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USDA Expressly Legalizes the Importation of Hemp Seed

hemp seed import DA
Here come the hemp seeds!

Last Friday, the U.S. Department of Agriculture (“USDA”) released a statement, in which the agency clarified that the passage of the 2018 Farm Bill rendered the importation of hemp seeds legal.

As we previously explained, the 2018 Farm Bill legalized hemp, hemp seeds, and other derivatives by removing them from the Controlled Substance Act. Accordingly, the USDA held that the DEA “no longer has authority to require hemp seed permits for import purposes.”

The agency further explained that the statement aimed to provide assistance to U.S. producers and hemp seed exporters who have repeatedly requested assistance from the USDA.

Indeed, the USDA received numerous comments pertaining to this issue during its March 13 webinar. Senator Jon Tester (D-Montana) was among some of the commentators who requested assistance with hemp importations. According to the Montana senator, the DEA was blocking Montana farmers from importing hemp seeds. USDA Executive Director, Sonny Perdue, explained that while the USDA was in the process of promulgating rules and regulations, farmers registered under an existing state research pilot program, pursuant to the 2014 Farm Bill, were allowed to import and cultivate hemp.

In its statement, the USDA maintained Perdue’s statement and further clarified that the agency now holds authority over hemp seeds and aims “to provide an alternative way for the safe importation of hemp seeds into the United States.” Specifically, the USDA set forth ways in which hemp seeds should be imported from Canada and other foreign countries.

Hemp seeds imported from Canada must be accompanied by:

  1. a phytosanitary certification from Canada’s national plant protection organization to verify the origin of the seed and confirm that no plant pests are detected; or
  2. a Federal Seed Analysis Certificate (SAC, PPQ Form 925) for hemp seeds grown in Canada.

Hemp seeds imported from countries other than Canada, must be accompanied by a phytosanitary certificate from the exporting country’s national plant protection organization to verify the origin of the seed and confirm that no plant pests are detected.

The agency further explained that “Hemp seed shipments may be inspected upon arrival at the first port of entry by Customs and Border Protection (CBP) to ensure USDA regulations are met, including certification and freedom from plant pests.”

As USDA Commission Purdue has expressed on numerous occasions, the hemp rule making process will take some time given the complex nature of the crop and its close connection with marijuana. However, even if hemp won’t be grown pursuant to the 2018 Farm Bill until regulations are in place, hemp growers who are registered under state pilot programs, and who comply with the newly released importation requirements, are free to import hemp seeds without the risk of DEA enforcement.

For additional information on the importation of hemp and hemp seeds, please contact our team.

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Pregnancy Complications: Can Cannabis Harm a Fetus?

A pregnant woman wearing a teal shirt holds a cannabis leaf in front of her belly.

Project CBD submitted this public comment, composed by Adrian Devitt-Lee, to California’s Office of Environmental Health Hazard Assessment (OEHHA), which administers the Proposition 65 Program. Approved as a 1986 ballot measure, Proposition 65 requires the state to maintain and update a list of chemicals known to cause cancer or reproductive toxicity.

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Psychedelics & Cannabis Therapeutics

Psychedelic compounds. LSD blotter, iboga root bark, syrian rue, ayahuasca, banisteriopsis caapi, hawaiian baby woodrose, salvia divinorum and morning glory seeds.

Although it may not be obvious during these Trump-rattled times, we’re in the midst of a psychedelic revival. There is more interest than ever before in experimenting with LSD, magic mushrooms, ayahuasca, ketamine, and other psychedelic drugs.

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Psychedelics & Cannabis Therapeutics

A cannabis flower sits inside of a mushroom on a mule background.

Although it may not be obvious during these Trump-rattled times, we’re in the midst of a psychedelic revival. There is more interest than ever before in experimenting with LSD, magic mushrooms, ayahuasca, ketamine, and other psychedelic drugs.

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Industrial Hemp and USDA Organic Certification

industrial hemp usda organic

We’ve written previously about the inability of cannabis companies to receive United States Department of Agriculture (USDA) organic certification for their products (although there are alternative state-level and private certifications available to fill this gap), but what some of our clients are unaware of is that the USDA will provide organic certification for qualified industrial hemp producers.

The USDA provided clarifying instructions in its September 2018 Instruction on Organic Certification of Industrial Hemp Production for the UDSA’s policy regarding the organic certification of industrial hemp production by certifying agents accredited by the USDA National Organic Program (NOP). The UDSA first noted that Section 7606 of the Agricultural Act of 2014 (the Farm Bill) authorized institutions of higher education and state departments of agriculture to establish industrial hemp research pilot programs in states where the production of industrial hemp is legal and subject to certain other conditions.

The USDA’s official policy is that “[f]or hemp produced in the United States, only industrial hemp, produced in accordance with the 2014 Farm Bill, as articulated in the Statement of Principles on Industrial Hemp issued on August 12, 2016 by USDA, may be certified as organic, if produced in accordance with the USDA organic regulations.”

For industrial hemp producers operating in accordance with their state’s industrial hemp program, becoming a certified organic operation will be no different than for companies in any other industry. The USDA lays out five basic steps to attaining organic certification:

  1. The farm or business adopts organic practices, selects a USDA-accredited certifying agent, and submits an application and fees to the certifying agent.
  2. The certifying agent reviews the application to verify that practices comply with USDA organic regulations.
  3. An inspector conducts an on-site inspection of the applicant’s operation.
  4. The certifying agent reviews the application and the inspector’s report to determine if the applicant complies with the USDA organic regulations.
  5. The certifying agent issues organic certificate.

All certified organic farms and businesses must also undergo an annual review and inspection process.

It is important to remember that touting your hemp (or cannabis) as certified organic when it is not is illegal under federal law. As mentioned above, for cannabis businesses there are alternative certifications available via some states or via private third-party certification companies.

In California, for example, SB 94 mandated that the California Department of Food and Agriculture (CDFA) create an organic cannabis program by 2021. In 2018, the CDFA formed the “OCal” project, which is a four-person team within CalCannabis dedicated to establishing that organic cannabis program. The program will be similar to the National Organic Program (NOP). OCal is currently in the information-gathering stage and is set to begin soliciting input from stakeholders this month.

In short, it’s clear that both hemp and cannabis companies value organic principles and are seeking certification. The path to such certification is clear for qualifying industrial hemp companies, but for other cannabis companies, the options are much more limited.

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Did the 2018 Farm Bill Open the Door to Importing Hemp?

industrial hemp import

We get a ton of questions about whether it’s legal to import hemp into the U.S. It’s a complicated question without a clear answer. We do know that the Drug Enforcement Administration has confirmed that the importation of cannabis plant material that falls outside of the Controlled Substance Act’s definition of “marihuana” (e.g., the mature stalks and seeds incapable of germination) is not in violation of the CSA or related laws and regulations specific to importing goods. That limited exception doesn’t cover other parts of the cannabis plant, including hemp flower. The 2014 Farm Bill allows for the limited cultivation of industrial hemp, but that bill requires that hemp be grown pursuant to an agricultural pilot program in compliance with state law. Hemp grown in another country can’t meet those inherently domestic requirements. The 2014 Farm Bill is still in effect as the U.S. Department of Agriculture (“USDA”) is preparing to regulate the commercial cultivation under the 2018 Farm Bill. However, the 2018 Farm Bill has already altered the CSA’s definition of marijuana to exclude hemp and that provision is not dependent on USDA regulation.

The complicated question was addressed in part in by a federal court in California. In November 2015, Innovative Nutraceuticals, LLC placed an order for hemp from Spain to L&M Natural Hemp. L&M shipped the Spanish-grown hemp along with documentation showing that the material contained in each package was cultivated from seeds certified from hemp in Spain and test results showing that the plant material contained 0.2% THC. On December 6, 2015, the Department of Homeland Security (“DHS”) seized the hemp shipment at the Los Angeles International Airport. The U.S. Customs and Border Protection (“CBP”) tested the shipment and found that it contained CBD.

Innovative Nutraceuticals filed a petition with CBP, seeking administrative review of the seizure. CBP denied the petition because CBD is a compound that naturally occurs in marijuana and therefore the shipment met the definition of marijuana in the Controlled Substances Act (“CSA”). CBP also stated that “hemp flowers” are not excluded from the CSA definition.

Despite this, Innovative Nutraceuticals continued to import hemp from Spain and CBP seized shipments in January and November of 2017. On March 14, 2018, CBP again seized an Innovative Nutraceuticals hemp shipment, this time at the Louisville, Kentucky airport. However, CBP informed Innovative Nutraceuticals that the shipment may be released if the company executed a “Hold Harmless Agreement” agreeing not to sue CBP for damages related to the seizure and requiring Innovative Nutraceuticals to pay costs for delivery or retrieval.

On July 2, 2018, Innovative Nutraceuticals filed a complaint against the United States of America in the U.S. District Court for the Central District of California, seeking the following claims for relief:

(1) an injunction and/or declaratory relief ordering the United States government [(the “Defendant”)] not to detain, seize, summarily forfeit, or destroy any future shipments of hemp plant materials containing [CBD] and/or 0.3% or less of [THC];

(2) an injunction and/or declaratory relief ordering Defendant to provide timely notice and a hearing to owners and shippers of detained or seized hemp materials;

(3) declaratory and injunctive relief ordering Defendant not to destroy and to return all seized hemp materials; and

(4) monetary reimbursement for all hemp materials seized and destroyed by Defendant.

In response, the government filed a motion to dismiss all of Innovative Nutraceuticals’ claims.

On March 28, 2019, the Court issued an order (available here, courtesy of Hemp Industry Daily) granting the government’s motion to dismiss Innovative Nutraceuticals’ first and second claim for mootness and granting dismissal of the fourth claim due to Innovative Nutraceuticals failure to identify the government’s waiver of sovereign immunity. Sovereign immunity is a legal doctrine saying you can’t sue the government for damages unless the government says you can.

In denying Innovative Nutraceuticals’ first and second claims, the Court determined the issue was moot. Under Article III of the U.S. Constitution, federal courts can only rule on actual, ongoing cases or controversies. The parties have to have some skin in the game in order for a federal court to have jurisdiction. Mootness occurs when one or more circumstances change making the controversy moot. This can happen due to a change in law, which is exactly why the Court denied Innovative Nutraceuticals first and second claims:

Section 12619 of the 2018 Farm Bill amended the CSA definition of marijuana so that it now includes an exemption for hemp, defined as “any part” of the Cannabis sativa L. plant “with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.” Id. Under this new exemption, any future shipments of industrial hemp product containing less than 0.3% THC by dry weight will clearly fall outside the CSA definition of marijuana and will not be subject to seizure.

[. . .]

Any uncertainty as to the legal status of Plaintiff’s shipments under the pre-2018 Farm Bill regime has since been eliminated by the Bill’s amendment of the CSA’s definition of marijuana.

The Court seems to indicate that future importers of hemp will no longer face the seizures that plagued Innovative Nutraceuticals. While makes sense given that hemp is excluded from the CSA’s definition of marijuana, it does not mean that CBP’s days of seizing hemp are over. The difference between hemp and marijuana is not obvious. It is determined based on the presence of a certain compound, THC. Hemp shipments may contain documentation showing that a product is hemp and not marijuana, but that doesn’t mean that the inquiry stops there. CBP will need a way to determine the difference between marijuana and hemp. This could be a problem in practice because hemp, especially in raw form, has a limited shelf life.

The takeaway from the Innovative Nutraceuticals order seems to be that because hemp is no longer a controlled substance under the CSA, that importing hemp does not violate the CSA. In practice, importing hemp still presents significant risk because CBP may still seize hemp on suspicion of it being marijuana. Anyone looking to import hemp into this country should plan accordingly.

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FDA Issues Warning Letters to CBD Manufacturers Making “Over-The-Line” Health Claims

fda cbd

Last week, the departing Food and Drug Administration (“FDA”) Commissioner, Scott Gottlieb, released a statement in which he announced that the agency, in collaboration with the Federal Trade Commission (“FTC”), had issued warning letters to three CBD manufacturers: Advanced Spine and Pain LLC (d/b/a Relievus), Nutra Pure LLC and PotNetwork Holdings Inc.. The letters were sent “in response to their making unsubstantiated claims related to more than a dozen different products and spanning multiple product webpages, online stores and social media websites.” According to Gottlieb’s statement, the companies used these online platforms to make:

…unfounded, egregious claims about their products’ ability to limit, treat or cure cancer, neurodegenerative conditions, autoimmune diseases, opioid use disorder, and other serious diseases, without sufficient evidence and the legally required FDA approval.”

The warning letters were released just a few days following Gottlieb’s testimony to a Senate subcommittee, in which he announced that his agency would use enforcement discretion against CBD product manufacturers who are making “over-the-line claims.”

Due to its limited resources, the FDA has chosen to focus enforcement actions against manufacturers who sell and advertise CBD products with unsubstantiated therapeutic claims that may put consumers at risk. Specifically, the agency fears that

These products have not been shown to be safe or effective, and deceptive marketing of unproven treatments may keep some patients from accessing appropriate, recognized therapies to treat serious and even fatal diseases.”

Although the warning letters set forth specific examples of claims made by the targeted companies, questions remain regarding what amounts to “unauthorized claims” that would put CBD companies at risk of enforcement actions. These questions will most certainly be addressed during the FDA’s upcoming public hearing on CBD scheduled for May 31. The public hearing will provide stakeholders an opportunity to share their thoughts on potential pathways by which CBD products may be legally sold and marketed. The FDA has expressed an interest in collecting comments, data and information on the following topics:

  1. Health and safety risks: Based on what is known about the safety of products containing cannabis and cannabis-derived compounds, are there particular safety concerns that FDA should consider regarding its regulatory oversight and monitoring of these products?
  2. Manufacturing and product quality: Are there particular standards or processes needed to ensure manufacturing quality and consistency of products containing cannabis or cannabis-derived compounds, including standards applied to evaluate product quality?
  3. Marketing, labeling and sales: How should consumers be informed about the risks associated with such products (e.g., directions for use, warnings)? What specific risks should consumers be informed about? Are there any subpopulations for which additional warnings or restrictions are appropriate?
    For a complete list of questions and topics identified by the FDA, see here.

The agency hopes that the comments received during the public hearing will assist the recently formed “high-level internal agency working group” in exploring potential pathways for dietary supplements and/or conventional foods infused with CBD to be lawfully marketed. Although the FDA recognizes that it will take time to fully resolved this complex issue, the agency is hopeful that the working group will begin sharing its findings with the public as early as this summer.

Until then, CBD companies should refrain from making any health claims that highlight the therapeutic value of their products. For more information on ways to mitigate the risk of FDA and FTC enforcement actions, contact our team of regulatory attorneys.

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Topical CBD: The FDA Stance on Hemp Derived CBD In Cosmetics

fda cbd topicals

In the last few weeks, two major drugstores publicly announced that they will start carrying products containing hemp-derived cannabidiol (“Hemp-CBD”). Both CVS and Walgreens announced that CBD topicals would be available in their stores, in a select number of states. Notably, both drug store chains limited products to non-ingestible topicals.

Dr. Scott Gottleib, the outgoing head of the FDA must have heard the news because on April 2 the FDA issued new guidelines on Hemp-CBD, updated its marijuana and hemp FAQs online, and sent a new round of warning letters to distributors of CBD products. Gottleib himself took to Twitter to chime in:

I was also concerned to hear recently that several national pharmacy chains and other major retailers have begun to sell or will soon begin to sell cannabidiol (CBD) products in several states.

We’ll be contacting them to remind them of #FDA obligations and our commitment to protect consumers against products that can put them at risk.

The FDA has long held that Hemp-CBD cannot be added to food or dietary supplements because of the Drug Exclusion Rule. The FDA’s position is that the Food, Drug and Cosmetics Act (“FDCA”) and underlying FDA regulation do not allow articles approved as drugs to be used in food or dietary supplements unless they were marketed as such prior to public investigations into that drug. CBD has been investigated and approved of as a drug (Epidiolex) and that is the basis for the FDA’s determination. The FDA has also focused on prohibiting companies from making any type of health claims about Hemp-CBD as such claims cause the FDA to classify that product as a drug.

Prior to the April 2 guidance, the FDA had side-stepped the issue of Hemp-CBD in cosmetics, unless those products were deemed drugs based on the way they were marketed (e.g., “this CBD cream cures cancer”). That is no longer the case as the FDA has updated its cannabis FAQs to include this question: What is FDA’s position on cannabis and cannabis-derived ingredients in cosmetics?

Before looking closely at FDA’s answer there, it’s important to understand how the FDA defines cosmetics. Cosmetics are “articles intended to be rubbed poured, sprinkled or sprayed on . . . or otherwise applied to the human body . . . for cleansing, beautifying, promoting attractiveness, or altering appearance,” except for soap which is classified separately. 21 USC 321(i). Unlike food and drugs, cosmetics and ingredients in cosmetics are not subject to pre-market approval. For cosmetics, the FDA relies on consumer complaints to monitor the industry. There has been a push for years for Congress to change laws to give the FDA broader jurisdiction over cosmetics. That hasn’t happened yet.

Though cosmetics aren’t regulated as tightly as other products, the FDA still has regulatory authority over them and their ingredients. For example, color additives used in cosmetics are generally subject to premarket approval. Additionally, the presence of a harmful ingredient in a cosmetic causes the FDA to deem that cosmetic adulterated. The FDA has determined by regulation that some ingredients cannot be used in cosmetics. For example, if a product contains chloroform (other than in trace amounts) it is deemed adulterated. According to the FDA’s FAQs, CBD does not fall into this category:

Certain cosmetic ingredients are prohibited or restricted by regulation, but currently that is not the case for any cannabis or cannabis-derived ingredients.

The story doesn’t end there though. In addition to ingredients that are prohibited by rule, cosmetics are adulterated if they contain “any poisonous or deleterious substance” which could harm users. The FDA’s FAQs take a look at this as it applies to cannabis:

Ingredients not specifically addressed by regulation must nonetheless comply with all applicable requirements, and no ingredient – including a cannabis or cannabis-derived ingredient – can be used in a cosmetic if it causes the product to be adulterated or misbranded in any way.

In other words, just because an ingredient is not prohibited per se doesn’t mean it’s safe for its intended use.

Let’s also take a look at what makes a cosmetic “misbranded.” The FDA will deem a cosmetic misbranded if it is labeled in a false or misleading way, does not bear required labeling information, or is made or filled in a deceptive manner. This is true for all cosmetics, including those containing Hemp-CBD.

The bottom line is that all of these cosmetic regulations were in place before April 2. Companies selling Hemp-CBD cosmetics should have been aware of the regulatory environment before entering the industry. Are the FDA’s recent comments significant? Of course! It is important to carefully track whatever the FDA says and does with regards to Hemp-CBD. But it’s also important not to overreact. The FDA has not determined that the presence of Hemp-CBD makes a cosmetic adulterated or misbranded. That may change in the future, but I for one don’t think it will. The CBD-infused toothpaste is out of the tube and the FDA knows it.

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BUG OFF! A True Story About CBD & MRSA

As you gaze upon these words, dear reader, a horde of alien marauders are ransacking all corners of the globe, chewing through the latest pharmaceutical defenses and leaving behind a gruesome trail of dead and weakened victims. According to a recent report by the World Health Organization (WHO), ferocious tribes of bacteria, parasites, viruses and fungi are on the rampage, and some are proving virtually invincible to the so-called “last resort” antibiotics.

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Oregon Hemp: Another Round of ODA Rules

oregon hemp oda

Hemp production is incredibly hot right now in Oregon. Since 2015 the number of licensed hemp growers has climbed from 13 to 584 (with much of that in the past two years) and hemp acreage has rapidly expanded to 11,000 acres. In 2019, we expect to see this dramatic escalation continue for several reasons, including: 1) recent changes ushered in by the 2018 Farm Bill, legalizing industrial hemp, 2) intense nationwide demand for CBD and hemp-based products, and 3) migration from the Oregon Liquor Control Commission (“OLCC”) marijuana program, where oversupply has made life hard for growers.

Fortunately, the Oregon state legislature Department of Agriculture (“ODA”) have been working hard to keep up with these developments. Last week, ODA issued its second notice of proposed rulemaking of the year. If you recall, on March 1, the agency filed temporary hemp rules, which brought the ODA’s testing rules for hemp and hemp products intended for human consumption in compliance with those used in the testing of marijuana. The new notice proposes to adopt these temporary rules permanently. In addition, the ODA introduced new proposed rules to help address changes to the hemp program, pursuant to HB 4089, as well as to clarify existing rules that were not adopted in the OLCC’s December 2018 filing.

Here is a brief summary of the most significant rule changes:

  1. Restructure registration fees. In lieu of a $1,300 hemp grower application fee, the new 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. Although the new rules maintain the $1,300 handler registration application fee, they now provide for a $500 application fee—which consists of a $800 fee reduction—for the registration of hemp handlers by reciprocity. This registration is designed for OLCC-licensed processors who are purchasing raw hemp, concentrates and extracts from ODA registrants and introducing these items into the OLCC recreational market. Lastly, the new rules propose to increase the cost for agricultural hemp seed producer application fees by $380 (from $120 to $500).
  2. Clarify and update recordkeeping and reporting. The proposed rules require a few additional reporting and recordkeeping by registrants. However, these changes do not significantly increase the burden to report and record keep imposed on current registrants.
  3. Clarify the option to remediate through resampling if a harvest lot fails pre-harvest testing. Under the new rules, both samples and filed duplicate samples must be reanalyzed if they failed testing. Labs that performed the original test are prohibited from subcontracting retesting. In addition, registrants allowed to remediate failed testing through resampling must provide notice to the ODA of their intent to remediate.
  4. Revise sampling procedures for pre-harvest THC testing. As explained above, growers or handlers must have every harvest lot of industrial hemp for human consumption tested as required and in the same manner as marijuana under OAR 333-007-0320 prior to sale or transfer. ODA growers and handlers must also comply with testing requirements for microbiological contaminants in accordance with OAR 333-007-0390, upon the ODA’s request.
  5. Establish a fee for submission of change forms. 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.
  6. Adopt a fee for department-provided pre-harvest THC testing. 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 includes additional fees, including travel time and overtime charges for services performed by the Department of Administrative Services.
  7. Clarify requirements for individuals making retail sales of industrial hemp in Oregon. 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.

As part of the formal rulemaking process, the ODA scheduled a hearing—on April 23, 2019, at the ODA’s office in Salem—during which stakeholders will have an opportunity to comment on these issues. Written public comments will be accepted until 5pm on May 7, 2019. We will keep you posted on any developments.

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Selling Hemp Products to Europe? Welcome to the GDPR Nightmare.

gdpr hemp europe export

Ever since the passage of the 2018 Farm Bill, our hemp lawyers have been getting a barrage of questions about the lawful status of hemp and hemp-derived cannabidiol (“Hemp CBD”) in the United States. The hemp laws appear to be changing in favor of a pro-hemp marketplace, but at a much slower pace than the actual U.S. market for hemp is growing.

As the market in the U.S. continues to develop, companies may shift their focus to the international market. As we recently wrote, selling hemp or Hemp CBD products in the European Union (“EU”) is one area that—sort of like in the U.S.—is bursting with various legal and regulatory concerns from the top EU agencies to the individual EU states.

In addition to the array of legal and regulatory concerns about the sale of Hemp CBD products in the EU noted in our above-linked post, the EU’s General Data Protection Regulation (“GDPR”) is something that almost any U.S.-based company doing business in the EU will need to become familiar with. And it won’t be pretty.

The GDPR is a groundbreaking EU privacy and data security regulation that went into effect on May 25, 2018. The GDPR gives EU residents a broad array of privacy rights with respect to holders of their data. EU residents have the right to, for example, request that companies delete or modify certain data about them, or even provide notification to the residents about what data they have. Companies are required to adopt very complex data security measures and enter into numerous data security contracts. Companies must disclose their privacy practices to consumers at the point of data collection (e.g., having a privacy policy, which is already required in the U.S., but on a lesser scale). And companies are only allowed to “process” (i.e., obtain or use) data upon consent or if there is another lawful basis for processing. This may not sound like a lot, but it created a worldwide rush to compliance leading up to May 2018, with many companies still trying to get their ducks in a row.

What U.S. companies need to seriously be concerned about is whether they engage in conduct that triggers GDPR compliance, which according to GDPR Article 3(2) could happen even for wholly U.S.-based companies:

This Regulation applies to the processing of personal data of data subjects who are in the Union by a controller or processor not established in the Union, where the processing activities are related to:

  1. the offering of goods or services, irrespective of whether a payment of the data subject is required, to such data subjects in the Union; or
  2. the monitoring of their behaviour as far as their behaviour takes place within the Union.

This is a very broad jurisdictional “hook”. If a U.S. company is offering goods or services—even for free—to EU residents, then GDPR may apply. Selling or even offering for sale hemp or Hemp CBD products to EU countries (assuming that there were no other regulatory barriers) thus could subject a U.S.-based operator to GDPR compliance. There is no threshold of goods that must be sold to trigger GDPR compliance, so even a few sales could theoretically require compliance.

The monitoring component is also important for companies to consider. Companies may use marketing tools to “profile” potential customers online. Applying these tools to EU residents could be another way to land oneself in GDPR compliance territory.

What happens if companies don’t comply with GDPR’s requirements if they are mandatory? First, effected EU residents may bring actions against the companies. Second, the companies could be subject to fines (see Article 83(4)–(5)) as high as €20,000,000 or four percent of a company’s annual turnover (i.e., its gross revenues). As GDPR is so new, we don’t yet know what enforcement will look like against U.S. companies and how foreign fines or judgments would be dealt with in the U.S.

The bottom line is that doing business in the EU may likely subject U.S. companies to very onerous compliance requirements. While we don’t yet have a full picture of what enforcement will look like, we wouldn’t be surprised if European regulators took a hard line against U.S. companies selling hemp or Hemp CBD products in their home states which they viewed as harmful or unlawful.

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Senators Wyden and McConnell Press for Hemp Industry Banking Services

industrial hemp banking
Unfortunately still the position for most banks and hemp.

Shortly after the 2018 Farm Bill passed, legalizing industrial hemp, we predicted that banking services for hemp businesses would be slow going. That has proven to be the case. For this reason, a bipartisan pair of U.S. Senators, Sen. Ron Wyden (D-OR) and Senate Majority Leader Mitch McConnell (R-KY), sent individualized letters to four federal banking and financial regulatory institutions on April 2, 2019, pleading them to prevent banking discrimination of the newly legal hemp industry.

As you might recall, Senators McConnell and Wyden were chief proponents of the hemp legalization provision that was included in the 2018 Farm Bill that ended federal prohibition of the very-low-THC cannabis variety. Readers of this blog may also recall that Senator Wyden similarly penned a hemp-related letter to the Food and Drug Administration, asking that agency to clarify its stance on hemp-derived CBD in consumable products.

In the more recent letter, sent February 2, the Senators stated as follows:

As authors of the Hemp Farming Act, McConnell and Wyden are committed to listening to the concerns of hemp farmers and producers and to urging federal agencies to properly implement the law.”

That statement was included in the Senators’ offices’ press release issued the same day, advising that the Senators sent the letters “reiterating hemp’s legality and requesting timely guidance and clarification to help ease concerns from lawful hemp farmers and producers about the lack of access to financial services.” The press release went on to recognize that Oregon and Kentucky “have been on the forefront of hemp production” since the authorization of industrial hemp pilot programs established by 2014 Farm Bill. However, despite the passage of the McConnell and Wyden language in the 2018 Farm Bill, which was signed into law on December 20, 2018, hemp businesses continue to face significant barriers.

The letters were addressed to the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), the Federal Reserve System, and the Farm Credit Administration (FCA). While each letter varied slightly from the others, the letters generally presented that the hemp industry “continues to face challenges with regulatory uncertainty as federal agencies work to implement this significant change in federal law.” Definitely at the top of their list of concerns, hemp businesses still face the substantial hurdle of accessing capital and traditional lending services through financial institutions that have essentially steered clear of the newly-legal industry.

We have consistently heard from lawful hemp producers about the lack of access to financial products. Specifically, we continue to hear from hemp producers who are interested in accessing credit through the Farm Credit System and their difficulties in securing financing and credit products to start, expand, or operate their businesses.”

The letters requested that the regulatory bodies “offer guidance to ease any concerns” their regulated entities might have regarding engaging with and providing services to hemp businesses. “Legal hemp businesses should be treated just like any other businesses and not discriminated against,” the letters urged. Here’s hoping the Senators’ requests are timely heeded and guidance is soon provided. Although some of our hemp clients are banked (and even have crop insurance) many others are still underserved.

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Hemp Testing

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