On Tuesday, October 29, the US Department of Agriculture (USDA) established the US Domestic Hemp Production Program through the issuance of an interim final rule (the “Rule”). The USDA published the Rule on Thursday, October 31, in the Federal Register. The Rule took effect upon publication, but the USDA will take comment for 60 days.
Pursuant to the Agricultural Improvement Act of 2018 (the “2018 Farm Bill”), the Rule outlines provisions for states and Indian tribes to submit their plans for the domestic regulation of hemp. Such plans will need to be approved by the USDA. The Rule also establishes a federal plan for hemp producers in states or territories of Indian tribes that do not have their own USDA-approved plan. The USDA will evaluate and approve or disapprove the plans submitted to them within 60 days of submission. The goal is to give state and tribal officials enough time to put the plans into action for the 2020 hemp season that will begin with planting in the spring. The Rule will sunset in two years. According to Greg Ibach, the Undersecretary for Marketing and Regulatory Programs, “[w]e will use the 2020 growing season to test drive the interim rule to guide any adjustments made in the final rule.”
Up until now, participants in the hemp industry have relied on the 2014 Farm Bill which allowed states to create hemp research pilot programs. The regulations of these state pilot programs were often vague and limited in scope which led to a significant amount of uncertainty after the passage of the 2018 Farm Bill allowed for commercial production of hemp (i.e. beyond research purposes). Additionally, these pilot programs sometimes strictly controlled the number of hemp producers in each state through licensing regimes.
With the passage of the Rule, states and Indian tribes will now be able to more fully regulate hemp production within their respective jurisdictions. The Rule will likely lead to a patchwork of different state legal regimes regulating hemp. The Rule will also lead to greater clarity within the legal framework that hemp producers can rely on with greater certainty.
One example of the additional clarity provided by the Rule is the testing requirements. Specifically, the Rule provides more guidance on when samples should be taken in relation to harvesting, the certifications and registrations laboratories are required to maintain in order to test hemp, and the inclusion of margins of uncertainty with respect to test results and THC levels.
Additionally, the Rule provides a “cushion” for negligent violations of the hemp regulations. Specifically, a hemp producer does not commit a negligent violations if they “make reasonable efforts to grow hemp and the cannabis (marijuana) does not have a delta-9 tetrahydrocannabinol concentration of more than 0.5 percent on a dry weight basis.” That is to say, if a hemp producer grows hemp that has a THC level greater than 0.3 percent, they have not automatically committed a negligent violation of the USDA regulations on that basis alone. Moreover, the Rule outlines the requirements of “corrective action plans” that states will need to maintain in order to address negligent violations of the regulations.
Finally, the USDA highlighted CBD as a key driver for hemp production and hemp prices. The USDA pressed the FDA to provide regulations governing the use of CBD in food and dietary supplements stating, “FDA has stated that they are actively considering the issue. If FDA does not provide clarity about their plans for future regulation of CBD, there will continue to be uncertainty and downward pressure on the CBD portion of the hemp market.”