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The U.S. Department of Agriculture (USDA) recently released—and then promptly rescinded—a notice on providing federal loans for hemp processors.

After the crop was federally legalized under the 2018 Farm Bill, USDA announced that regulations were being developed to offer direct and guaranteed loans to the industry. The federal agency unveiled those guidelines in April and then issued a new notice this month notifying applicants about the policy change ahead of the planned expiration of the earlier 2014 hemp pilot program.

The next day, however, it posted an “obsoleting notice” invalidating the prior document.

The new guidance “was developed with the understanding that operators would no longer be authorized to produce hemp under the 2014 Farm Bill Pilot Program,” USDA said. However, because Congress approved a continuing resolution that extends the program until September 30, 2021, the loan policies are not currently applicable.

That pilot program extension came at the behest of numerous stakeholders, advocates and lawmakers who have been pushing USDA to make a series of changes to its proposed hemp regulations. As those rules are being reviewed and finalized, they said it was necessary to keep the 2014 program in place.

The president signed the continuing resolution late last month, so it’s not clear why the notice on loan policy changes was released weeks later, which then necessitated a follow-up recision. But in any case, it’s another example of the fluidity and challenges of rulemaking for the non-intoxicating cannabis crop following its legalization.

It stands to reason that the loan processes outlined in the now-invalid notice will likely be consistent with what’s ultimately released next year, assuming the pilot program does expire then.

The primary rule change concerns licensing requirements for borrowers. After the 2014 regulations are no longer in effect, hemp loan applicants must be licensed under a USDA-approved state or tribal hemp program, or under the agency’s basic regulations if the jurisdiction the business operates in has not submitted its own rules.

Borrowers who are not licensed to grow hemp will be considered in non-monetary default and any losses will not be covered. For direct and guaranteed loans, hemp businesses must have a contract with USDA’s Farm Service Agency laying out termination policies and their ability to repay the loans.

As of this month, USDA has approved a total of 69 state and tribal hemp regulatory proposals—mostly recently for Illinois, Indiana, Michigan, New Mexico, Oklahoma and South Dakota. Illinois and Oklahoma were among a group of states that USDA had asked to revise and resubmit their initial proposals in August.

While the agency released an interim final rule for a domestic hemp production program last year, industry stakeholders and lawmakers have expressed concerns about certain policies it views as excessively restrictive.

USDA closed an extended public comment period on its proposed hemp regulations earlier this month. Its initial round saw more than 4,600 submissions, but it said last month that it was reopening the feedback period in response to intense pushback from stakeholders on its original proposal.

The federal Small Business Administration (SBA) said last month that the new 30-day comment window is too short and asked USDA to push it back, and it also issued a series of recommended changes to the interim final rule on hemp, which it says threaten to “stifle” the industry and benefit big firms over smaller companies.

All told, it appears that USDA is taking seriously the feedback it’s received and may be willing to make certain accommodations on these particular policies. The department’s rule for hemp is set to take effect on October 31, 2021.

In July, two senators representing Oregon sent a letter to Perdue, expressing concern that hemp testing requirements that were temporarily lifted will be reinstated in the agency’s final rule. They made a series of requests for policy changes.

Senate Minority Leader Chuck Schumer (D-NY) wrote to Perdue in August, asking that USDA delay issuing final regulations for the crop until 2022 and allow states to continue operating under the 2014 pilot program in the meantime.

Sen. Cory Gardner (R-CO) also called on USDA to delay the implementation of proposed hemp rules, citing concerns about certain restrictive policies the federal agency has put forward in the interim proposal.

The senators weren’t alone in requesting an extension of the 2014 pilot program that was ultimately enacted legislatively, as state agriculture departments and a major hemp industry group made a similar request to both Congress and USDA in August.

Amid the coronavirus pandemic, hemp industry associations pushed for farmers to be able to access to certain COVID-19 relief loans—a request that Congress granted in the most recent round of coronavirus legislation.

While USDA previously said that hemp farmers are specifically ineligible for its Coronavirus Food Assistance Program, that decision was reversed last month. While the department initially said it would not even reevaluate the crop’s eligibility based on new evidence, it removed that language shortly after Marijuana Moment reported on the exclusion.

Meanwhile, USDA announced last week that it is planning to distribute a national survey to gain insights from thousands of hemp businesses that could inform its approach to regulating the industry.

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