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Breaking News: Industrial Hemp Legalization is Happening!

industrial hemp 2018 farm bill

After a long last, it's finally happened. The 2018 Farm Bill has made it out of conference and has been approved by the Senate. It currently awaits approval from the House, which is expected this week. If Donald Trump signs the 2018 Farm Bill before the current legislative session ends on December 21, industrial hemp will be legal under U.S. federal law. Though we still are likely a few years out from full marijuana legalization, it appears that 2019 is going to be the “Year of Hemp” if Washington D.C. can make this happen before the deadline. Now, we'll turn to the long awaited hemp-related text of the 2018 Farm Bill, as agreed to by the House and Senate. A copy of the full 2018 Farm Bill is available, via the U.S. Hemp Roundtable, here.

Some key provisions of the 2014 Farm Bill remain. “Industrial hemp” still means parts of the cannabis plant, whether growing or not, with less than 0.3% THC on a dry weight basis. Cannabis with more than 0.3% is still considered marijuana and is still classified as a schedule I substance. Additionally, the 2014 Farm Bill's hemp provisions will continue for a year after the 2018 Farm Bill is signed. That means that the agricultural pilot programs that we know and love will stick around for a little bit longer.

However, the new version of the Farm Bill differs significantly in that industrial hemp is explicitly defined to include “all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers” of industrial hemp. Technically, this isn't necessarily a change in the sense that industry stakeholders (including yours truly) have long interpreted the 2014 Farm Bill to make derivatives and cannabinoids from industrial hemp legal. Now that interpretation has been codified into US law.

The CSA will also explicitly exempt “hemp” from the definition of marijuana. That means that the CSA will acknowledge two different types of cannabis, hemp and marijuana. Hemp is an agricultural commodity. Marijuana is a controlled substance. The problems that plague the marijuana industry including the lack of access to banking, bankruptcy, and federal intellectual property protections should no longer impact businesses dealing solely in industrial hemp. This distinction will also likely lead to increased research by the FDA and other agencies, and remove any question as to whether industrial hemp producers are subject to IRC 280e, which prohibits the taking of deductions related to the trafficking of Schedule I or II controlled substance.

The questions of the interstate transfer of industrial hemp is also addressed. Section 10114 of the 2018 Farm Bill 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) [the provisions on industrial hemp] through the State or the territory of the Indian Tribe, as applicable.
This is a major development as the 2014 Farm Bill did not require states to make any distinction between hemp and marijuana. The new provision means that states that don't adopt an industrial hemp program cannot interfere with the transportation or shipment of industrial hemp. Though this may not go so far as to require each state to allow the sale of industrial hemp or hemp products, including Hemp-CBD, it does prevent states from interfering with the distribution of industrial hemp.

The 2018 Farm Bill also gives Indian tribes the authority to regulate industrial hemp. This is an important change as the Menominee tribe, who's territory falls within the state of Wisconsin had its initial hemp crop destroyed by DEA agents. A Federal Court ruled that the 2014 Farm Bill required that hemp be cultivated in compliance with state law and therefore, because Wisconsin had not implemented an agricultural pilot program to research industrial hemp, that the Menominee tribe could not legally cultivate hemp. The 2018 Bill explicitly gives tribes the ability to implement programs allowing the cultivation of industrial hemp.

One of the reasons the 2014 Farm Bill's hemp provisions have been so murky is that no federal agency was given regulatory authority over hemp. The 2018 Farm Bill addresses this by appointing the United States Department of Agriculture (USDA). The USDA will oversee a state or tribe's regulatory authority over industrial hemp. The state or tribe will submit a plan to monitor and regulate the production of industrial hemp and the USDA will have 60 days to review the plans. Plans must track the land where hemp is cultivated, procedures for testing hemp and disposing of non-compliant hemp, and indicate how the state will enforce against violations of the 2018 Farm Bill.

The 2018 Farm Bill covers penalties for violations of approved state or tribal plans and breaks them into the following categories:

  • Negligent Violations occur when a hemp producer unintentionally violates a state or tribal plan for hemp cultivation by failing to provide a legal description of the land where hemp will be cultivated, failing to obtain the required license or authorization from the state or tribe, or produces cannabis with more than 0.3% THC. Producers who commit a negligent violation shall enter into and comply with a plan established by a state or tribe to correct the violation. The corrective action plan must include a date by which the producer corrects the violation and require that the producer periodically report to the state or tribe on compliance for no less than two years. Producers who commit negligent violations will not be subject to criminal or civil enforcement action beyond agreeing to submit to a corrective action plan. However, if a producer commits three negligent violations within a five-year window
  • Other violations occur when a hemp producer acts with a “culpable mental state greater than negligence.” Other violations could cover things like intentionally growing THC-rich marijuana under the guise of industrial hemp or completely disregarding the industrial hemp rules. Other violations will be referred to the Department of Justice or the “chief law enforcement officer of the State” where the industrial hemp is grown.

The 2018 Farm Bill will prohibit “any person convicted of a felony relating to a controlled substance” under state or federal law before, on, or after the date when the Farm Bill passes to produce hemp under the 2018 Farm Bill or participate in a state or tribal hemp program for a period of 10 years following the date of conviction. This prohibition will not apply to any person lawfully growing hemp with a license, registration, or authorization under a 2014 Farm Bill agricultural pilot program prior to the 2018 Farm Bill enactment. In addition, anyone who makes a false statement on an industrial hemp application will also be banned from the industry.

Finally, the 2018 Farm Bill would also extend federal crop insurance coverage to industrial hemp, meaning that the feds will actually insure a cannabis crop. Hemp producers can also apply for USDA certification and grants, as with other agricultural commodities.

Expect us to write more on this in the near term. This is an important day in the history of cannabis reform and will have a major and positive impact on the cannabis industry.

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Breaking News: Industrial Hemp Legalization is Happening!

industrial hemp 2018 farm bill

After a long last, it’s finally happened. The 2018 Farm Bill has made it out of conference and has been approved by the Senate. It currently awaits approval from the House, which is expected this week. If Donald Trump signs the 2018 Farm Bill before the current legislative session ends on December 21, industrial hemp will be legal under U.S. federal law. Though we still are likely a few years out from full marijuana legalization, it appears that 2019 is going to be the “Year of Hemp” if Washington D.C. can make this happen before the deadline. Now, we’ll turn to the long awaited hemp-related text of the 2018 Farm Bill, as agreed to by the House and Senate. A copy of the full 2018 Farm Bill is available, via the U.S. Hemp Roundtable, here.

Some key provisions of the 2014 Farm Bill remain. “Industrial hemp” still means parts of the cannabis plant, whether growing or not, with less than 0.3% THC on a dry weight basis. Cannabis with more than 0.3% is still considered marijuana and is still classified as a schedule I substance. Additionally, the 2014 Farm Bill’s hemp provisions will continue for a year after the 2018 Farm Bill is signed. That means that the agricultural pilot programs that we know and love will stick around for a little bit longer.

However, the new version of the Farm Bill differs significantly in that industrial hemp is explicitly defined to include “all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers” of industrial hemp. Technically, this isn’t necessarily a change in the sense that industry stakeholders (including yours truly) have long interpreted the 2014 Farm Bill to make derivatives and cannabinoids from industrial hemp legal. Now that interpretation has been codified into US law.

The CSA will also explicitly exempt “hemp” from the definition of marijuana. That means that the CSA will acknowledge two different types of cannabis, hemp and marijuana. Hemp is an agricultural commodity. Marijuana is a controlled substance. The problems that plague the marijuana industry including the lack of access to banking, bankruptcy, and federal intellectual property protections should no longer impact businesses dealing solely in industrial hemp. This distinction will also likely lead to increased research by the FDA and other agencies, and remove any question as to whether industrial hemp producers are subject to IRC 280e, which prohibits the taking of deductions related to the trafficking of Schedule I or II controlled substance.

The questions of the interstate transfer of industrial hemp is also addressed. Section 10114 of the 2018 Farm Bill 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) [the provisions on industrial hemp] through the State or the territory of the Indian Tribe, as applicable.
This is a major development as the 2014 Farm Bill did not require states to make any distinction between hemp and marijuana. The new provision means that states that don’t adopt an industrial hemp program cannot interfere with the transportation or shipment of industrial hemp. Though this may not go so far as to require each state to allow the sale of industrial hemp or hemp products, including Hemp-CBD, it does prevent states from interfering with the distribution of industrial hemp.

The 2018 Farm Bill also gives Indian tribes the authority to regulate industrial hemp. This is an important change as the Menominee tribe, who’s territory falls within the state of Wisconsin had its initial hemp crop destroyed by DEA agents. A Federal Court ruled that the 2014 Farm Bill required that hemp be cultivated in compliance with state law and therefore, because Wisconsin had not implemented an agricultural pilot program to research industrial hemp, that the Menominee tribe could not legally cultivate hemp. The 2018 Bill explicitly gives tribes the ability to implement programs allowing the cultivation of industrial hemp.

One of the reasons the 2014 Farm Bill’s hemp provisions have been so murky is that no federal agency was given regulatory authority over hemp. The 2018 Farm Bill addresses this by appointing the United States Department of Agriculture (USDA). The USDA will oversee a state or tribe’s regulatory authority over industrial hemp. The state or tribe will submit a plan to monitor and regulate the production of industrial hemp and the USDA will have 60 days to review the plans. Plans must track the land where hemp is cultivated, procedures for testing hemp and disposing of non-compliant hemp, and indicate how the state will enforce against violations of the 2018 Farm Bill.

The 2018 Farm Bill covers penalties for violations of approved state or tribal plans and breaks them into the following categories:

  • Negligent Violations occur when a hemp producer unintentionally violates a state or tribal plan for hemp cultivation by failing to provide a legal description of the land where hemp will be cultivated, failing to obtain the required license or authorization from the state or tribe, or produces cannabis with more than 0.3% THC. Producers who commit a negligent violation shall enter into and comply with a plan established by a state or tribe to correct the violation. The corrective action plan must include a date by which the producer corrects the violation and require that the producer periodically report to the state or tribe on compliance for no less than two years. Producers who commit negligent violations will not be subject to criminal or civil enforcement action beyond agreeing to submit to a corrective action plan. However, if a producer commits three negligent violations within a five-year window
  • Other violations occur when a hemp producer acts with a “culpable mental state greater than negligence.” Other violations could cover things like intentionally growing THC-rich marijuana under the guise of industrial hemp or completely disregarding the industrial hemp rules. Other violations will be referred to the Department of Justice or the “chief law enforcement officer of the State” where the industrial hemp is grown.

The 2018 Farm Bill will prohibit “any person convicted of a felony relating to a controlled substance” under state or federal law before, on, or after the date when the Farm Bill passes to produce hemp under the 2018 Farm Bill or participate in a state or tribal hemp program for a period of 10 years following the date of conviction. This prohibition will not apply to any person lawfully growing hemp with a license, registration, or authorization under a 2014 Farm Bill agricultural pilot program prior to the 2018 Farm Bill enactment. In addition, anyone who makes a false statement on an industrial hemp application will also be banned from the industry.

Finally, the 2018 Farm Bill would also extend federal crop insurance coverage to industrial hemp, meaning that the feds will actually insure a cannabis crop. Hemp producers can also apply for USDA certification and grants, as with other agricultural commodities.

Expect us to write more on this in the near term. This is an important day in the history of cannabis reform and will have a major and positive impact on the cannabis industry.

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CBD Companies Should Prepare Now for Product Liability Claims

CBD product recall litigation

We counsel our cannabis (and non-cannabis) clients extensively on product liability issues, and have warned them that the federal illegality of their products will not shield them from the same products liability risks faced by companies in other industries. We extend the same warnings to our cannabidiol (CBD) clients, who, if they are operating outside of a state-run cannabis licensing regime, are actually in a position of even greater risk. Lack of regulation in the CBD space is to the detriment of consumers, who often cannot be certain what ingredients the products they purchase actually contain, or whether those products are safe and free of contaminants.

It’s only a matter of time before harmed consumers start suing CBD companies alleging defective, dangerous, or mislabeled products (and Proposition 65 violations). Here are some posts we’ve written about product liability in the cannabis industry, which are highly relevant to CBD companies as well:

Recently, Vice published an alarming article about a new study that detected synthetic marijuana and a compound in cough syrup in one CBD company’s vape products. The article summarizes the findings of Michelle Peace, a toxicologist and vaping expert at Virginia Commonwealth University who evaluates how electronic cigarettes are being used for substances other than nicotine. Peace received a tip that a product supposedly containing only CBD had psychedelic effects for a consumer. Upon further testing, she discovered that out of nine products tested, four contained synthetic marijuana (5-fluoro MDMB-PINACA (5F-ADB)) and one contained dextromethorphan, an ingredient in cough syrup.

Unfortunately, these findings do not surprise us. We’ve long been wary of the proliferation of CBD products with very little regulation from federal or state governments. Some states have taken steps to combat these unregulated products. In July of this year, the California Department of Public Health’s Food and Drug Branch (CDPH) issued an FAQ on CBD in food products stating:

“[A]lthough California currently allows the manufacturing and sales of cannabis products (including edibles), the use of industrial hemp as the source of CBD to be added to food products is prohibited. Until the FDA rules that industrial hemp-derived CBD oil and CBD products can be used as a food or California makes a determination that they are safe to use for human and animal consumption, CBD products are not an approved food, food ingredient, food additive, or dietary supplement.”

In California, CBD products derived from marijuana and produced by licensed cannabis manufacturers may be sold, but unregulated, industrial-hemp-derived products intended for consumption may not.

So, what should CBD companies be doing to protect themselves from consumer product liability claims? Of course, we recommend implementing robust testing protocols that are in line with those required by state agencies of cannabis manufacturers. The first step in protecting your company is ensuring that your products are safe. In the same vein, be sure that everything you state about your product is accurate.

And oftentimes, one of the best ways to mitigate against product liability claims is to institute a product recall, and having a product recall plan in place will facilitate this. In crafting that plan, below are some recommendations we’ve made before, which bear repeating:

  1. Create an overall recall strategy.
  2. As part of your recall plan, create definitions and standards for classes of recall and the depth and scope of any given recall. If your state or local laws do not provide basic recall standards for cannabis businesses, check out the FDA’s website under Guidance for Industry: Product Recalls, Including Removals and Corrections.
  3. Appoint a recall committee within your company, to be led by experienced personnel capable of evaluating and investigating product complaints to determine if a recall is warranted. This also entails your developing a product complaint form that will be utilized by customers. It is important to learn about product problems as early as possible.
  4. Develop a complaint receipt and evaluation method to ensure your product complaint processing and investigations are logical, efficient, and comprehensive. There are few things worse than receiving product safety complaints and then ignoring them until the situation is out of control.
  5. Truly ponder what your product complaint investigation will entail. What facts should your recall committee be gathering when seeking to determine if a product complaint is valid or if a recall is warranted? What should your recall look like, as based on the facts and circumstances and the threat your product may pose to consumers and vendors?
  6. Create a distribution list so your product recall committee can quickly and easily identify all affected products and product lots for disposition and potential destruction. The distribution list should — at minimum — include the names of all affected consumers and vendors, their contact information, and the dates on which the products were sold to them or consumed by them, and it should also include any side effects, injuries, or illnesses resulting from product use. Time is of the essence here. Our firm had a regional food client that inadvertently failed to issue a recall notice to one of many supermarket chains to which it sold its food. This supermarket chain was so angry about having been kept out of the loop that it refused ever to purchase our client’s product again. Then other supermarket chains learned of our client’s failure to notify this one supermarket company and they too ceased all of their purchasing. Needless to say, our client company no longer exists. Don’t let this sort of thing happen to you.
  7. Institute a method of stock recovery so all tainted product in inventory is effectively quarantined from sale and distribution.
  8. Generate your recall notice and be very careful with your wording in how you alert vendors and consumers to the recall. You want to effectively communicate that a product has been affected and how to deal with that, but you also want to minimize whatever liability your product problems may create for the company. On a case by case basis, consideration should also be given to drafting a press release to help the company’s PR. For this you absolutely need attorney help.
  9. Make sure to as quickly as possible (preferably in advance) alert your outside advisors (your lawyers, your insurance broker, etc.) regarding your recall.
  10. Set out in your recall plan your options for product disposition. Will you destroy a product? Cleanse and then repurpose it? Lay out your options in your plan now so you are not scrambling to try to figure out your possible options later, when you have no time to do so.
  11. Record everything you do. Document every effort you make and record all your communications with consumers and vendors. If there is a legal action later, you will want to be able to show the court that you took all reasonable steps to ensure consumer safety.

In addition to the foregoing, we also recommend regular compliance audits to ensure that your procedures are safe, legal and effective. It is only a matter of time before CBD product liability claims start to proliferate, and CBD companies should prepare for that reality now.

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Labeling CBD-Infused Foods: Part 2

cbd label copyright trademark
Start from scratch to avoid infringement issues.

We previously discussed the need for manufacturers of CBD-infused foods and beverages (“Manufacturers”) to comply with the Food and Drug Administration labeling rules. However, such requirements are only one of many issues Manufacturers should worry about. Indeed, Manufacturers should also ensure: 1) that their name as well as their logo/design are not infringing on those of another; and 2) that they hold the right to the Trademarks they intend to display on their labels. This post provides a brief overview of the steps Manufacturers should take to shield themselves from infringement claims.

Trademark and/or Logo Infringement

As we explained before, trademarks are words, phrases, symbols or designs (i.e., logos) that identify the source of a product and help distinguish that product from that of competitors. The very best way to protect your trademark is to register it at the state or federal level.

Logos may also be protected under copyright law. Copyright law protects literary, musical, graphic, or other artistic forms in which an author expresses intellectual concepts. Thus, logos that are adequately original and ornate have a strong chance of being copyright protected, even without registration—though it is in the Manufacturer’s best interest to register its Logo with the U.S. Copyright Office, see why here.

Choosing branding that will not infringe the trademark and/or copyright rights of another is a critical step in developing a sound marketing strategy. Infringing will not only result in paying substantial damages to the pre-existing brand owner, it will also lead to massive rebranding costs: Think of all those printed labels a Manufacturer will need to throw away and the products they will need to pull off the shelves.

Therefore, before they start printing their labels (and ideally, before they start marketing altogether), Manufacturers should do their due diligence and conduct comprehensive searches with the U.S. Patent and Trademark Office and the U.S. Copyright Office to ensure that no one has already registered a similar trademark and/or logo.

Ownership of Logo

Some Manufacturers whose labels we reviewed hired a graphic designer to develop their logo, yet, few entered into a written independent contractor agreement (“Agreement”).

This Agreement is a contract between two parties, in this case a Manufacturer and a graphic designer, for a specific service or project (i.e., the development of a logo). It clearly provides why the graphic designer was hired and stipulates that he or she is not an employee of the Manufacturer for legal and tax purposes.

In addition to requiring the graphic designer to carry insurance and to hold any mandatory professional licenses under state and federal laws, the Agreement states that the designer assigns his or her rights in the work product to the Manufacturer. In other words, the logo becomes the sole ownership of the Manufacturer even if its author is the graphic designer (under copyright law, the author of a creative work is automatically the owner of the work, absent any arrangement to the contrary).

Consequently, an Agreement will ensure that the Manufacturer has the right to freely use the logo, including entering into licensing agreements and relying on their logo as a valuable asset.

With the growing popularity of CBD-infused foods and beverages, Manufacturers are eager to enter the market and tend to rush through the marketing process, running the risk of incurring significant recall and rebranding costs. To avoid such financial burden, Manufacturers should consult with experienced CBD business attorneys who can review their product labels and ensured that their branding is indeed theirs to use.

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Industrial Hemp Litigation: U.S. Postal Service Loses CBD Delivery Case

USPS industrial hemp delivery litigation
If only it were so simple!

In January 2018, the United States Postal Service (USPS) seized a package in Denver, Colorado sent by KAB, LLC, a registered, Colorado industrial hemp cultivator. The package contained 1170 grams of cannabidiol (CBD) powder, derived from industrial hemp. KAB appealed USPS’s decision, arguing that the powder was not a controlled substance and therefore should not have been withheld. Administrative Law Judge (ALJ) James G. Bilbert oversaw the appeal and wrote an opinion in favor of KAB.

In his opinion, the ALJ considered whether CBD grown and cultivated from industrial hemp, in line with Section 7606 of the Agriculture Act of 2014 (Farm Bill) was nonmailable as a Schedule I controlled substance. The ALJ observed that marijuana is classified as a Schedule I substance under the Controlled Substances Act (CSA) and that “CBD that is a derivative of the marijuana plant, as defined under the CSA, is non-mailable.” The ALJ quoted USPS, Publication 52, Hazardous, Restricted, and Perishable Mail § 453.31 (Aug. 2017) stating that “[i]f the distribution of a controlled substance is unlawful under [the CSA or related regulation] than the mailing of the substance is also unlawful under 18 USC § 1716.”

The ALJ’s analysis then turned to the Farm Bill, reciting well-known § 7606, which establishes the following:

  • Notwithstanding the CSA, a state department of agriculture may cultivate industrial hemp if it is grown for the purpose of research conducted under an agricultural pilot program and is permitted by state law.
  • Industrial hemp means the plant cannabis sativa L. and any part of such plant, whether growing or not, with less than .3% THC on a dry weight basis.

The ALJ identified that the Farm Bill and the CSA appear to be in conflict. The CSA broadly defines marijuana to include nearly all parts of the cannabis plant. In turn, the Farm Bill defines industrial hemp as all parts of the cannabis plant as well. The difference? The .3% threshold. The ALJ determined that that the Farm Bill “draw a clear and distinct difference by delineating that the plant with less than 0.3% THC concentration is industrial hemp.”

The ALJ considered the DEA’s much-maligned Statement of Principles on Industrial Hemp, which reiterated the DEA’s position that the sale and transport of industrial hemp across state lines was prohibited. The ALJ didn’t put much weight into the Statement, writing that based on an “amicus brief filed by members of Congress in a recent Ninth Circuit matter, and in correspondence from members of Congress to agency officials, the [Statement’s’ legitimacy as a valid interpretation of the Agriculture Act of 2014 was strongly criticized.”

In the end, the ALJ’s ruling turned on statutory interpretation, focusing on the use of “notwithstanding” in the Farm Bill:

By choosing to define industrial hemp based upon the concentration of THC in the plant Cannabis sativa L, Congress did not amend the CSA so much as carve out a clear exception for industrial hemp. The language “[n]otwithstanding the Controlled Substances Act” is particularly instructive in this regard. “The Supreme Court has indicated as a general proposition that statutory ‘notwithstanding’ clauses broadly sweep aside potentially conflicting laws.” United States v. Novak, 476 F.3d 1041, 1046 (9th Cir. 2007) (citing Cisneros v. Alpine Ridge Group, 508 U.S. 10, 18 (1993)) (“As we have noted previously in construing statutes, the use of such a ‘notwithstanding’ clause clearly signals the drafter’s intention that the provisions of the ‘notwithstanding’ section override conflicting provisions of any other section.”)[.]

The parties stipulated to the fact that KAB had a license to cultivate industrial hemp and used industrial hemp to create the CBD powder. KAB was registered with Colorado Department of Agriculture (CDA). Accompanying the package was “Industrial Hemp Inspection and Chain of Custody” paperwork from the CDA showing the powder was derived from a crop of industrial hemp with less than .3% THC. The CBD isolate also tested for low amounts of THC.

Given the evidence that the powder was made in compliance with the Farm Bill, the ALJ ruled it was mailable. In that sense, the ALJ came to the same determination as the Ninth Circuit earlier this year, when it opined that Congress intended to remove Farm Bill hemp from the strictures of the CSA.

The story of KAB, however, is a reminder that industrial hemp comes with risk. Even though the ALJ ultimately ruled in favor of KAB, the company still had to deal with the unwarranted seizure, business disruption and litigation. Let’s hope for a good Farm Bill soon!

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Five Key Documents Necessary to Understand Industrial Hemp Law

industrial hemp cannabis

On Thursday, November 30, I’ll be speaking at a presentation hosted by the Seminar Group titled, “The Business of Marijuana in Washington State.” In preparation for this event, I’ve put together a list of materials that I think are vital to understanding the law on hemp-derived CBD (Hemp-CBD). Below is a list of statutes, cases, and other authority that frames the legal status of Hemp-CBD.

The Agricultural Act Of 2014 Section 7606 (the 2014 Farm Bill). Any analysis of US policy regarding hemp must the begin with the 2014 Farm Bill. Section 7606 of the 2014 Farm Bill is the starting point of the country’s rapidly expanding Hemp-CBD industry. The 2014 Farm Bill allows states to implement agricultural pilot programs overseeing the cultivation of industrial hemp. Industrial hemp is defined as the cannabis plant with less than .3% THC on a dry weight basis. States that have implemented an agricultural pilot programs are then authorized to issue licenses or permits to individuals and entities who can then cultivate industrial hemp. The 2014 Farm Bill requires a research component. What constitutes research is not defined within the “four corners” of the 2014 Farm Bill. Some states, such as Colorado, Kentucky, and Oregon, have interpreted the 2014 Farm Bill liberally, allowing the commercial sale and distribution of industrial hemp and industrial hemp products, such as hemp-CBD.

Statement of Principles on Industrial Hemp (the Statement). In 2016, the Drug Enforcement Administration (DEA), issued the Statement. The stated goal of this guidance document is to provide clarity as to how federal law applies to activities associated with industrial hemp, grown pursuant to the 2014 Farm Bill. The DEA interpreted the 2014 Farm Bill taken narrowly as the Statement indicates that the general commercial sale of industrial hemp is not permitted except for “marketing research” conducted by institutions of higher education or state departments of agriculture. The DEA also interprets the 2014 Farm Bill to prohibit the interstate transfer of industrial hemp. The DEA has not enforced the Statement robustly. For the most part, the commercial sale of industrial hemp and Hemp-CBD and the interstate transfer of industrial have been unimpeded by the DEA.

The Agricultural Appropriation Act of 2018, Section 537. One of the major reasons that the DEA has not followed up on the Statement, is that Congress has exercised its “power of the purse” to prevent the DEA from using federal funds to prevent the interstate transfer of industrial hemp or the commercial sale of industrial hemp. This was first enacted in 2017 and recently was renewed to run through December 9, 2018.

Hemp Indus. Ass’n v. U.S. Drug Enf’t Admin., 720 Fed. Appx. 886 (9th Cir. 2018). This case, decided by the US Court of Appeals for the Ninth Circuit, was brought by the Hemp Industry Association in response to the DEA’s “marijuana extract rule.”

The rule established a new drug code specifically for marijuana extracts and defined a marijuana extract as any extract containing cannabinoids derived from the cannabis plant. On its face, the rule makes no distinction between industrial hemp and marijuana. Shortly after issuing the rule, the DEA issued a clarifying statement that said that the rule only applied to derivative of marijuana, and that it would not make any extracts that were otherwise legal under US law illegal.

HIA was unsuccessful in the sense that the Ninth Circuit upheld the rule, dismissing the HIA’s challenges on procedural grounds. However, the DEA’s rule was left largely toothless by the time the Court issued its memorandum as the DEA had already walked back the rule through its clarification. Additionally, the Court stated that the 2014 Farm Bill preempted the Controlled Substances Act (CSA), meaning that when the CSA and 2014 Farm Bill conflict, the 2014 Farm Bill prevails. This preemption interpretation does not set precedent, as the memorandum is non-binding. It does, however, give credence to the argument that the 2014 Farm Bill preempts the CSA.

Hemp Farming Act of 2018. The Hemp Farming Act of 2018 was introduced by Senate majority leader Mitch McConnell. Mitch McConnell hails from the state of Kentucky, which has become a major player in industrial hemp. The Hemp Farming Act is much more detailed than the 2014 2014 Farm Bill. It explicitly removes industrial hemp and derivatives from industrial hemp, including CBD, from the CSA. It also provides a more robust regulatory framework’s for states to implement industrial hemp programs.

The Hemp Farming Act was adopted in its entirety in the Senate version of the 2018 Farm Bill. The house version of the 2018 Farm Bill did not include the Hemp Farming Act. Before the 2018 Farm Bill can be enacted into federal law, both houses of Congress must agree on the language of the Bill. Recently, McConnell guaranteed that the hemp provisions included in the Senate Bill would make the final cut. If that’s true, then as early as next year we will see a much more thoughtful (and discernible!) federal policy on industrial hemp.

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