Publication

October 30, 2019Client Alert

USDA Issues Hemp Rule

The United States Department of Agriculture released on Tuesday a long-awaited interim rule to regulate the production of hemp in the United States (the “Interim Rule”). Congress sowed the seeds of this rulemaking in the 2018 Farm Bill, which removed hemp from the controlled substances list and placed it under the authority of the United States Department of Agriculture (USDA). The 2018 Farm Bill directed USDA to draft rules to regulate the production of hemp in the United States, and the Interim Rule released yesterday is the first draft of the rule released to the public.

The Interim Rule is effective immediately but may change based on comments received during a 60-day public comment period. Based on our first review of the Interim Rule, USDA requests comments on a significant number of the rule provisions and therefore the Interim Rule is likely to change following the comment period. This article provides our initial thoughts on the rule and its impacts for the hemp industry, as well as an outline of some major components of the rule that are likely to warrant public comment from the industry.

The general structure of the Interim Rule was not a surprise to the industry as it was outlined in the 2018 Farm Bill. Based on a principle of “cooperative federalism”, the Interim Rule creates a floor for a national hemp regulatory program, but invites states to submit their own hemp programs that may be more restrictive than the floor established by USDA. This policy preserves the rights of states to regulate hemp more aggressively than USDA, but in doing so, it may hinder the growth of the hemp industry because it fails to set national standards for detailed issues such as testing standards for delta-9tetrahydrocannabinol (THC). A lack of federal standards is likely to create a patchwork of state regulations that the hemp industry itself will have to standardize to facilitate the growth of the national hemp industry.

The hemp industry as a whole is facing many challenges from a lack of regulation, and the standards in the Interim Rule are a welcome start down the long road toward regulating and standardizing the industry. For example, the Interim Rule specifies certain requirements for testing THC, but it stops short of specifying an approved chemistry method for testing THC. The Interim Rule broadly allows states to submit THC testing methodology for USDA approval that meets the basic guidelines set by USDA, which we have listed below. The Interim Rule states “testing methodologies meeting these requirements include, but are not limited to, gas or liquid chromatography.” (p. 128)  By allowing multiple testing methodologies for such a highly regulated product, the Interim Rule may complicate future transactions in the hemp industry if hemp businesses in separate states are subject to different sampling requirements.

One area where we may see the hemp industry or specific states take the lead in establishing standards not set by USDA is the testing for pesticides in hemp products. The Interim Rule does not require hemp be tested for residual pesticides despite a recent outbreak of illnesses tied to persons vaping cannabis products that contain unsafe amounts of pesticides, and quality products in the industry already offering Certificates of Analysis that indicate no pesticides are present in the product. States, such as California, are likely to fill in the void left by USDA and require hemp products be tested for pesticides. As California has for years set the nation’s standards for car emissions because of its more strict regulations under the Clean Air Act, states with large hemp markets such as Texas or California are likely to become nation-wide standard setters amidst the state-by-state regulatory regime created under the USDA’s policy of cooperative federalism.

Below are some basic content requirements that state hemp programs must contain to be approved by USDA under the Interim Rule:

  • A process to collect data on land used for production of hemp
    • Licensed producers must report their hemp crop acreage to the US Farm Service Agency
  • Procedures for sampling and testing hemp to ensure it remains under the acceptable THC level of 0.3%
    • Testing for THC must be conducted by a DEA registered laboratory
    • Testing must occur within 15 days of anticipated harvest
    • Testing must occur post-decarboxylation (after the non-psychoactive acid form of THC—delta-9-tetrahydrocannabinolic acid or “THCA”—is converted into THC)
    • Sampling must test only hemp flower, not any other part of the plant
    • Margins of error of testing protocols may be used in calculating whether or not a product may be under 0.3% THC
  • Procedures for the disposal of non-compliant crops
    • If a crop is “hot” (i.e. exceeds the 0.3% THC limit) then it must be treated as a controlled substance and disposed of by a person authorized under the Controlled Substances Act to handle marijuana
  • Compliance and enforcement regulations
  • Information sharing such as contact information for each producer
  • Certification that the state or tribe has sufficient resource to manage its hemp program

Other items addressed in the interim rule that provide some clarification for states are the following:

  • Interstate transportation of hemp is legal, even if hemp must pass through a state that prohibits the cultivation of hemp.
  • Existing state hemp pilot programs established under the 2014 Farm Bill may remain in place through the 2020 growing season, but one year after the interim rule takes final effect, those programs will expire and states will have to have received approval of their new programs from USDA.

The Interim Rule is effective immediately but may change based on public input received during a 60-day public comment process. Michael Best has significant experience drafting and reviewing public comments on behalf of industry interests, so contact any of the attorneys in our Cannabis Industry Group if you require assistance in filing comments or have any questions about the Interim Rule. We will continue to update our clients with any further regulatory updates.

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