Murchison & Cumming LLP

USDA Releases Long-Anticipated Regulation on U.S. Hemp Production

October 30, 2019

By: Kelly Hayes

Ten months after the 2018 Farm Bill was signed into law, the U.S. Department of Agriculture on Tuesday, released the long-awaited Draft Final Interim Rule to regulate and license domestic hemp production in the United States, its territories, and on Tribal lands.

States and Indian Tribes are required to obtain USDA approval of their proposed plans and will have primary regulatory authority over the production of hemp within their designated territories. If the State or Tribe does not have a USDA-approved plan, hemp producers in those locations may apply to produce hemp under the USDA’s Departmental Plan.

The 2018 Farm Bill defines “Hemp” as “the plant species 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.” Delta-9 tetrahydrocannabinol, is commonly known as “THC”, and is the primary intoxicant found in cannabis. “Cannabis” commonly called “marijuana” contains greater than 0.3 percent THC levels and continues to remain illegal under federal law, classified as a Schedule I controlled substance under the federal Controlled Substances Act, alongside other drugs like heroin, LSD, and ecstasy.

Many are not aware of the United States’ long-established history in using hemp for industrial purposes. Hemp was commonly used to produce fabric, fuel, paper, construction materials, food products, and even cosmetics. However that changed with the passage of the Marihuana Tax Act of 1937 which levied a significant tax on Hemp and it’s close relative, marijuana. The Marihuana Tax Act essentially made it illegal to produce the plants by imposing a significant excise tax on all sales. However, during World War II the U.S. hemp supply from Southeast Asia was cutoff, and the USDA lifted the tax on growing hemp and implemented the “Hemp for Victory” campaign promoting the US need to grow hemp for rope, canvas, and U.S. Army and Navy uniforms.

Then the Agricultural Act of 2014 (the “2014 Farm Bill”) established an Agricultural Pilot Program allowing State Departments of Agriculture and institutions of higher education to apply for permission to produce hemp for research purposes only. Last year Congress made history with the passage of the Agricultural Improvement Act of 2018 (or the “2018 Farm Bill”) which extended the 2014 Farm Bill even further.

Under the 2018 Farm Bill States and Tribes may submit hemp production plans to the USDA for approval. More importantly though, the 2018 Farm Bill redefines hemp, thereby removing hemp from the definition of “cannabis” found under the federal Controlled Substances Act, and allows for the interstate transportation of hemp within the United States. On December 20, 2019, the 2018 Farm Bill was signed into law requiring the USDA Secretary to promulgate regulations and guidelines to administer the federal hemp production program. Yesterday, those long-anticipated draft regulations were released.

The Interim Rule addresses a myriad of areas applicable to all hemp producers including:

1) Licensing requirements;
2) Maintaining information on the land on which hemp is produced;
3) Procedures for testing the THC concentration levels for hemp;
4) Procedures for disposing of noncompliant plants;
5) Compliance provisions; and
6) Procedures for handling violations.

However the Interim Final Rule does not:
1) Address hemp seed certifications – Technology is not advanced enough to make seed certifications feasible. According to the USDA “the same seeds grown in different geographical locations and growing conditions can react differently.” The example provided claims a hemp seed grown in one state may have less than 0.3% THC levels, but that same seed could produce higher levels of THC content if grown in another state. This would essentially make the plant by definition cannabis (a federally illegal substance) and not hemp (an agricultural product).
2) Allow for the exportation of hemp outside of the United States – this may be addressed in the future.
3) Allow States or Tribes to prohibit interstate commerce.

The Final Interim Rule is anticipated to be submitted to the Federal Registrar on or around Thursday October 31, 2019. Once published in the Federal Register it becomes effective immediately. However, the USDA is inviting a 60-day public comment period once it is published.

For more information on federal and state hemp laws and regulations, please contact Kelly Hayes  (619) 544-6838.


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