are
encouraged. Under the PRA, DEA is required to provide a notice
regarding the proposed collections of information in the Federal
Register with the notice of proposed rulemaking and solicit public
comment. Pursuant to section 3506(c)(2) of the PRA (44 U.S.C.
3506(c)(2)), DEA solicits comment on the following issues:
Whether the proposed collection of information is
necessary for the proper performance of the functions of DEA, including
whether the information shall have practical utility.
The accuracy of DEA's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used.
Recommendations to enhance the quality, utility, and
clarity of the information to be collected.
Recommendations to minimize the burden of the collection
of information on those who are to respond, including through the use
of automated collection techniques or other forms of information
technology.
Please send written comments to the Office of Information and
Regulatory Affairs, OMB, Attention: Desk Officer for DOJ, Washington,
DC 20503. Please state that your comments refer to RIN 1117-AB54/Docket
No. DEA-506. All comments must be submitted to OMB on or before May 22,
2020. The final rule will respond to any OMB or public comments on the
information collection requirements contained in this proposed rule.
If you need a copy of the proposed information collection
instrument(s) 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.
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 proposes to amend 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.
* * * * *
[[Page 16305]]
(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.
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. 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.
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
[[Page 16306]]
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 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 [EFFECTIVE DATE OF FINAL
RULE] will not be considered pending for purposes of paragraph (a) of
this section until all applications accepted for filing on or before
[EFFECTIVE DATE OF FINAL RULE] 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 (CSA), 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.
[[Page 16307]]
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 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.
Dated: March 16, 2020.
Uttam Dhillon,
Acting Administrator.
[FR Doc. 2020-05796 Filed 3-20-20; 8:45 am]
BILLING CODE 4410-09-P
