Month: May 2019

On May 28th, 2018, the United States Department of Agriculture (“USDA”) issued a non-binding opinion letter regarding hemp production (“USDA Letter“). The USDA’s Office of General Counsel (a.k.a., the USDA’s lawyer) made four conclusions in the letter, which I’ll explore in this post.

1. As of the enactment of the 2018 Farm Bill on December 20, 2018, hemp has been removed from schedule I of the Controlled Substances Act and is no longer a controlled substance.

Much of the 2018 Farm Bill is contingent on the USDA implementing a program to oversee the cultivation of hemp on the federal level. Section 10113 of the 2018 Farm Bill covers hemp production (which you can read about here) in great detail and gives the USDA the authority to oversee hemp production at the federal level and to approve of State and Tribal plans covering the cultivation of hemp. In February, the USDA stated that it will not start approving plans until it issues its own regulations in Fall of 2020. This clarification from USDA indicates that in the agency’s opinion, the CSA removed hemp as a schedule I substance as soon as it was signed into law by Donald Trump.

2. After USDA publishes regulations implementing the new hemp production provisions of the 2018 Farm Bill, States and Indian tribes may not prohibit the interstate transportation or shipment of hemp lawfully produced under a State or Tribal plan or under a license issued under the USDA plan.

This is an affirmation of Section 10114 (b) of the 2018 Farm Bill, which states the following:

TRANSPORTATION OF HEMP AND HEMP PRODUCTS.—No State or Indian Tribe shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with subtitle G of the Agricultural Marketing Act of 1946 (as added by section 10113) through the State or the territory of the Indian Tribe, as applicable.

In plain English, this means that states and Tribes can’t prohibit hemp or hemp products from passing through their state or territory if the hemp or hemp products were produced in compliance with Section 10113 of the 2018 Farm Bill.

3. States and Indian tribes also may not prohibit the interstate transportation or shipment of hemp lawfully produced under the 2014 Farm Bill.

This is where things get interesting. The 2018 Farm Bill did not repeal Section 7606 of the 2014 Farm Bill. The 2014 Farm Bill authorized colleges and state departments of agriculture to cultivate industrial hemp for research purposes. The hemp industry that we know and love has “grown up” under the 2014 Farm Bill because the USDA has not yet approved any 2018 Farm Bill state plans. That means that all the hemp grown in this country is done so under the 2014 Farm Bill. The 2018 Farm Bill will repeal Section 7606 of the 2014 Farm Bill one year after the USDA issues hemp regulations.

The USDA Letter’s third conclusion says that Section 10114 of the 2018 Farm Bill, which prohibits states and Indian tribes from interfering with the interstate transport of hemp, protects hemp cultivated pursuant to the 2014 Farm Bill. The USDA’s reasoning turns on a subsection of Section 10113, which states that “[n]othing in this sections prohibits the production of hemp in a State or the territory of an Indian tribe, for which a state or Tribal plan is not approved under this section, if the production of hemp is in accordance with [. . .] other Federal laws[.]” According to the USDA Letter, the 2014 Farm Bill qualifies as “other Federal laws” and therefore states and Indian tribes cannot interfere with the transport of 2014 Farm Bill grown industrial hemp or products derived from industrial hemp.

It’s worth pointing out that the USDA Letter is a non-binding interpretive statement and a judge may disagree with the USDA’s conclusions. However, this gives strong support to the argument that states should not interfere with legally grown hemp shipments.

4. A person with a State or Federal felony conviction relating to a controlled substance is subject to a 10-year ineligibility restriction on producing hemp under the Agricultural Marketing Act of 1946. An exception applies to a person who was lawfully growing hemp under the 2014 Farm Bill before December 20, 2018, and whose conviction also occurred before that date.

This last conclusion, though unfortunate, is a pretty straight forward interpretation of the 2018 Farm Bill’s prohibition on felons producing hemp. If anything, it clears up the date when felons are “grandfathered” in: 12/20/18.

This guidance from the USDA is helpful and mostly positive for the industry, especially when in comes to the uncertainty around interstate shipments. It’s also worth noting that the USDA released this guidance a few days before the FDA is scheduled to hold a public hearing on May 31. This all but assures that it will be a big week for hemp.

In the past few months, our team has been quoted in several magazines and online publications on the risks of traveling with CBD products. These media inquiries resulted from repeated arrests of travelers in possession of CBD oil at the Dallas/Fort Worth International Airport (“DFW”).

At the time of these arrests, the Transportation Security Administration (“TSA”), an agency of the U.S. Department of Homeland Security that has authority over the security of the traveling public in the United States, maintained the position that:

Possession of marijuana and cannabis infused products, such as Cannabidoil (CBD) oil, is illegal under federal law. TSA officers are required to report any suspected violation of law, including possession of marijuana and cannabis infused products. TSA’s screening[s] are focused on security and are designed to direct potential threats to aviation and passengers. Accordingly, TSA security officers do not search for marijuana or other illegal drugs, but in the event a substance that appears to be marijuana or a cannabis infused product is observed during security screening, TSA will refer the matter to a law enforcement officer.”

As a federal agency, TSA adheres to the rules and regulations of the federal government. However, even after the passage of the 2018 Farm Bill and the legalization of hemp, TSA continued not to differentiate marijuana from hemp and to treat all CBD products as illegal under federal law.

However, following more arrests at DFW last week, TSA decided to provide some clarification and revised its Medical Marijuana page, which provides that:

Products/medications that contain hemp-derived CBD or are approved by the FDA are legal as long as it is produced within the regulations defined by the law under the Agriculture Improvement Act 2018.” (Emphasis added).

However, these new guidelines are vague and confusing.

First, to which “regulations defined by the law” under the 2018 Farm Bill is TSA referring? Is TSA going to allow hemp-derived CBD products processed pursuant to a plan approved by the U.S. Department of Agriculture (“USDA”)? No such product currently exists since the USDA has yet to approve state plans. Alternatively, is the agency authorizing passengers to carry products processed under a 2014 state pilot program? This might make more sense, as the 2018 Farm Bill provides that the 2014 Farm Bill shall remain in place for one year following the adoption of rules by the U.S. Department of Agriculture.

Still, if TSA intended for the latter to apply, then it would mean that passengers could carry hemp-derived CBD “products/medications,” such as CBD-infused food and dietary supplements, whose introduction in interstate commerce has been deemed unlawful by the FDA. Indeed, the language of the TSA guidelines provides that both hemp-derived CBD “products/medications” that meet the “regulations defined by the law” under the 2018 Farm Bill “or” FDA approved “products/medications” may be brought on planes. Currently, the FDA has only approved the following “products/medications”: (1) three generally recognized as safe (“GRAS”) hemp seed ingredients; and (2) Epidiolex, a CBD-infused drug used in the treatment of epilepsy.

TSA is now one of several federal agencies to have revisited its policies regarding the legality of hemp-derived CBD products, including the U.S. Alcohol and Tobacco and Trade Bureau, the U.S. Patent and Trademark Office, the U.S. Postal Services and the USDA.

It remains to be seen how TSA will enforce its new policy and whether it will defer to other federal agencies, including the FDA which is exploring potential pathways for dietary supplements and/or conventional foods containing CBD to be lawfully marketed, in developing its enforcement strategy.

But one thing is certain, unless TSA clarifies these guidelines, more airport arrests could ensue.

We will continue to monitor this issue and will keep you informed of any development. For now, the “anything goes” approach to CBD and air travel is a risky one, despite some reporting out there to the contrary.

While Oregon legalized hemp production in 2015, the Beaver State has seen a huge influx of hemp grower and handler registrations since the enactment of the 2018 Farm Bill, which legalized hemp under federal law.

To keep up with the growing interest in the crop and its derivatives, the Oregon Department of Agriculture (“ODA”) has been actively revising its rules and finally adopted their permanent version on May 15^th.

Specifically, the rules make permanent the temporary rules that were filed around March 1 and the proposed rules that were filed at the end of March. They should be in place for a while, or at least until the state legislature adopts HB 2740 or yet another hemp statute.

Many of our hemp clients have been asking how these rules would impact their businesses. Because it’s been a while since we ran through program basics, we thought it might be helpful to summarize them here on the blog.

Overall, the permanent rules do the following:

• Update the testing rules to conform to the changes made by the Oregon Health Authority in December 2018. The rules impose specific testing requirements based on the type of products involved, which include:
  (1) industrial hemp for human consumption and hemp items;
  (2) industrial hemp for human consumption and usable hemp;
  (3) hemp concentrate or extract intended for use by a person to make a hemp cannabinoid product;
  (4) finished hemp concentrate or extract; and
  (5) finished hemp cannabinoid products.

• Clarify and update recordkeeping and reporting requirements imposed on registrants. The proposed rules put a few additional reporting and recordkeeping requirements on the registrants’ shoulders, but nothing too demanding.
• Clarify the option registered growers have to resample in the event a harvest lot fails pre-harvest testing. Under the new rules, both samples and filed duplicate samples must be reanalyzed if they fail testing.
• Establish a fee for the submission of a change form. Under the new rules, registrants who wish to update their registration, such as adding a grow site to an existing registration, will be charged a $125 fee.
• Adopt a fee schedule for pre-harvest THC testing provided by the ODA. The new hemp sampling fees would be increased by approximately 33 percent to cover the ODA’s cost associated with collecting regulatory samples. The proposed rules include additional fees, including travel time and overtime charges for services performed by the Department of Administrative Services.
• Clarify requirements for individuals making retail sale of industrial hemp in the state. Those who sell industrial hemp items to consumers will no longer be required to test the item for potency before sale so long as the hemp ingredient used in the product has a compliance test at or below 0.3 percent total THC (THCA converted to delta9 and delta9 THC).
• Change testing requirements for THC and CBD potency in final products. A finished hemp cannabinoid product must be tested for THC and CBD concentration in the same manner as cannabinoid products under OAR 333-007-0340 before it can be sold or transferred to a consumer.

In addition, the permanent rules address issues that shall go into effect on January 1, 2020. These issues include:

• Revision of sampling procedures for pre-harvest THC testing. Specifically, the rules require that the total THC be tested, which the ODA has concluded is required by the 2018 Farm Bill.
• Restructure of handler registration application process and fees, which adds the option for registration by reciprocity for OLCC-licensed processors who hold a hemp endorsement to process hemp with the OLCC Recreational Market.
• Restructure the grower registration application and fees. In lieu of a $1,300 hemp grower application fee, the permanent rules provide for two separate fees and applications: (1) a fee of $250 for a grower registration application, and (2) a fee of $500 for each grow site registration application. Under this new structure, the average grower would pay lower registration fees ($750-1,250) because a majority of registered growers currently farm two or fewer fields.

For more information on the new permanent rules, don’t hesitate to contact our team of cannabis and CBD attorneys.