The 2018 Farm Bill removed industrial hemp and all derivatives (including hemp derived CBD) from Schedule I of the Controlled Substances Act (CSA). It also provided that intentional violations of the Farm Bill, including unlicensed production of industrial hemp, must be reported to the U.S. Department of Justice (DOJ). But what can DOJ do with such reports if hemp trafficking is no longer a crime?

Relevant Provisions

The Farm Bill (officially entitled the Agricultural Improvement Act of 2018):

Removal of Hemp from CSA

  • defined hemp as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis” (Section 297A);
  • amended the Controlled Substances Act (CSA) to clarify that “marihuana” as used in the CSA does not include hemp as defined in the Farm Bill (Section 6);

Requirements for States/Territories

  • required states and tribal territories “desiring to have primary regulatory authority over the production of hemp in the State or territory” to submit to the USDA a plan to monitor and regulate hemp production (Section 297B);
  • required such plans to include:
    1. practices to maintain information regarding land on which hemp is cultivated;
    2. procedures for testing THC levels in hemp;
    3. procedures for disposing of non-compliant products; and
    4. enforcement procedures to implement the Farm Bill’s enforcement provisions (Section 297B(a)(2)(A)).
  • required the USDA to either approve or disapprove the plan within 60 days (Section 297B(b)(1))

Violations by Producers

  • defined violations to include:
    1. failing to provide a legal description of land on which the producer produces hemp;
    2. failing to obtain a license or other required authorization from the State or Tribal government; and
    3. producing Cannabis Sativa L with a THC concentration of more than .3 percent on a dry weight basis (Section 297B(d)(2)(A)).
  • required violations of State/Tribal plans committed “with a culpable mental state greater than negligence” to be reported to the Attorney General of the United States “immediately.” (Section 297B(d)(3)(A)(1)).

But what can DOJ do?

The Farm Bill provisions on reporting violations to DOJ raise the question – what can DOJ do about such violations? In the case of sub-section (3) violations, i.e., producing cannabis with a THC concentration of more than .3 percent, the answer is easy. Such a product would not meet the Farm Bill definition of hemp, and its production or distribution would be subject to prosecution under the CSA, just like any other controlled substance. But what about violations under sub-section (1) (failing to provide a legal description of the land on which the hemp is to be produced) or sub-section (2) (producing hemp without a license or required authorization)? Here the answer is much less clear. It is not a federal crime to produce hemp in violation of state hemp plan requirements and such production cannot be prosecuted under the CSA, given that hemp is no longer a controlled substance.

Does this mean that one can violate the Farm Bill regulatory requirements without any consequences at the federal level, criminal or otherwise? Not so fast. A report to DOJ for suspected licensing violations would likely trigger an investigation into whether the business is producing a controlled substance.  This could involve, among other things, seizure of the business’ product for testing and analysis, grand jury subpoenas to employees and business partners, and execution of search warrants at the business’ premises.  The visual similarity of hemp and marijuana makes it easy for federal authorities to establish probable cause for seizing hemp for testing.  And one need look no further than the Big Sky Scientific case, in which a federal court in the District of Idaho upheld a seizure of hemp that was produced by a grower licensed by the Oregon Department of Agriculture, to realize that interdiction is a real possibility.      

Even if, in the best case, the government concludes that the business is only producing hemp, an investigation alone could cause severe disruption and reputational harm. If any federal marijuana violation is discovered during the investigation, the business and its employees could be prosecuted for narcotics trafficking and any other crimes revealed by the investigation including, possibly, conspiracy, money laundering, Travel Act violations, mail/wire fraud and tax evasion. This could destroy the entire business, legal hemp and all.

Such a scenario is not just speculative, as various federal law enforcement officials have made clear that they intend to aggressively prosecute abuse of legalization regimes.  For example, US Attorney for the Southern District of West Virginia Mike Stuart recently tweeted “Medicinal marijuana regimes are for medicinal purposes only as medical needs require. Abuses of system will be dealt with the same way we deal with other drug dealers and drug abusers in existing medical system- Sternly and Toughly.”  In addition to possible criminal prosecution by DOJ, inappropriate marketing claims about any products made with hemp could also trigger investigations by the Food and Drug Administration for violations of the Food, Drug and Cosmetic Act or the Federal Trade Commission for violations of the Federal Trade Commission Act. 

Therefore, despite the decriminalization of industrial hemp, it is important for anyone getting in to the hemp business to establish a robust compliance program to include, at a minimum:

  1. reliable and generally accepted procedures for testing THC content and disposing of any non-compliant products;
  2. verification of compliance with all relevant state licensing and permitting requirements;
  3. background checks on employees who will be involved in production and handling; and
  4. thorough due diligence on all business partners to ensure that they will comply with all relevant state and federal legal requirements.

Tom Firestone is located in Baker McKenzie's Washington D.C. office and Co-chair of the firm's North American Government Enforcement practice.