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Are CBD-Infused Alcohol Beverages Legal?

cbd alcohol

The recent wave of crackdowns on cannabidiol (“CBD”)-infused alcohol beverages has further exacerbated public confusion regarding the legal status of the cannabis plant’s non-psychoactive compound.

This post provides an overview of the regulatory framework of alcoholic beverages, including pre-manufactured industrial hemp-infused drinks and “homemade” alcoholic drinks infused with CBD oil or extracts.

Pre-Manufactured Alcohol Beverages Infused with Hemp

As we previously explained, alcoholic beverages are regulated by federal and state laws. Cannabis is heavily regulated at the state level but unlike alcohol, it is—for the most part—strictly prohibited under federal law. However, one variety of cannabis, hemp, was recently legalized under the Agriculture Improvement Act of 2018 (“2018 Farm Bill”), which removed that particular crop from the definition of “Marihuana” under the Controlled Substance Act (“CSA”). Consequently, hemp is allowed in the formulation of alcohol beverages so long as the product meets specific criteria imposed by federal and state alcohol regulatory bodies.

The formulation of hemp-infused alcoholic drinks is regulated by the U.S. Alcohol and Tobacco and Trade Bureau (“TTB”) as well as by state liquor control agencies in states where the production and sale of hemp-infused drinks is allowed. Indeed, in its latest FAQ’s (which pre-dates the enactment of the 2018 Farm Bill), the TTB declared it understood the 2014 Farm Bill to only authorize the use of hemp in the production of alcoholic beverage products for sale within limited state-sanctioned pilot programs.

However, in the same FAQ’s, the TTB explained that before it approves a formulation, it consults with the Food and Drug Administration (“FDA”) to determine whether a hemp ingredient is safe for consumption and whether its use is lawful under the Food, Drug & Cosmetic Act (“FD&CA”). As we previously explained, the FDA currently deems the use of hemp-CBD-infused foods and drinks as unlawful because CBD has been approved in the treatment of epilepsy (Epidiolex); and therefore, can only be used as a drug. As such, the FDA has refused to recognize hemp-CBD as a safe food additive, which means it would treat hemp-CBD infused alcoholic beverages as unlawful under the FD&CA.

Consequently, alcoholic beverages derived from parts of the hemp plant that do not contain CBD, such as hulled hemp seeds, hemp seed protein and hemp seed oil, grown pursuant to a state pilot program that allows the commercial sale of these products, seem to be the only hemp-infused beverages eligible for TTB approval at the moment.

Drinks Infused with CBD Oil or Extracts

The alcoholic beverages recently banned from state bars and restaurants consisted of pre-manufactured alcohol beverages to which CBD oil or extract was later added. Unlike manufactured alcohol beverages, alcoholic drinks sold in bars and restaurants are directly regulated by state liquor control boards and state departments of health, which are free to defer to and adopt FDA regulations.

Although the FDA has limited its enforcement actions against CBD-infused products by sending warning letters, state agencies have begun confiscating those products, pursuant to FDA guidelines that categorize CBD as unsafe food additives. As I previously explained, food additives must receive FDA pre-market approval to be deemed safe for human consumption. However, given the FDA’s current position on CBD-infused products, such approval has yet to be granted.

Because these “homemade” CBD-infused alcoholic drinks are devoid of TTB and FDA market approval, it is understandable that they be banned from local restaurants and bars as they pose a potential threat to health and safety.

So as of now, only TTB-approved hemp-infused alcohol beverages seem to be legal and officially “safe” for human consumption. And to be honest, we don’t know of any that have been approved. That said, this is an incredibly fast-evolving area of law and policy, and we have seen a dramatic escalation of interest in this space ever the past year.

For more information on this issue, feel free to contact our team of hemp and CBD experts.

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Idaho State Police Are Not Required to Return Seized Hemp (Yet)

idaho hemp cannabis seize

Earlier this week, I wrote about how hemp businesses should not yet rely on the 2018 Farm Bill to protect them from their products being seized. This is because although Section 10114 of the 2018 Farm Bill prohibits states from interfering with the interstate transport of hemp and hemp products, that protection is limited to hemp that was cultivated in accordance with Section 10113 of the 2018 Farm Bill. At this time, full compliance with Section 10113 is not possible because the US Department of Agriculture (“USDA”) has yet to approve of any state or tribal plans covering the cultivation of hemp or issue its own plan allowing for the cultivation of hemp in states that do not have an approved plan.

As such, the cultivation of hemp is still governed by the 2014 Farm Bill, which allows state departments of agriculture to license the cultivation of industrial hemp. States have taken a widely different approach to regulating industrial hemp and not all states recognize any difference between industrial hemp and marijuana, regardless of the amount of THC present.

Back in September 2018, I wrote about how varying state laws made it challenging to ship hemp products, including hemp-derived CBD (“Hemp-CBD”) across the country. I used the following example to illustrate the risks:

[B]usinesses must carefully consider how their products reach consumers. For example, imagine that Hemp Co. is planning to distribute Hemp-CBD. Hemp Co. sources its industrial hemp from a farm in Medford, a small town in Southern Oregon. Hemp Co. has a large order to fill for a natural food store in Billings, Montana. Hemp Co. decides that the fastest and cheapest method of delivery is ground shipping through Idaho. However, according to a 2015 informal opinion from the Idaho Attorney General, the state makes no distinction between industrial hemp and marijuana. Therefore, Hemp-CBD, even without the presence of THC, is not permitted in Idaho. Even though Hemp Co.’s products come from a farmer who cultivates in-line with Oregon’s industrial hemp program (and relevant federal law), that does not insulate Hemp Co. from liability if the shipment is inspected by Idaho State Police.

Unfortunately, this hypothetical now appears to be playing out in real life as the Idaho State Police recently seized a shipment of industrial hemp traveling from Oregon to Aurora, Colorado.

Big Sky is a Colorado company that processes hemp into CBD powder which it then sells to manufacturers who add CBD to a number of different consumer products. Big Sky purchased 13,000 pounds of hemp from a permitted hemp cultivator in Oregon. Big Sky contracted with a third party logistics company to have the hemp shipped from Oregon to Aurora, Colorado.

On January 24, 2019, a truck carrying the hemp was stopped in Ada County, Idaho. The driver did not conceal the fact that he was shipping hemp and a bill of lading that accompanied the shipment indicated that the cargo was hemp. The Driver was arrested and charged with marijuana trafficking in Idaho state court. The Idaho State Police seized the contents of the truck: 7,000 pounds of industrial hemp.

Big Sky’s attorneys filed suit in US District Court in Idaho. Big Sky is seeking a declaratory judgment stating that Idaho Police improperly seized Big Sky’s properly and are improperly holding the property in light of the 2018 Farm Bill’s prohibition on the interstate shipment of hemp and general principles under the Commerce Clause which prohibit states from interfering with the interstate shipment of lawful goods. Big Sky also filed a motion for a temporary restraining order (TRO) and preliminary injunction to force the Idaho State Police to immediately return the seized hemp.

In order to get emergency relief in the form of an injunction or TRO, a party must show that they are likely to succeed on the merits of the underlying case. The Court determined that Big Sky had not met this burden because it is unclear whether Section 10144 of the 2018 Farm Bill covers the seized hemp at issue. The Order denying Big Sky’s claims states the following;

The takeaway from an examination of the respective arguments of Big Sky and the [Idaho State Police] is that a reasonable argument can be made that even though Big Sky may, at some point in time, be able to purchase industrial hemp that has been “produced in accordance with Subtitle G,” the hemp that was seized in Idaho could not possibly meet that standard because no “plans” to regulate the production of industrial hemp under the 2018 Farm Act have either been approved (by the federal government as to Oregon, as pertinent here) or created and promulgated by the United States Department of Agriculture for the federal government (to apply in the absence of an approved state or tribal plan).
To clarify, the Court is not ruling on the question of whether Big Sky was afforded protection under Section 10114 of the 2018 Farm Bill. Instead, it is saying that Big Sky has not yet shown a high likelihood that it prevail on the merits and therefore it is not entitled to have the seized hemp returned now. The Court has, however, identified that it is not clear that the 2018 Farm Bill prevents states from interfering with the interstate transport of hemp grown under the 2014 Farm Bill.
Big Sky will no doubt argue that the 2018 Farm Bill does prevent Idaho from interfering with this shipment. Though it is true that the Section 10114 does not explicitly cover hemp grown under the 2014 Farm Bill, it seems fair to say that the intent of Congress is to have hemp treated like an agricultural commodity, not a controlled substance. Additionally, Big Sky’s attorneys can expand their arguments that Idaho is interfering with interstate commerce, an area that is traditionally only to be regulated by Congress under the Commerce Clause of the US Constitution.
We’ll continue to monitor Big Sky’s case against the Idaho State Police. In the meantime, be very careful about how you ship hemp products.

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Free Lunch-Time Webinar TOMORROW: West Coast Hemp-CBD After the Farm Bill

Congress passed the Agricultural Improvement Act of 2018 (better known as the “Farm Bill”) in December 2018 which removed hemp from the federal Controlled Substances Act. This further resulted in hemp-based cannabidiol or “hemp-CBD” legalization. Despite their federally legal status, hemp-CBD products are now more in question than ever, different state and federal agencies have proposed drastically different regulations throughout every facet of the hemp-CBD industry.

If you are a hemp-CBD business, have interest in the industry or are interested in the state and future of hemp-CBD legality, please join us tomorrow, February 21, 2019 at noon (PST) for the latest installment in our lunchtime webinar series. This session is entitled “West Coast Hemp-CBD After the Farm Bill.”

In this hour-long session, Harris Bricken lawyers Daniel Shortt (Seattle, Washington), Nathalie Bougenies (Portland, Oregon), and Griffen Thorne (Los Angeles, California) will provide an in-depth look at changes in federal law and policy post Farm bill, as well as its impact on each of the three west coast states (Washington, Oregon, and California). Throughout the presentation our team will also discuss the status of laws and regulations in each state. Some of the topics we will cover include:

  • the future of hemp permitting;
  • Farm Bill implications for Internal Revenue Code section 280E;
  • banking for hemp-CBD businesses;
  • intellectual property for hemp-CBD businesses;
  • CBD in food, beverages, vape cartridges, oils, topicals, and other products; and
  • the Food and Drug Administration’s role in hemp-CBD.

With an industry that is projected to be worth $20 billion by 2022, interest in hemp is at in an all-time high. Make sure you don’t miss out on this valuable information! The webinar will be moderated by Hilary Bricken, with our panel of attorneys addressing audience questions throughtout the presentations. Please register for the event here! Should you have any further questions, please feel free to reach us at firm@harrisbricken.com.

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Transporting Hemp Across State Lines is Still Risky

hemp cbd transport arrest

Back in September 2018, I wrote about how important it was for hemp businesses to carefully plan the routes they would use to ship hemp and hemp products, including hemp-derived CBD. This is because some states are hostile towards hemp and do not recognize a difference between hemp and marijuana.

My article was written prior to the passage of the Agricultural Improvement Act of 2018 (“2018 Farm Bill”), which expanded federal law to cover a wider range of commercial hemp activity and gave the US Department of Agriculture (“USDA”) regulatory authority over the cultivation of hemp. With regards to the interstate transfer of hemp, section 10114 (b) 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) 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. On it’s face this provision may look like hemp businesses no longer need to fear state-level enforcement against hemp or hemp products entered into interstate commerce. However, that is not necessarily the case and businesses who hang their hat on section 10114 do so at their own risk.

The problem with relying on section 10114 is that it appears to be contingent on Section 10113 of the 2018 Farm Bill. Section 10113 of the 2018 Farm Bill covers hemp production (which you can read about here). In summary, Section 10113 indicates that the USDA will oversee hemp production at the federal level by approving of state and Tribal plans covering the cultivation of hemp. States and Tribes will submit plans to the USDA for approval. Section 297C of the 2018 Farm Bill requires that the USDA establish its own plan and and issue licenses to cover the cultivation of hemp in states or Tribal territories where that state or Tribe’s plan for hemp cultivation has not been approved.

The USDA has not yet approved of any state or Tribes plan. It also has not created its own plan under Section 297C. That means that any hemp legally cultivated in the US was done so under Section 7606 of the 2014 Farm Bill. The 2014 Farm Bill allows states to implement agricultural pilot programs to research the cultivation of industrial hemp. State departments of agriculture can issue licenses for the cultivation of hemp. Some states have interpreted this to cover commercial activity. However, the 2014 Farm Bill provides no explicit protection for the interstate transfer of industrial hemp.

Returning to the 2018 Farm Bill, Section 7605 (b) of the 2018 Farm Bill extends Section 7606 of the 2014 Farm Bill for one year after the USDA establishes a plan under 297C. That provision is not contained within Section 10113. Section 10114’s prohibition on interference with the interstate transfer of hemp does not reference the 2014 Farm Bill. Therefore, Section 10114’s protection against interference with the interstate shipment of hemp or hemp products may not currently apply to hemp or hemp products currently in transit because they cannot yet be cultivated “in accordance with” Section 10113.

On the other hand, the intent of Congress seems to indicate that hemp and hemp products should be commercially distributed throughout the country. The 2018 Farm Bill changes the Controlled Substance Act (“CSA”) by explicitly removing “hemp” from the definition of marijuana. It also defines hemp as an agricultural commodity that is eligible for federal crop insurance. Additionally, it allows the USDA to license the cultivation of hemp in a state or Tribal territory that does not have an approved plan. Additionally, an administrative law judge has held that products containing CBD derived from 2014 Farm Bill industrial hemp are allowed to be distributed in the US mail. Also, a federal judge in West Virginia recently lifted a restraining order that limited a hemp cultivator from transporting processed hemp to a Pennsylvania lab that would process it into CBD isolate, because “the Court has become increasingly doubtful of the Government’s case on the merits.” This is due, at least in part, to the 2018 Farm Bill’s removal of hemp from the CSA. (A copy of the order is provided by Hemp Industry Daily, which also wrote about the decision here.)

We’ll likely get additional insight into the question of whether companies can ship 2014 Farm Bill hemp across state lines as there is currently a lawsuit pending between Big Sky Scientific, LLC (“Big Sky”) and the Idaho State Police. I’ll provide some additional insight on this case later this week.

For now, the bottom line is that hemp businesses must still carefully consider their shipping plans for hemp and hemp products. Blind reliance on Section 10114 to protect against local law enforcement is ill advised. Until the 2018 Farm Bill is fully implemented by the USDA, states may seize hemp shipments. Hemp businesses should avoid transporting their products through states that show hostility towards hemp. If you have questions about other ways to mitigate the risk of state level enforcement, please contact our regulatory attorneys.

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Hemp Testing

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